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Real Estate - Case in Point

Real Estate Case in Point.

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11 Lessons (75m)

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  • Description & Objectives

  • 1. Real Estate Investing Model Deal Terms

    05:43
  • 2. Real Estate Investing Model Calcs Revenues

    08:11
  • 3. Real Estate Investing Model Calcs Opex

    04:24
  • 4. Real Estate Investing Model CF NRR

    04:36
  • 5. Real Estate Investing Model CF Opex

    05:35
  • 6. Real Estate Investing Model CF Expense Reimb

    04:31
  • 7. Real Estate Investing Model CF Capex

    04:02
  • 8. Real Estate Investing Model CF After Debt Service with Debt Calcs

    12:28
  • 9. Real Estate Investing Model Unlevered Cash Flows

    07:09
  • 10. Real Estate Investing Model Levered Cash Flows

    07:43
  • 11. Real Estate Investing Model Returns

    09:50

Prev: Real Estate - Cap Rates and Other Metrics

Real Estate Investing Model Calcs Opex

  • Notes
  • Questions
  • Transcript
  • 04:24

Understand the steps to calculate the operating expenditures

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3. Real Estate Investing Model Calcs Opex Empty3. Real Estate Investing Model Calcs Opex Full

Glossary

Common Area Maintenance Insurance Expenses Operating Expenditure Property Taxes Repair Expenses Utilities
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Venture Capital Project Finance Credit Analysis Transaction Banking Restructuring Capital Markets
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Transcript

Our next step is to calculate the operating expenditures, and we have a series of different kinds of operating expenditures. We have Common Area Maintenance, which is the upkeep of the common areas, things like security, things like cleaning services, et cetera. We have the Common Area Utilities. Utilities are generally calculated separately because they're metered separately. We have Insurance on the building, we have Repairs and Maintenance for the overall building, and we have Property Taxes, which are driven not by square footage, but rather by property value, which is a function of square footage, but tend to be calculated off the assessed value of the building. So all of these will increase on an annual basis. So similarly to the rental revenues, we have to tie these increases into our dates at the top. And I will start by linking to the operating assumptions and keeping in mind, of course, that we need to put these from annual into monthly. So because the structure of these rows is equal to the structure of the rows on the operating assumptions, if we anchor correctly, we can do this once and then copy. So basically, we have our Common Area Maintenance, monthly cost per square foot, and now we're going to factor in the increase and that's going to be equal to the increase as indicated on our assumptions page and we want to anchor the column here and not the row so we can copy this down. So I'll hit F4 three times and that anchors my column. And I'm gonna multiply that by our year indicators at the top. And here I'm going to anchor my rows but not the column. So D2 twice minus C2, hitting F4 twice. And that should give me a proper copyable formula. And now I simply need to put in my growth function and I'll put my formulas out here. We're gonna copy over them in a moment, but we'll put our formulas out here so you can see what we've done. So we've anchored, for the increase, we've anchored the column so that the columns on the assumptions don't walk out to the right, and we've anchored the date indicators, we've anchored the rows so that the rows don't walk south on us. So now I should be able to copy these down to the other expenses. And for the property increase, property tax increase, I need to change this to a percent format because that is how that is handled. And now I can just do a quick check to see if this has in fact worked. It is picking up the property tax increase and it should copy across correctly, but we will find that out in a moment. And what I can do to copy this across, because we're in a very wide model in terms of columns, you know, you tend to kind of get lost in these, in this copy, and it can be burdensome to continually have to find the column that you're in. One of the tricks you can do to avoid that is before you start your model, you can actually put sort of a stopper character in the last column. And then that can be effectively the column that you copy over to so that when it's time to copy the entire thing, we hit the stopper column and we can copy directly over to it. You can also hide the columns to the right of the spreadsheet, which effectively truncates the spreadsheet. Everything beyond column BW disappears, and then that's one way to do it. I'll leave it up to you to figure out which way works best for you. But we can just take a peek and see if the date increases have worked correctly. And it appears, if I go out to year six, that they do, and it looks like everything has in fact copied according to plan. So we now have our operating expenditure calculations.

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