Real Estate Model?

Does anyone have any real estate valuation models? If so, please send to: I vaguely recall kkent passing one around a year or two ago but I could be wrong. Also, I’ve seen QuantJock talking about real estate models before. Thanks in advance!


I thought it’s covered pretty well in the CFA text (Level I/II) ? Or is that another chapter that is inapplicable in the real world?

just use any NOI model any the CFAI guidance on RE models is very applicable, as i used to work at a bank and we used the same techniques when valuing RE for loan underwriting, so the above comment holds no weight.

@builders, the ‘above’ wasn’t a comment. It was posed as a question. I’ve never worked in the real estate industry but I thought the CFA did a good job of covering how to value income-earning properties and that is why I suggested topher refer to those models. Also when something is plural (ie. RE models), they “are” very applicable, not they “is” very applicable. Just sayin’

Divide NOI/Cap rate u get your value. Thats the gist of it. Thats what CFA curriculum tells you and thats what basic loan officers use at banks to screen a deal and kick it upstairs. Professional real estate firms use more complicated models which address things like CAM charges etc. I have seen some crazy models with Monte Carlo add-ons for lease renewal probabilities, mortgages and mezz pieces. The models also differ by property types; Affordable housing vs hotel models are different. Basically, the math is not hard (its plug and play and L1 material) Its the knowledge of how an asset type/security works that makes for a good model and something you wont see in the CFA curriculum. Talk to a senior underwriting guy in a RE dept if you know one. What specifically are you looking for?

I’m in the interviewing process for a junior position at a private equity real estate firm. I just wanted to get a flavor for what is commonly used at a fund like that. If anyone is wondering I got the interview through close network contacts.

^are they looking for someone w/ experience? if so, they’ll expect you to know Argus. If not, if you know general DCF and a little about real estate (direct cap valuation, comps analysis, etc.), they’ll probably be willing to train you on the rest. What region/property type? It might be a good idea to check out some market reports on the market/property type you’d be involved in - know a little about the trends going on now: rents, vacancy trends, pricing. CBRE has market reports on their website, which i think are free if you register:

I don’t have any experience in real estate and the email stated that RE exp is preferred but not necessary. Thanks for the info though. I actually only just had a phone interview so far. I’m still waiting for more info. This position isn’t actually on the deal team, but it is an analytical position that would pay well and be way better than what I have now.

ditto jbaldyga!!! They will prob want you to know Argus. Argus is the industry standard in RE. Its kinda stupid req. The software is 2K. No one would buy it themselves, and mos companies are not willing to train you. Try to get an academic version for a few hundred bucks and see if you work thru it. Know DCF valuation, IRR, XIRR/MIRR and NPV. Real Estate firms esp in NYC are notorious for tossing a valuation problem at you during an interview. Its also important to know whats happening in various asset classes thru the country. Find out what they specialize in i.e. industrial, medical office space etc. and dig thru market reports. Whats going on in gateway cities, and secondary and tertiary cities. If the firm specializes in lending/investing in RE securities know whats happening on lending front, who has started lending and what competitors are up to.

Hi Topher, Read a couple of industry sites to get a grasp of things It all depends on what the firm is looking for; multi-family, retail, office, industrial, loan pool portfolios etc. They obviously know you have limited experience in real estate so just show them that you’re smart and easy to work with. Best of luck