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Real Estate Financial Modeling Accelerator (Updated October 2024)

Prior to launching the Accelerator program, Michael and I fielded email after email requesting a more structured real estate financial modeling training program on the site. Over the years, we've covered hundreds of real estate modeling…

IRR (Internal Rate of Return)

A metric that annualizes the rate of return for a range of cash flows and estimates the profitability of an investment. In most cases, IRR will give you a large result. The textbook formula for IRR is: Discount rate at which Initial…

DSC

Debt Service Coverage. See Debt Service Coverage Ratio.

OCIP

See Owner Controlled Insurance Program (OCIP).

CCIP

See Contractor Controlled Insurance Program (CCIP).

Life Plan Communities

See Continuing Care Retirement Communities (CCRCs).

Construction to Permanent Loan

See Construction-Perm Loan.

Rollover Loan

See Construction-Perm Loan.

Inducement

See Concessions.

Cap Ex

See Capital Expenditure.

WAL

See Average Life

Weighted Average Life

See Average Life.

Gross Absorption

Gross absorption is measured as the total amount of space (or number of units for residential) leased in a given period divided by the total amount of space (or number of units) in a defined market. Gross absorption = Total Units/SF Leased…

Linear Mortgage

A mortgage loan where the amount of principal due in each period is static. As a result, the loan payment due in each period decreases over time as the amount of interest due decreases and the principal due stays the same. The loan balance likewise…

Operating Expense Ratio

The ratio of Operating Expenses to Effective Gross Revenue. The Operating Expense ratio is a metric used in real estate underwriting to understand what proportion of gross revenue is used to cover the expenses necessary to operate the property.…

Prepayment Penalty

A fee charged by a lender for agreeing to allow a borrower to payoff a loan prior to the end of the contractual loan period. A prepayment penalty (i.e. prepayment fee) is meant to cover the cost to lender of a loan paid off prior to the agreed…