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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…

Weighted Average Lease Expiry

Weighted Average Lease Expiry (WALE) is a leasing metric in commercial real estate that measures the average time until the expiry of leases across a property, weighted by rental income. This metric is synonymous with WAULT (Weighted Average…

Annual Percentage Yield

Annual Percentage Yield (APY) is the true rate of return earned taking into account compounding interest. Also known as the Annual Effective Rate, the formula for APY is as follows: APY = ( 1 + APR / n ) ^ n – 1 Periodic Rate…

Net Absorption

Net absorption is the rate at which rentable area is leased up over a period of time in a given market. The net absorption figure considers construction of new space, demolition of existing space and any additional vacancies during that period.…

Annual Percentage Rate

The Annual Percentage Rate (APR) is a simple nominal interest rate representing annual interest accrued. APR is the base rate that allows linear compounding period after period. Periodic Rate = APR / n When n = Frequency of compounding…

Architect

In commercial real estate, architects are typically present throughout the entire development process through design and construction and different architects may serve in different functions on the same project such as design architect and…

Weighted Average Lease Term

A metric in commercial real estate that measures how much contract rent is remaining at the property.  Specifically, the WALT measures the weighted average remaining contract lease term for all tenants at a property. Generally rental income…

1031 Exchange

A common real estate practice with origins in the IRS code section 1031, which allows investors to essentially swap one property for another in an effort to defer capital gains taxes. The two properties must be "like-kind" properties and used…

Build-for-Rent

See also 'Build-to-Rent'. In commercial real estate, Build-for-Rent (BFR) refers more generally to an investment approach where a developer undertakes the construction of a project with the explicit intention of leasing it out to one or more…

Garantías de tipos de interés

Una garantía de tasa de interés es una combinación de un tope de tasa de interés y un piso de tasa de interés. Sirve para limitar las fluctuaciones de la tasa de interés de un préstamo a tasa variable. El prestatario que utiliza una garantía…

Interest Rate Cap

An interest rate cap is a type of derivative contract that provides the purchaser with protection against rising interest rates. It sets a maximum (or cap) level on the interest rate on a floating or variable rate loan. If interest rates rise…

Interest Rate Collar

An interest rate collar is a combination of an interest rate cap and an interest rate floor. It serves to limit the range of interest rate fluctuations on a variable-rate loan. A borrower who uses a collar agrees to an upper limit on the rate…

Interest Rate Swap

An interest rate swap is a financial contract in which two parties agree to exchange one stream of interest payments for another, over a set period. Typically, this involves swapping fixed-rate loan payments for variable-rate payments, or vice…

Equity Multiple

A return metric which shows how much an investor earned on his or her invested capital. The equity multiple (EMx) is calculated by dividing the sum of all capital inflows (capital distributions) by the sum of all capital outflows (capital contributions).…

Financial Model

A comprehensive, quantitative tool that combines various financial and operational inputs to forecast and predict the financial performance, value, and viability of a commercial real estate investment or project. A financial model enables…

Levered

The term "levered" or "leveraged" refers to the use of borrowed funds or debt to finance an investment in a property. Leveraging allows investors to increase their potential returns by using a smaller amount of their own capital and borrowing…