Practicing Financial Modeling and Building "Case Studies"
How do you get the most out of taking an offering memo and building a model for it from scratch? Once you have built one multifamily acquisition model from scratch you seem to hit diminishing returns pretty quickly. What else could I be doing to get more out of this exercise?
[{"id": "j213cqm", "text": "So anyone can build the model. It\u2019s knowing what goes in that fields that matter. Study area vacancy rates closely. Study rents p/sf, unit mixes how those lease. Study all costs. What\u2019s common in that market. Sanitation pests water etc. That way when you see OM you know if it\u2019s lean, fat etc", "replies": [], "depth": 1}, {"id": "j23zg8x", "text": "Building the model also gives you an opportunity to see if the brokers are giving bullshit projections.  Does the property have a 5% vacancy in year one when it\u2019s a value add full unit renovation for 250 units, because it\u2019s unlikely you can turn that many units in 1 year and only have 12 units remain vacant the whole year when you need to turn 21 units per month plus lease up.  \n\nOr maybe it assumes a 75% retention rate on short term leases while rent increases by 30%, or a myriad of other bullshit assumptions that no investor would put in their model.  \n\nLike the other poster said, modeling just lays it out, to really add value is whether you can understand the property, what\u2019s driving cost, are the assumptions realistic, and what are the risks.  Lastly, make sure your models can do sensitivities and are flexible, and for me, look good.  Don\u2019t just make a model with assumptions all over the place, make a model that is presentable, with clean tables and the assumptions on one tab along with a summary sheet that prints on 1 page.  \n\nAnyone can make a model, but can you make one that not only tells me the returns and the risks, but is one where I can print the summary and present with it.  If not, you\u2019re not done with the model imo.", "replies": [], "depth": 1}]