Summary
Full Transcript
In the opening lesson of the financial modelling course, the focus is on building a foundational structure for the financial model. A new tab called "Cash Flows" is added to the model. This tab is intended to consolidate all the key assumptions required for the financial modeling exercise. The primary goal in this lesson is to input assumptions, which are pivotal to financial modeling. The assumptions are categorized into different sections: 1. Acquisition Assumptions: Here, the purchase price of the asset is set at €90 million. Additionally, 5% of the purchase price is allocated for real estate transfer taxes, and €250,000 is allocated for due diligence costs. 2. General Assumptions: These include the modeling start date (December 23) and the total surface area of the building, which stands at 10,000 square meters. 3. Rental Assumptions: The rental rate per square meter per month is €30, with an annual growth rate of 3%. The inflation rate is set at 4%. The occupancy rate is expected to remain at 100%, and the lease length is projected to be ten years. 4. Financing Assumptions: Loan-to-cost financing is set at 50%, and the cost of debt is 4%. 5. Exit Assumptions: The exit yield is set at 3.5%, and exit costs are estimated to be 1%. The asset is projected to be sold in year five. 6. Additional Assumptions: Asset management fees are assumed to be 6%. Annual operating expenses (Opex) are estimated at €250,000. The lesson emphasizes the importance of structuring assumptions neatly and uniformly within the "Cash Flows" tab. Proper formatting, alignment, and colour coding are applied for clarity and organization. The tab serves as a central repository for all assumptions, laying the foundation for subsequent lessons where these assumptions will be utilized for cash flow projection. This lesson provides a crucial starting point for building a robust financial model, a cornerstone of real estate financial modelling. The course instructor also mentions that the exit yield and other complex aspects are explored in more detail in dedicated courses on their platform, highlighting the depth of understanding achievable in financial modeling. By completing this lesson, students are now equipped with a structured set of assumptions and are ready to delve into the financial modeling process in subsequent lessons. All financial modelling files and support files for this case study can be downloaded here https://www.reia-edu.com/beginner-real-estate-financial-model For more advanced real estate investing and financial modelling courses please visit: www.reia-edu.com
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