8 Ways to Level Up Your Multifamily Real Estate Modeling

Use the following 8 tips to level up your multifamily real estate modeling!

1) Load the complete rent roll.

Make sure to include the full rent roll in your multifamily analysis. Compare revenues generated by renovated units to non-renovated units to verify the accuracy of the advertised premium. Level up the analysis by loading the lease end dates and building a chart to visualize rollover.

Pro tip: In most markets, leasing is best in the summer months. Large amounts of rollover in winter months might inhibit the ability to reach market rents.

2) Plan the timing of value-add renovations.

Use the lease end dates in the rent roll to plan the timing of value-add renovations. This will inform how quickly a value add strategy can be executed and the cash flow implications during the renovation period.

3) Show cash flows on a monthly basis.

Calculate monthly cash flows, especially during the renovation period of a value-add acquisition. Vacancy can greatly swing during the renovation period, so timing is important.

4) Control revenue and expense growth line by line.

Show the impact of a value-add strategy by controlling expense and revenue growth (or contraction) on a line by line basis.

Example: If water saving fixtures are part of a value-add plan, the underwriter should be able to control the growth (or reduction) of the water bill independently from the rest of the property’s expenses.

5) Add "per unit" and "per square foot" calculations to revenue and expense items.

Have a better handle on revenue and expense projections by allowing assumptions to be input on a “per unit” or “per square foot” basis. This can be especially useful when calculating other income from laundry or predicting water usage.

6) Add a sources & uses section.

A project’s sources of funds must equate to its uses of funds. Build a simple table to show the calculation. Level up your table by presenting the sources and uses per unit, per square foot, and as a percentage of the total.

7) Get comfortable with circular references.

Sometimes loan origination fees can be rolled into a debt sizing, creating a circular reference within your model. Build a circular reference table in your model to track and correct circular references.

8) Run sensitivity analysis on risks and returns.

Use Excel’s built-in data analysis tools to find the impact of varying market growth, disposition timing, and occupancy on returns and debt service coverage.