Learning to underwrite a CRE deal - what courses/books/literature etc do you recommend?
I’m a CRE broker (retail) looking to add value to clients (and knowledge for myself) by having a firm understanding of underwriting a deal. I can do back of the napkin numbers for a STNL or building a small strip center, but when you get into multiple stories, mixed-use etc I don’t know the language or process. I can’t afford to go back to school to get a formal education in CRE development and underwriting. Are there any online courses, books, or otherwise you could recommend? Thank you in advance!
[{"id": "fs6vd2e", "text": "CCIM 101-104", "replies": [{"id": "fs6xti2", "text": "Thank you!", "replies": [], "depth": 2}], "depth": 1}, {"id": "fs75gmx", "text": "I'm not a broker but I would recommend going to Udemy and pick up any of the classes by Justin Kivel. He does a great job of running you through the numbers in excel.", "replies": [{"id": "fs77rj8", "text": "Thank you!", "replies": [], "depth": 2}, {"id": "fs91vo3", "text": "He seems to make sense except he doesn't understand the basics of real estate.  I just heard him tell people they should buy at a 3% cap rate and work hard to get it to a 7% cap rate.  That is ignorant beyond belief.  Sounds like a wannabe Guru.", "replies": [{"id": "fs9kq41", "text": "who did you hear and where?", "replies": [{"id": "fs9l30s", "text": "Here. https://www.youtube.com/watch?v=DXzZ8FDLij8\nNotice that he responds to everyone except those that question him.  If you know what you are talking about you can easily respond to anyone.", "replies": [], "depth": 4}], "depth": 3}, {"id": "fsa0ss0", "text": "Just watched...agree.  What he is saying is mostly true but obviously he doesn\u2019t have institutional experience or know what he is saying.  Haven\u2019t watched his other videos but the cap rate one was misleading to the audience and that\u2019s not how pere shops use going-in cap rates or exit cap rates.  As someone else mentioned, I like the [Top Shelf Academy](http://tsmfinancialacademy.com) classes.  Real people who underwrite $ billions of deals for legit shops.", "replies": [{"id": "fsa3myc", "text": "I'll check out Top Shelf.  I just ran across Multifamily Investing Academy and watched a few videos and they seemed right on.  95% of the crap on Youtube is novice or scammer talk.", "replies": [], "depth": 4}], "depth": 3}], "depth": 2}], "depth": 1}, {"id": "fs7ihyq", "text": "ULI has a number of very good courses on this. If you have a local chapter, you should definitely be a member of ULI anyway!", "replies": [], "depth": 1}, {"id": "fs7v7nk", "text": "Thank you!", "replies": [], "depth": 1}, {"id": "fs887g4", "text": " I\u2019ve taken the classes at [Top Shelf Academy](https://www.tsmfinancialacademy.com/) and it has really helped me understand how to model various property types.\u00a0 I started with their 1-hour crash course and then ended up doing private tutoring over financial underwriting with them.\u00a0 I like their courses over Udemy/CCIM/ULI because they actually underwrite investments for PERE shops on a daily basis through their consulting firm and have real-world examples/insights which I found more valuable than hearing a professional teacher discuss it who hasn\u2019t done it in forever.", "replies": [], "depth": 1}, {"id": "fs8g00t", "text": "Thank you!", "replies": [], "depth": 1}, {"id": "fs8jmuo", "text": "Online Courses: \n\u2014 Justin Kivel on Udemy (personally took many of his classes). He\u2019s great - you can check him out on YouTube beforehand as well. \n*Pro tip - Udemy courses are either $200 or $15 - it ALWAYS falls back down to $12-15, so wait for that dip.*\n\n\u2014 REFM is ok as well. They have a whole section on the double promote waterfall structure, which I couldn\u2019t find in Justin Kivel\u2019s courses. The excel certification is also somewhat respected in the real estate world. Not the biggest fan of this course though - I wish Peter Linneman taught it\n\nBooks: \n\u201cWhat Every Real Estate Investor Needs to Know About Cash Flow... And 36 other Key Financial Measures\u201d - Frank Gallinelli\n\n\u201cReal Estate Finance &amp; Investments: Risks and Opportunities\u201d - Peter Linneman", "replies": [{"id": "fs8kjjd", "text": "Thank you!", "replies": [], "depth": 2}, {"id": "fsbpqr5", "text": "A Udemy article,    [https://blog.udemy.com/what-is-a-cap-rate/?utm\\_source=adwords&amp;utm\\_medium=udemyads&amp;utm\\_campaign=DSA\\_Catchall\\_la.EN\\_cc.US&amp;utm\\_content=deal4584&amp;utm\\_term=\\_.\\_ag\\_95911180068\\_.\\_ad\\_436653296108\\_.\\_kw\\_\\_.\\_de\\_c\\_.\\_dm\\_\\_.\\_pl\\_\\_.\\_ti\\_dsa-509445535421\\_.\\_li\\_9032811\\_.\\_pd\\_\\_.\\_&amp;matchtype=b&amp;gclid=EAIaIQobChMIqvOcnInc6QIVUdbACh3x2QrCEAAYASAAEgINBfD\\_BwE](https://blog.udemy.com/what-is-a-cap-rate/?utm_source=adwords&amp;utm_medium=udemyads&amp;utm_campaign=DSA_Catchall_la.EN_cc.US&amp;utm_content=deal4584&amp;utm_term=_._ag_95911180068_._ad_436653296108_._kw__._de_c_._dm__._pl__._ti_dsa-509445535421_._li_9032811_._pd__._&amp;matchtype=b&amp;gclid=EAIaIQobChMIqvOcnInc6QIVUdbACh3x2QrCEAAYASAAEgINBfD_BwE) \n\n&amp;#x200B;\n\nSome of the outright ridiculous statements,\n\n1.   *A cap rate can also help you make investment decisions when deciding whether to purchase two similar properties located near each other. If one property has a 6% cap rate, while the other has 12%, you should instinctively deduct that one asset has a higher risk premium.* \n\n$100,000 NOI at a 6% cap rate sold for $1,666,667.  At 12% it would sell for $833,333.  Now what fool is going to believe that difference for \"similar properties located near each other\".\n\n2.    *is a measure used to evaluate the viability of various investment vehicles such as real estate* \n\nGeez, all a cap rate tells you is WHAT investors have paid per dollar of possible NOI.  $10 in a 10% cap rate market and $20 in a 5% cap rate market.  Now can anyone tell which property has a \"better\" return?  NO!  And these people are charging for this incorrect information.  I'd be asking for my money back.\n\nu/blindgraduate  u/egemeaux  u/dfwstars", "replies": [{"id": "fsc1iwe", "text": "What point are you trying to make here? This has nothing to do with Justin Kivel and his courses. Do a bit of research on Udemy please. They have courses being taught by all types of teachers - some are pretty bad, others aren\u2019t. Justin Kivel uses Udemy solely as a platform to sell his courses - he also has his own website Breakintocre.com where you can find the same courses (like many others on Udemy)", "replies": [{"id": "fsc2n51", "text": "You missed this post in this thread.  Here's your clueless boy!\n\n [https://www.youtube.com/watch?v=DXzZ8FDLij8](https://www.youtube.com/watch?v=DXzZ8FDLij8) \n\nHas no clue what he is talking about and ignores any criticism.  If he know his stuff he should be able to quickly address it.  That is scammer tactics, to completely ignore criticism.  I looked into their model.  Pretty much anyone can get on there and spout nonsense to gullible people.  As long as they pay and Udemy gets their cut who cares?  You got screwed.", "replies": [{"id": "fsc62oi", "text": "Lol stop. Have you seen his track record?! He\u2019s worked for highly regarded institutionals and now manages his own Office/Multifamily properties across SoCal. \nHe\u2019s using EXAMPLES to explain simple concepts to people that have just started out in the field - he\u2019s not going to address every single thing that affects one type of investment metric in one YouTube video - that\u2019s for you to read up on and learn! \nAnd I could care less about \u201cUdemy\u2019s model.\u201d Justin Kivel\u2019s excel model videos are the BEST out there, right in line with Top Shelf, and that\u2019s coming from someone that has taken courses from MULTIPLE instructors. AND AGAIN, Justin Kivel\u2019s excel models on Udemy are no where near bulletproof (ex. his commercial lease model doesn\u2019t allow you to layer on multiple renewals from one tenant), but that\u2019s not the point - the point is to teach you the fundamentals of real estate excel modeling and then YOU have to take the initiative to grow those skills. (I AM 100% PAYING $12 FOR THAT)", "replies": [{"id": "fsc74ui", "text": "Yeah, he must be the Clayton Morris of education.  I am telling you he is clueless.    Direct capitalization is a basic concept of commercial real estate.  He thinks it is a \"return\" and want to take a 3 cap property to a 7 cap!!!  Not only are you out the money you paid but now you look like a fool regurgitating foolish talk.", "replies": [{"id": "fsc9bif", "text": "Wow. You have clearly missed my point.", "replies": [{"id": "fsc9nh0", "text": "You did not make a point.  You are just blindly accepting information and making excuses when it is proven wrong.", "replies": [{"id": "fscba0k", "text": "And you are BIG MAD.\nwhat are you talking about my guy?! I\u2019m referring to his excel modeling course and clearly just stated that you need to take it upon yourself to understand the concepts behind what go into a model. Stop being lazy - you aren\u2019t going to find the answers in a 10 minute YouTube video.", "replies": [{"id": "fscbums", "text": "I am saying if he can't correctly explain direct capitalization then why would I think he could explain anything more complex. That is pretty much the basic valuation method of CRE.  If you are not smart enough to not overpay then pretty much any analysis is useless.", "replies": [{"id": "fscdos6", "text": "And I\u2019m saying that\u2019s irrelevant to my point. I\u2019m pretty sure that he knows what a cap rate is bud. If he thinks you should buy at a 3 cap, grow it to a 7, and sell it at 3 - lol go ahead and take that risk if you want to. If you hit that, all things considered, congrats, you either know something no one else knows, or you got extremely lucky. \n\nIf you\u2019re just going to do that because he told you so, then you shouldn\u2019t be in this field. You have to question everything and you have to do your own DD! And I don\u2019t even know why I have to say that- not the point of this post. You\u2019re out here arguing about his opinion on an investment metric - stop wasting your time", "replies": [{"id": "fscefym", "text": "&gt; If he thinks you should buy at a 3 cap, grow it to a 7,\n\nDo you have any idea what that means?  I bet you don't because it is gibberish from Justin Kivel\n\nI am not arguing about his \"opinion\".  I am telling you he has very limited knowledge of direct capitalization and should not be misinforming people for money.  If you don't know how cap rates are used you should not be in real estate or making excuses for a scammer.", "replies": [{"id": "fscfg4s", "text": "Lol do YOU know what that means? I\u2019m beginning to think you really don\u2019t know what you\u2019re talking about...", "replies": [{"id": "fscfntv", "text": "I just told you it was gibberish.  You can't explain it either can you?  And you paid for it!", "replies": [{"id": "fschxjg", "text": "Lmao you have zero idea what you\u2019re talking about! \n1. I REALLY don\u2019t think you understand the concept of growing a cap rate\n2. Here you go bud - I\u2019ll lay it out for you since I\u2019ve already wasted my time here\n\n- You buy at a 3 cap - NOI/Purchase Price = 3% \n- You grow your NOI to a 7 cap - NOI/YOURPURCHASEPRICE = 7%\n- FINALLY, if the market is still strong and people are valuing your property at a 3 cap (which may or may not happen, WHICH IS WHY I said you should do YOUR OWN DD) you will then sell it a 3cap = GROWNNOI/Seller\u2019s Purchase Price = 3%\n\n*There is risk in all of these steps (if you\u2019re as smart as you say you are, then I\u2019m assuming you know what these are)*\n\nYou understand? Now I am extremely sorry that Justin didnt want to sit down and explain that to\nyou. \nYou\u2019re welcome.", "replies": [{"id": "fscj4al", "text": "&gt; You grow your NOI to a 7 cap - NOI/YOURPURCHASEPRICE = 7%\n\nCap rate is a market metric.  Are you arguing that it is not? You cannot \"grow\" your NOI to a 7 cap.  If you increase your NOI by say $10,000 bought at a 3 cap then that incremental NOI is worth $333,333.  If the market is now only buying NOI at a 7 cap then that $10,000 NOI and say your original $50,000 NOI is now only worth $857,150.  You paid $1666,667 PLUS worked to increase NOI and now only have a property worth $857,150.  \nSucks when you don't know what you are doing!", "replies": [{"id": "fsckby8", "text": "lol no shit, it\u2019s a VALUATION metric, that\u2019s all! And I literally just stated that there are risks. Will I use my NOI and in-place purchase price to determine how my property is performing - no. THERE ARE MANY FACTORS involved and most of those all occur below the line (as in taken into account after NOI - some more knowledge for you)\nYou\u2019re trolling dude - get out of here", "replies": [{"id": "fsclcr5", "text": "&gt;And I literally just stated that there are risks.\n\nWhat risks?", "replies": [{"id": "fscnt89", "text": "Wow - Not wasting anymore time on you.\nAnd go ahead and compare me to Justin for not answering this one lol\nYou\u2019re a joke. Understand what goes into NOI before anything please. Read a book.", "replies": [], "depth": 19}], "depth": 18}], "depth": 17}], "depth": 16}, {"id": "fsckywp", "text": "&gt;You grow your NOI to a 7 cap - NOI/YOURPURCHASEPRICE = 7%\n\nMake up your mind.  First you make excuses for Justin and explain that you can grow your NOI to a 7 cap but now you are correctly stating that Justin is full of bull and cap rates are not what Justin stated but only a valuation metric.  I think you be the troll going back and forth.", "replies": [{"id": "fscm7ie", "text": "Lol you really are getting a free lesson right now! CONGRATS\nOk so, why can\u2019t you grow your NOI to a 7%?!? You do know that CapEx (the \u201cwork\u201d that I believe you are referring to) is recorded below NOI right? CAPEX IS NOT PART OF YOUR NOI lmao.\nIt\u2019s recorded below the line and capitalized through your hold period.", "replies": [{"id": "fscop40", "text": "&gt; Lol you really are getting a free lesson right now! CONGRATS Ok so, why can\u2019t you grow your NOI to a 7%?!? You do know that CapEx (the \u201cwork\u201d that I believe you are referring to) is recorded below NOI right? CAPEX IS NOT PART OF YOUR NOI lmao. It\u2019s recorded below the line and capitalized through your hold period.\n\nWhen is this lesson starting?  i think you may be wasting your time on me.  I am a qualified expert witness on valuations for the state of CA!\n\n1.  Fact ONE.  You do not control the market cap rate.  If investors are paying $10 per dollar of possible NOi (10% cap rate) then for each dollar that you increase your NOI you should expect an increase of market value of $10.  Your market value goes up as a result of increased NOI not the cap rate.  \n\n2.  Fact TWO  Capex has nothing to do with the cap rate.  Capex is not \"capitalized\".  It is not an operating expense, that is exactly why it is not a part of NOI.  If the property needed a new $10,000 boiler at the time of purchase if you capitalized it at 3% you are asking for a concession of $333,333 for the $10,000 replacement costs!  No seller is going to give you a below the line adjustment of $333,333 just to replace a $10,000 boiler.  Seriously, did Justin teach that to you also? \n\nWell, I see you realized you don't know what you are talking about and bailed!  Typical when you run into someone that knows what he is talking about.  Buh, Bye.", "replies": [{"id": "fscqkha", "text": "Nah I\u2019m still here! \nLol idgf what you\u2019re profession is and stop bringing in all of these external factors (a boiler? really?) We\u2019re talking simple and straight. \nYour Fact One - useless. Go back to my points - i stated that IF THE MARKET values your property at that price - of course you can\u2019t control the market *that\u2019s one of the many risks*\nFact Two - useless. Doesn\u2019t relate to my point. when the hell did i state that capex has something to do with cap rate? - I said the exact opposite when I said that it is BELOW THE LINE and you just stated what I did. Go listen to Justin man - u might learn something.", "replies": [{"id": "fscsavx", "text": "Um, a boiler isn't a capital expense in your and Justin's imaginary world?  \n\nYou and Justin say you grow your NOI to a 7 cap.  But then you argue for and against.  Your point seems pointless as this is just gibberish and even you can't explain what Justin was trying to say.  If you can, please do.\n\nYou stated that capex was recorded below NOI.  Really had no idea why you are saying that but it was in the context of cap rates.\n\nLet's discuss.  Thanks for coming back and hanging in there like a big boy.", "replies": [], "depth": 20}], "depth": 19}], "depth": 18}, {"id": "fscr62v", "text": "&gt;You do know that CapEx (the \u201cwork\u201d that I believe you are referring to) is recorded below NOI right?\n\nJust to clarify for those that want to be educated correctly.  The \"work\" as u/blindgraduate  has tried to present it has nothing to do with cap rates since capex is not a part of the NOI calculation.  The \"work\" that I was referring to was controlling expenses and increasing rents.  IN FACT THREE,  Capex is only a part of the direct capitalization process as a below the line adjustment to the value when it is something that needs immediate attention.  Otherwise it is not \"recorded below NOI\" as u/blindgraduate incorrectly stated.", "replies": [{"id": "fscsnv9", "text": "Lol WAY TO TAKE MY POINTS (please read this thread - I TAUGHT him that capex is below the line and has nothing to do with caprates), but wow you still managed to be incorrect. Capex is not considered below the line ONLY when \u201cit is something that needs immediate attention\u201d idiot. When you\u2019re looking at a value-add property, ALL of those improvements are BELOW the line as well. Is this the first time you\u2019ve been proven wrong? You aren\u2019t taking this well man", "replies": [{"id": "fscuf1s", "text": "&gt; (please read this thread - I TAUGHT him\n\nWhat thread?  Is this imaginary also?\n\nSo you you really think a seller is going to care about your \"value add\" speculation that he is going to be open to YOUR below the line development costs?  Yeah, not in the real world.  Now he might if you would be willing to start the valuation on the PGI as completed.  So he has a $100,000 NOI that similar properties are selling at a 10 cap so it is worth $1,000,000.  You think you can reposition the property and say increase NOI to $150,000 and sell at a 8 cap like similar properties have sold so now it is worth $1,875,000.  As a seller I'd agree to sell to you at that price and let you make below the line adjustments from that value.  After all, you are taking all the risks and you may spend a few hundred thousand and still have a $1,000,000 property!", "replies": [], "depth": 20}], "depth": 19}], "depth": 18}], "depth": 17}], "depth": 16}, {"id": "fscspwh", "text": "&gt;  I REALLY don\u2019t think you understand the concept of growing a cap rate \n\nSo you think you can grow a cap rate?  Or not?  Geez, make a point and stick with it!  LOL", "replies": [], "depth": 16}], "depth": 15}], "depth": 14}], "depth": 13}], "depth": 12}], "depth": 11}], "depth": 10}], "depth": 9}], "depth": 8}], "depth": 7}], "depth": 6}], "depth": 5}], "depth": 4}], "depth": 3}, {"id": "fsh5913", "text": "Well, I am sorry that u/blindgraduate deleted his account.  I would give him more credit if he just said he realized he had been instructed poorly by Justin Kivel and was thankful he got the truth early in his career.  \n\nI just came back to post a new youtube  [https://www.youtube.com/watch?v=iecoNuThZFE](https://www.youtube.com/watch?v=iecoNuThZFE)   of someone that understands direct capitalization.  Compare this to the link I posted to Justins and you clearly see the difference.  \n\nReal estate investing is not about knowing everything but being able to understand what someone is saying instead of blindly agreeing to somebody's crap rate, 1%rule. 50% rule, etc.  Don't be embarassed to make mistakes but learn from them.\n\nu/dfwstars  u/egemeaux", "replies": [], "depth": 3}], "depth": 2}], "depth": 1}, {"id": "fslik5g", "text": "Adventures in CRE, Breaking into Wall Street or REFM are the most reputable courses by far. I like the A.CRE teaching style.\n\nJustin Kivel is good for the price but as somebody else mentioned his core understanding of real estate is flawed.\n\nLinneman textbook is also great for core CRE finance knowledge.", "replies": [], "depth": 1}, {"id": "fsmp5bw", "text": "Thank you!", "replies": [], "depth": 1}]