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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…

Wall Street Prime Rate

The Wall Street Prime Rate (Prime Rate), is the interest rate charged between the largest banks in the United States. The rate is not linked to the Fed funds rate although there is typically a 300 basis points (3%) spread between them. The WSJP…

Millage Rate

The rate used to calculate the property tax on real property. This is calculated in increments of $1,000, with each “mill” representing 0.1% of the property’s taxed assessed value (often lower than market value). For example, if a property's…

Institutional Investor

An institutional real estate investor is a large company or organization with substantial capital and an allocation to real estate investments. Pension funds, life insurance companies, investment banks, sovereign wealth funds, and endowments…

Limited Partner

A limited partner is a passive, in terms of management responsibility, partner in a real estate investment. In a typical real estate partnership, the general partner (sponsor or GP) manages the day-to-day aspects of the investment strategy and…

Special Servicer

The designated party responsible for handling situations whereby the borrower defaults. A special servicer has the authority to structure loan workouts or institute foreclosure proceedings. This is in contrast with a standard mortgage servicer…

Levered Cash Flow

The net cash inflows and outflows of a real estate investment taking into account cash flows related to financing.  Levered cash flows generally consist of total investment costs, loan fundings and payoffs, net operating cash flows after financing,…

Loan Amortization

The repayment of the principal balance of a loan through periodic payments over time. In an amortizing loan, a portion of the loan payment each period is used to pay the interest owed for that period with the balance used to pay down principal…

Interest Reserve

A reserve account held by the lender of a construction loan and used by the borrower to cover loan interest shortfalls during construction and lease-up. The interest reserve is funded via the initial proceeds from the construction loan, and…

Pari Passu

A Latin term used to describe the equal treatment of investors, returns or securities. In real estate, the term is commonly used in waterfall distribution models to reference the pro-rata distribution of profits based on each investor’s initial…

Occupancy Cost

The total cost incurred by a tenant in order to occupy space in a building. These costs are all stipulated in the lease agreement and include items such as base rent, tenant reimbursement expenses, percentage rent, parking charges, etc.

Sources and Uses

A schedule which provides an overview of where capital for a real estate project is sourced from (sources) and how capital is deployed (uses). The sources side includes items such as loan proceeds and investor equity contributions, whilst the…

Permanent Financing

A long-term mortgage loan typically secured by a fully stabilized and performing real estate asset. A Permanent Loan (i.e. Permanent Financing) often includes a fixed interest rate with a longer loan term (7+ years). The permanent loan may…

Internal Rate of Return

The discount rate at which the net present value of an investment is equal to zero. The internal rate of return is a time value of money metric, representing the true annual rate of earnings on an investment. In real estate practice, IRR is…

Opportunistic

A real estate investment strategy categorized by high risk and high returns. Opportunistic real estate strategies typically involve a high degree of uncertainty, more volatility in cash flow and require greater subject matter expertise. These…

Lease Depth

The distance measured between the building window line and the building core wall’s exterior side.