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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…

Loan to Cost

In real estate, Loan to Cost (LTC) is the ratio of the outstanding loan balance to total project cost. The higher the loan-to-cost, the less cash equity the borrower has invested in the property (i.e. less skin in the game) and therefore the…

Loan to Value

In real estate, Loan to Value (LTV) is the ratio of the outstanding loan balance to the value of the property expressed as a percentage. The higher the loan-to-value, the less likely the borrower will be able to repay the loan at maturity. Real…

Future Value Factor

Also called the Future Amount of One or FV Factor, the Future Value Factor is a formula used to calculate the Future Value of 1 unit today, n number of periods into the future. The FV Factor is equal to (1 +i)^n where i is the rate (e.g. interest…

Present Value Factor

Also called the Present Value of One or PV Factor, the Present Value Factor is a formula used to calculate the Present Value of 1 unit n number of periods into the future. The PV Factor is equal to 1 ÷ (1 +i)^n where i is the rate (e.g. interest…

Present Value

The lump-sum value today of a string of future cash flows discounted back to today at a specified discount rate. In real estate, the Present Value of a real estate investment is the price that an investor would be willing to pay today for a…

Hangout and Hangout Risk

The hangout is the expected outstanding loan balance owed the lender by the borrower at the end of the lease term of a key tenant, while the hangout risk is the risk to the lender associated with the borrower's ability or inability to repay…

Net Lease

A commercial lease where the tenant pays base rent plus pays for its pro rata share of some or all operating expenses related to the tenant's occupancy of the space. Types of net leases include single net, double net, triple net, and absolute…

Full Service Gross Lease

A commercial lease where the tenant pays a base rent and the landlord pays for all operating expenses related to the tenant's occupancy of the space such as common area maintenance, utilities, property insurance, and property taxes. Full Service…

Title Insurance

A form of indemnity insurance that safeguards real estate owners and lenders from potential losses stemming from defects in the title of a property. Such defects might include undisclosed liens, encumbrances, or legal discrepancies that existed…

Loan Workout

A resolution agreed upon between the lender and the borrower to restructure the terms of the loan before foreclosure of the property. Workouts typically involve negotiations regarding the minimum monthly payment and/or the amortization period.…

Short Sale

The sale of the property for less than the outstanding debt balance owed to all lienholders (typically senior and mezzanine debt providers). The property will fall into foreclosure if all parties do not reach a consensus agreement to sell.

Jingle Mail

A colloquialism in real estate, a Jingle Mail is the letter a lender would receive containing a borrower’s keys (making a “jingle” sound as the keys bounced around). This situation typically occurs when there is a sharp decrease in the…

Key Performance Indicator

A metric used to measure the performance of a property. Real estate-specific KPI’s include metrics such as Cap Rate, LTV, Debt Yield, Cash on Cash Return, Internal Rate of Return, Equity Multiple, among others.

REVPAR (Revenue Per Available Room)

Referred to in commercial real estate as RevPar, Revenue Per Available Room is a metric used in hotel underwriting to calculate the amount of revenue each available room generates in a given period. RevPar is calculated by either 1) dividing…

Gross Asset Value

A measure used to describe the market value of a property. The value includes debt and equity positions but excludes any acquisition/closing costs.