Valuing a Real Estate Investment
Learning Outcomes
Get More Info
data, Tech & ai skills in
What’s Included
Introducing the Case
Introducing the Case
To begin, we'll learn about real estate asset we're going to value. We'll also meet the investor and his expectations for the investment.
Define the Model Structure
Define the Model Structure
In this lesson, we'll create a structure for the valuation model, defining the critical variables that will determine internal rate of return (IRR).
Revenue Projections
Revenue Projections
Generating revenue projections is typically the first Excel task we complete when building a valuation model. This part of the model is where market knowledge is most important.
Calculate Effective Gross Income
Calculate Effective Gross Income
Effective gross income accounts for revenue losses due to vacancy and collection losses. In this lesson, we'll learn how to include these variables in our model.
Expense Projections
Expense Projections
Expense projections are often ignored in real estate valuation but can have a big impact on final returns. Learn how to add them to your model in this lesson.
Navigation Tips for Models
Navigation Tips for Models
Navigating valuation models can be difficult as they grow. This lesson shows you a very useful tip that makes navigating models much easier.
Mortgage Calculations
Mortgage Calculations
Most real estate assets will be bought with loans to increase IRR. This can be tricky to incorporate into a model, due to the tax treatment of interest payments.
Income Tax Calculations
Income Tax Calculations
Income tax is paid on rental income received during the holding period. It can be reduced by loan interest repayments as we'll find out in this lesson.
Operating Cash Flows
Operating Cash Flows
Operating cash flows are the cash flows received by the investor each year from rental income. Cash flows can be positive or negative, depending the on expenses incurred.
Estimating the Final Selling Price
Estimating the Final Selling Price
The final selling price of our asset will be based on an income multiple. This variable is hard to predict but will hugely impact our final IRR.
Capital Gains Taxes
Capital Gains Taxes
Capital gains taxes (CGT) are incurred when you sell the asset at a profit. CGT rates can vary by asset and by location so you'll need some tax advice to calculate correctly.
Calculate Investment IRR
Calculate Investment IRR
To calculate our investment IRR, we need to combine the initial investment, operating cash flows and cash flows on sale. See how to calculate IRR in this lesson.
Certifications
A Learner Experience Designed to Deliver Transformation
How Leading Teams Use Kubicle to Upskill & Excel
