Recommended financial models for apartments?

17 Replies

Hi everyone,

I am fully aware of the BP calculators (which are awesome), but as I am a finance person and like to see things being calculated in excel (or a platform with greater granularity), do you have any financial model examples for valuing apartment complexes and modeling out their cash flow? I'm aware of ARGUS as well those I've seen from Googling, but I definitely trust the opinions of BP members and just wanted to see if there was anything you guys could recommend from your experience.

Ideally hoping to start within the 20 unit range, but open to all shapes and sizes to become more familiar.

Thank you!

Michelle

Hi Michelle, I use the Opportunity Evaluator by J. Scott Scheel. It uses Excel format and does all the calculating for you from current to projected financials for presenting them to your network of investors,etc. 

I've used this for the last few years and haven't needed anything else. I'm open to also knowing what other people use. 

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@Tony Banawa and @Ashley Pimsner , thank you for your recommendations, will take a look!

Any others? or perhaps any variables you've come to include along the way based on your experiences?

Hi Michelle,
You might want to take a look at www.realdata.com. You can download Excel templates from there.

George

George Hermann, Halstead Property, LLC

@Michelle Watt

I have a simple Excel sheet that I use for multis.  At the end of the day I come up with a number that I'd like to pay for the place.  I have posts all over BP with "I'd pay $xxxx for that place if..." or something like that.

I like it simple.  I don't use appreciation in my calculations anywhere.  When I look to sell a place, I'm going to know that I didn't spend extra money holding it in hopes that it's value has gone up.

If I play the appreciation game, I prefer forced.  

@Aaron Montague - Hi Aaron, that's comforting to know people still use excel haha. Helpful and interesting to know you don't factor in appreciation anywhere, that's probably something I'll follow since I know appreciation should only be icing on the cake, if you can get it. Thanks for your advice!

I am currently looking into refm, getrefm.com (excel or web). I think the two most advanced options would be that and realdata.com. Michael Blank, who writes on the BP blog, also sells something at themichaelblank.com (excel). I have not looked in depth into it, but it looks pretty solid for most use cases while being considerably less expensive.

@Seth C. - awesome, thanks for chiming in. Another BP member recommended Michael Blank's stuff and real data, so I'm glad I've got some validation from you! Can I ask why you are looking into refm, is there something in particular it offers?

For refm, it is a mix of having many features like realdata, including double promote, two levels of detail that you can use to promote to different people, rehab scenarios, etc., as well as being customizable. That last point is a big one. I find it hard to justify $500 for realdata when it is not customizable, but it is Galinelli's product, and it is very well done. REFM is also associated with some big names, Bruce Kirsh there works on some level with Peter Linneman from Wharton. So those two are backed by some of the biggest names in RE finance. 

At the same time, I don't really know if their computer programs offer anything more than what is offered by Michael, or that couldn't be easily integrated into his excel models. Two things that stood out to me are the double promote and the MIRR. But MIRR can be added in about 30 seconds since there is an excel function for that (as I found out), and it is not even useful for promoting your deals. Everyone has their own baseline for returns, and they need to do it themselves. Double promote, lease option returns versus syndication, more complex tax calculations, comparing different opportunities in detail ... at least the possibility to add it is there.

In reciprocity, what are the main points you are looking for? I am quite curious as to what you are leaning towards, whether it is ground-up dev or anything you have seen... I am shying away from ground up for now, because I think I risk focusing on things that are textbook important but perhaps need to take a back seat in light of an experienced investment perspective. These guys have already done that for me, so it is an inexpensive way to get some training wheels while I learn by doing.

@Seth C. - thanks for the detail on that. It sounds like at your level of experience and knowledge, REFM may seem like a good fit for you. If and when you try it, would love if you could come back and post your thoughts! I graduated from Penn, so if Peter Linneman works with it then I'm definitely curious about it.

As for me, I consider myself to be a complete newbie in real estate (going through the recommended books/webinars one by one), but I do feel I'm at the point where most of the recommended learning sources are saying similar things, and so my next course of business is to dig deep into the analysis. I'm a former investment banker who still works in finance, so for me (especially in the early stages), I'd prefer not to just have a software that does everything for me. I'd like to go cell by cell and figure things out that way, like why we are doing it and how it's being calculated. Maybe just my personality haha. 

It's funny how even though I've been on BP for only two months, my goals have changed from finding a fourplex in state (CA) to aiming for a ~20 unit apartment complex out of state (feel free to impart any advice if this is your area, accepting any and all opinions from BP members hahaha). I have not yet purchased and am currently learning how to analyze these deals - that said, I always like to see additional flexibility and hence reached out for excel based models to teach me.

Since I'm new, definitely not looking at ground up dev (yet, at least). The usual newbie looking for an older property in a more decent area are my criteria, while I research good markets. I think until then, Michael Blank and Real Data should get me through. Once I'm done with those, will probably post my opinions on them on here if I have anything valuable to add :)

@Michelle Watt , I recently started a different thread about property analysis and shared my spreadsheet there. You're welcome to take a look:

http://www.biggerpockets.com/forums/88/topics/197189-a-sample-value-add-apartment-deal---how-un-realistic-is-this-porforma

oh awesome @Nick B. ! Will take a look now. Thank you for pointing me to it!

@Michelle Watt , I meant software dev, sorry! It is all a cost-benefit thing. I find that the excel work is more tedious than educational, so I am still deciding whether to pay up and move fast or do the ground up work. I have never been required to use it and would rather use a proper programming language, but my investors will require excel, so I am stuck. I definitely agree that the books quickly can't add much unless they are read while you are actually doing things. But get beyond your comfort zone of the analytics and talk to brokers, etc. You learn very fast that way.

hahaha @Seth C. , sorry for the misunderstanding! Completely agreed - I just wanted to see the excel so I could understand how things are calculated, then I'll be fine with the software after a couple of them :) And great point about the brokers and getting out and networking - a meeting I had with a broker is what prompted me to get a model I could really understand! I think they go hand in hand.

Thanks for the advice and happy investing to you!

I think you will like this. CCIM DCF

@Bryan H.  - thank you! I've been on CCIM but didn't realize there were models. Will take a look, thanks so much!