Foundations of Real Estate Financial Modelling, Second Edition is specifically designed to provide the scalable basis of pro forma modelling for real estate projects. The book introduces students and professionals to the basics of real estate finance theory prior to providing a step-by-step guide for financial real estate model construction using Excel. The book introduces an innovative new financial metric, P(Gain), which quantifies the probability of a Return of Capital and answers the most basic question for investing, "What is the probability I get my money back?".
This new second edition has been fully revised and expanded. The book is separated into three functional units: (1) Real Estate Valuation Basics, Theory and Skills, (2) Real Estate Pro Forma Modelling, (3) Real Estate Pro Forma (Enhancements). New and enhanced Chapters cover:
In addition, this new edition includes problem sets and solutions at the end of each chapter as well as case studies underpinning the chapter topics. Further chapters are dedicated to risk quantification and include scenario, stochastic and Monte Carlo simulations, equity waterfalls, and adding U.S. GAAP financial statements to existing real estate pro forma models.
This book is the ideal textbook for a Real Estate Finance class, providing the theoretical basis of real estate finance as well as valuable modelling skills for the workplace. This book provides individuals with a step-by-step instruction on how to construct a real estate financial model starting with a new spreadsheet. The resultant model is portable, scalable, and modular. A companion website provides the pro forma models to readers as a reference for their own constructed models.
Companion web material available at: https://pgainllc.com/
PART 1 Real estate valuation basics, theory, and skills
1. Real estate basics
2. Asset valuation defined
3. Real estate characteristics defined
4. Interest rates
PART 2 Real estate pro forma modelling
6. Single-family rental (single page)
7. 5-unit multifamily
8. "N"-unit rent roll
9. Development page
10. N-unit for sale
PART 3 Real estate pro forma (enhancements)
12. Accounting statement(s)
14. Schochastic modelling (Crystal Ball)
15. Organization (OptQuest)