Learn Real Estate Financial Modeling

In an interview I did with Dr. Peter Linneman I asked him “what’s the best way to break in to the real estate business?”. His response, get to the point where you can do Excel in your sleep – know how to put together rows and columns quickly and accurately. The reason is because it’s a useful input in everyone’s decisions process and none of us want to do it. If you can model real estate deals in Excel quickly and accurately, you’re valuable.

Learning to model real estate deals in Excel is a valuable tool and can differentiate you from other job-seekers, but it’s very hard to do on your own. This page is dedicated to helping you learn how to model real estate transactions in Excel enabling you to land a great position with a best-in-class firm.

Teach Yourself

Ambitious students can teach themselves real estate modeling in Excel by purchasing a textbook and completing the exercises at the end of each chapter. The best textbooks for learning real estate financial modeling are:

Online Classes

REFM provides students with best in class online real estate financial modeling training. They offer intensive beginner classes that will teach you financial modeling techniques specific to a variety of real estate property types. While the only way to really learn financial modeling is dig in and do it on your own, REFM will accelerate the learning process. Full disclosure, I’m an affiliate of REFM. I recommend them because they are useful and helpful, not because of the small commission I make if you decide to buy their product.

Breaking into Wall Street: If you’re interested in working in investment banking or for a REIT, I recommend Breaking into Wall Street’s Real Estate and REIT Modeling Course. In this course you’ll learn how to use REIT equity research and SEC filings and important metrics and methodologies, such as Funds from Operations (FFO), Adjusted Funds from Operations (AFFO), and the Net Asset Value (NAV) model.

In-Person Classes

Josh Kahr, Excel for Real Estate Analysis: I’ve taken Josh’s courses in NYC and I’m blown away by his knowledge of the business and his ability to make excel for real estate analysis training interesting. A schedule of his classes can be found on his website.

Experts Weigh In

I asked Bruce Kirsch of REFM  and Professor Roger Staiger to share their thoughts on what characteristics great modelers possess and the best way to learn real estate modeling in Excel.

What are some of the characteristics of good deal modelers?

Bruce:

  1. Curiosity about deal mechanics and the ability to ask the right questions to uncover the nuances
  2. Carefulness
  3. Speed

Roger:

“Anal Retentive”. I once gave my father a T-shirt on Christmas that said, “Does anal retentive have a hyphen?”  I still do not know the answer to it but simply pondering the question is a good characteristic of a great modeling.  One must be detail oriented, focus on presentation and formatting, and command a great understanding of accounting and statistics.  The languages of finance are accounting and finance so understanding both to a great degree is essential.

How would you describe your philosophy on teaching financial modeling in excel?

Bruce:

A model is meant to simulate a business outcome. You must first understand the business elements and the operating and deal mechanics before you can model them accurately.

What are some of the most common questions you get asked in your class?

Bruce:

What’s the keyboard shortcut for this on a Mac?”

My answer: “Are you a DJ or a graphic designer?  Why are you using a Mac for spreadsheet modeling?”

(Sorry if it seems harsh, but exactly zero of the large companies for whom we conduct corporate trainings use Macs. These are companies at the very top of the business.)

What’s the best way to learn real estate financial modeling on your own? Top books/resources?

Bruce:

Build every Excel-based Figure in the Linneman textbook from scratch.

(Biased) Devour our blog and all of our products.

Roger:

If you want a child, it requires a pregnancy. The same is true with real estate.  The best way to break into real estate is to purchase on one’s own account.  If you and starting out, a small house that you rent rooms to your friends.  Place the house in an LLC and develop monthly financial statements, no matter how Spartan, for the business.  Track every revenue dollar and expense in a spreadsheet that flows into financial statements.  Develop a financial model for the project and the outgrowth will be a budgeting tool.

What’s one piece of advice you’d give to a real estate professional brand new to modeling deals?

Bruce:

Don’t assume anything about things new to you. Simply ask: “How does this work?” and then listen closely.

If there are any resources you’ve found effective, email me so I can add them to the list.