Multifamily value-add is the bread and butter of the commercial real estate industry. It presents a great opportunity to improve a property and raise rents accordingly. However, things can go wrong, and one way to ensure success is building out a model with a sensitivity analysis and waterfall to see how much money you will make if conditions don’t go as projected. I am happy to offer this model to help determine an accurate picture of a property’s financial future.

How much does the bank charge for using their money? That is a good way to look at the issue of interest rates. If the cost of borrowing money, aka the interest rate, is too high that will mean more of your profits will go to the bank. If more of your profits go the bank then your DSCR, Debt Service Coverage Ratio, will not be enough to qualify for the loan. I explain all the terms and lingo you need to know in this spreadsheet as well. Use this excel template to determine how much your mortgage will be with different interest rates.

Is there high demand and low supply? Are construction costs reasonable? When assessing the appetite of the market for more supply, you need to do your homework. Building is a risky business, and it can easily go wrong. You should carefully budget and plan you build. To start, download this form, to help you outlay all your costs and budgets. From there the model will calculate, the returns you could make. Remember, a model is only as good as its inputs, so make sure the input numbers are accurate. Use this excel template to help determine you profit and value after building.

A sources and uses sheet is a great way to track where money will be allocated during a project. This simple model will help bankers, investors, and syndicators understand how the much money is needed, and the different categories it will be allocated to.

Many of my clients start out with small, non-branded hotel or motels. From there they climb into bigger properties, usually through a value-add approach. Afterwards, they take on larger more well-known brands, such as Hilton, Marriott, Clarion, and more. Then onwards and upwards to develop hotels. What starts small can very well grow big, but first let’s get down to basics. Here I go over what may be the very beginning of your hotel ownership journey. Use this excel template to determine how much a hotel is currently worth.

To solve the housing crisis, many more homes need to be built. Understandably, some neighborhood will be built-to-rent, single family homes. This model will walk you through a detailed chorography of financial modeling to help uncover all the costs and profits a project can manifest.