Apartment Investing Model

9 Replies

Do you guys build your own models or have you guys had any luck downloading some? Either models are too complex, or they're overly simplified. I'm all for DIY but wanted to explore this first. 

Hey @Sam Garner , I use Michael Blank's Syndicated Deal Analyzer. It's $100 but well worth it. A few things to know about it:

-there is a small learning curve but not bad at all, plus there are plenty of videos to watch to help you understand it

-if you are not going to syndicate any deals, it still works great but you will have to make a few tweaks

-some might think it is overkill for smaller complexes (say 6-10 units) but I'm using it for small complexes as well and I love the detail and thorough analysis

Let me know if you have any specific questions. Also check out the calculator at https://jakeandgino.mykajabi.com/store/zdt9X8o2 if you're looking for online tools that are a little simpler.

When I first started I built a really simple model that was about as sophisticated as my skill level at the time.  It's simplicity was really reflective of how little I knew about modeling income property.

Next I stepped up to Real Data's REIA Pro. It's a good program and has a lot of advanced features for a few hundred bucks. But then I started running into limitations because I couldn't customize it when I needed to so something specific that the program wasn't built to do.

Finally I realized I just had to build my own if I wanted something that could do everything I wanted to do.  The first run at it was pretty good but couldn't handle all of the variations in financing and didn't have a user-friendly printed output.  So then I went back to the drawing board and started over.  This time I got it right, but even still I've done over 100 different versions over the years as I add features and capabilities.  Now it does everything I want no matter what is thrown at me, and I can't say the same about any commercial product I've seen.

Another benefit to writing your own model--you know exactly what it is doing.  Nothing is worse than having an investor ask a specific question about your numbers and you are caught stumbling and saying "I don't know how that's calculated".

Bottom line is most sophisticated buyers build their own models (and never share them).  But it isn't easy, I've probably spent a couple thousand hours on mine.  Your model should function for the way you operate, it isn't one size fits all.

@Sam Garner   Completely agree with @Brian Burke .  The models I use are built in house and have been refined over many iterations.  For example, I have a drop-down menu by state that automatically incorporates our default inputs by state when we are doing a quick screening of a deal.  If it looks interesting, we will of course validate each input as we dig deeper.

Additionally, our models can also consider ranges of inputs.  So, I can run the model based on low/mid/high values.  And then calculate an expected value based on the probabilities of those ranges occurring.  This is likely overkill for most, but if you have a background in decision analysis, it can be helpful.  Since we buy high vacancy / distressed properties with limited financial history, this can be extremely helpful as we gauge risk.  That way, we can run a version of the model that shows a conservative scenario, as well as a likely expected value scenario.  This helps immensely with making offers and negotiating on these types of properties.

My models started from books and articles that I read and then grew from there. It is amazing when I go back an look at my original analysis models. At the time they felt so detailed, but now, when I look at them, they are very basic. Using someone else's modeling is a great thing, but you need to be able to tweak it to fit what you are trying to accomplish. I expect that in 20 years I will look back and laugh at the modeling I now created. 

The danger in building your own model is that it's so easy to forget important items or have incorrect formulas. When I built the first version of my latest model, I had a couple other models running the same deal side-by-side. That way I was able to match up the values and see where I was wrong. 

Building a financial model is no joke, but it's necessary if you want to have full control over the inputs and methodology.

Just curious. When you say building your own model what type of platform are you starting with? Is it built in Excel and evolved over the years, coded from scratch, pay someone to code it for you? Thanks

Thanks guys for the input! I work in loan origination for multi family, so I’m very comfortable with complex models. I think at the end of the day building my own model is ideal for all the reasons listed, but I do enjoy getting to explore other models for ideas. This is obviously for excel.