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All Excel models are not created equally and these features can add significant benefits to your analysis and have an impact on your investment decisions.
How sophisticated and complete are the inputs to the excel model? As most property investors and aspiring investors know, there are a large number of factors that can make or break a real estate deal.
In particular, if you buy property that needs rehabilitation, it is critical that the financial model you are using allows you to enter a full array of expenses with sufficient detail to see each item's impact.
You should also be able to group or view income and expenses by category, unit type, month, quarter, year, and tenant.
All of these should be adjustable by simply changing the values themselves, or by applying growth rates.
A wide range of inputs helps during the what-if analysis process and creating multiple scenarios to assess risk.
In the real estate excel model is there enough room to enter multiple financing arrangements from initial down payment to various possible mortgages or seller financing options? Even the simplest property investments can have an initial lump sum of cash which is possibly financed, a first and second mortgage at different rates and maturing at different times, and lots of different transaction fees.
Unless the financial model has this detailed capability it will be difficult to use effectively.
Are taxes and other government or state fees included in the cash flow projections? Depending how your investment is structured these can be very significant factors to the bottom line cash flows or net income.
Since taxes are often paid in lump sum but allocated over time, they can be difficult to model correctly.
There should be a facility in the real estate excel model to change the timing and magnitude of these items.
As demonstrated above, there are a number of important features to look for when buying a real estate excel model.
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