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Real Estate Financial Modeling Accelerator (Updated April 2024)

Prior to launching the Accelerator program, Michael and I fielded email after email requesting a more structured real estate financial modeling training program on the site. Over the years, we've covered hundreds of real estate modeling…

Sources and Uses

A schedule which provides an overview of where capital for a real estate project is sourced from (sources) and how capital is deployed (uses). The sources side includes items such as loan proceeds and investor equity contributions, whilst the…

Permanent Financing

A long-term mortgage loan typically secured by a fully stabilized and performing real estate asset. A Permanent Loan (i.e. Permanent Financing) often includes a fixed interest rate with a longer loan term (7+ years). The permanent loan may…

Free and Clear Return

The total unlevered (before debt) pre-tax cash flow of a real estate project divided by the total capital invested, generally expressed as a percentage on an annual basis. To clarify, the numerator is typically total unlevered pre-tax cash flow…

Cash-on-Cash Return

Before tax cash flow (BTCF = CFO - Debt Service) divided by the total equity contribution to date, expressed on an annual basis as a percentage. Cash-on-Cash Return = Before Tax Cash Flow ÷ Total Equity Contribution to Date Before tax cash…

Internal Rate of Return

The discount rate at which the net present value of an investment is equal to zero. The internal rate of return is a time value of money metric, representing the true annual rate of earnings on an investment. In real estate practice, IRR is…

Opportunistic

A real estate investment strategy categorized by high risk and high returns. Opportunistic real estate strategies typically involve a high degree of uncertainty, more volatility in cash flow and require greater subject matter expertise. These…

Building Core

A main concrete structural component that goes the entire vertical length of a high-rise building and houses elevators, stairwells, and MEP vertical risers. In many cases, the core will also house the bathrooms in non-residential commercial…

Lease Depth

The distance measured between the building window line and the building core wall’s exterior side.

Retention

The withholding of funds owed in order to increase the probability that the project will be fully completed to the standards initially promised by the contractor/subcontractor. An example of this would be an owner retaining say 10% of the funds…

Contingency Cost

An estimated amount set aside by the developer and/or the contractor in order to account for any unknown risks (added and unexpected costs) associated with the project. These costs are designed to cover unforeseen expenses which are not precisely…

Vertical Expansion Option

A real option which allows the owner of a development project to build and complete the project to a certain height with an option to increase the height of the building at some future point. The cost of a project when building with this option…

Specifications Manual

A project manual that details the various products, construction materials and methods to be used in the project development.

Bid and Award Process

The period during which the owner and/or general contractor solicit bids from numerous subcontractors (subs) from the trades needed to build a project. Once the subs have responded to the bid requests, the general contractor may request additional…

Construction Documents

Detailed documents of the development project put together by the architect after the Design Development Phase of the design process. The Construction Documents (CDs) reflect the finalized building design and provide specific details to communicate…

Design Development

The period following schematic design whereby all design team consultants work together to further refine the project details. In this phase, the design team begins to select systems and materials and looks carefully at the coordination of all…