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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…

Retention

The withholding of funds owed in order to increase the probability that the project will be fully completed to the standards initially promised by the contractor/subcontractor. An example of this would be an owner retaining say 10% of the funds…

Vertical Expansion Option

A real option which allows the owner of a development project to build and complete the project to a certain height with an option to increase the height of the building at some future point. The cost of a project when building with this option…

Specifications Manual

A project manual that details the various products, construction materials and methods to be used in the project development.

Schematic Design

The first formal stage of the design phase after the conceptual design period, where initial design concepts are re-evaluated and many early-stage design documents are produced such as early iterations of site plans, floor plans, sections, and…

Owner Controlled Insurance Program (OCIP)

OCIP (Owner Controlled Insurance Program) and CCIP (Contractor Controlled Insurance Program) are broad and all-encompassing insurance policies that usually cover, at a minimum, general liability insurance, worker’s compensation, and excess…

Guaranteed Maximum Price (GMP)

A type of cost plus contract whereby the contractor is reimbursed for all construction related costs, plus a fixed fee. The agreed upon costs and fee are capped, transferring the risk of cost overruns to the contractor, whilst any savings resulting…

Lump Sum Contract

A contract whereby the total price of an entire construction project is negotiated and agreed to between the General Contractor and the Owner regardless of what the actual price ends up being at the end of the project. This type of contract…

Project Buyout

The Project Buyout is the time when the owner of a development project selects the General Contractor (GC) who then, either together with the project owner or alone, goes through the process of selecting and hiring all the subcontractors (subs)…

Offering Memorandum

A presentation and marketing document given to investors for their investment consideration summarizing a potential deal. The memorandum will typically highlight various aspects of the investment such as a detailed description of the property,…

Make Ready Costs

Most often seen on multifamily operating statements, 'Make Ready' costs refer to minor repairs and maintenance work to an apartment unit in order to ensure that the unit is in a suitable condition before being placed on the market and leased…

Renewal Option

A clause contained in a lease agreement giving the tenant the right to renew or extend their lease agreement. The option clause usually contains various predefined terms which both parties initially agree upon, such as a reversion to a ‘market-related’…

Ratio Utility Billing System (RUBS)

A method of calculating a resident’s utility bill based on specific factors such as occupancy rate or apartment square footage and then billing the tenant for their share of utility use. It is often used when the installation of sub meters…

Guarantee of Non-Recourse Carve-Outs

Also referred to as a "Bad-Boy Guarantee", a Guarantee of Non-Recourse Carve-Outs is a guarantee provided by an individual or entity which covers the extent of the recourse liability arising from any non-recourse carve-out.

Non-Recourse Carve-Outs

Referred to colloquially as "Bad Boy Carve-outs", a list of actions or guarantees that may result in the borrower or guarantor taking on partial or full recourse liability for the loan. These actions initially were limited in scope to “bad…

Master Tenant

A tenant who leases directly from the property owner and subsequently subleases all (or portion of) the property to other tenants.