Why is Excel Used in Real Estate?

Regardless of whether it is a brand-new development or a core investment, there are lots of moving parts in every real estate deal. From the original acquisition to the debt servicing, construction hard and soft costs, monthly cash flows, and equity distributions, an inexperienced investor can easily lose track. To mitigate failures, professional real estate investors and financial analysts identify good deals by using Excel to underwrite how the cash flows from the acquisition to the disposition of each deal.

Additionally, a good Excel model can identify the worst-case and the best-case scenario in each deal. Ensuring that you and your investors have the complete picture of the deal and preparing for “known unknowns” is critical to the deal’s success.

Underwriting is a critical part of succeeding in real estate investing. From the mom-and-pop level to the most high-end institutional level, investors are expected to be able to understand the risk factors and model each deal. This is why high-end financial institutions hire full-time analysts to underwrite and evaluate deals. Internal financial analysts speed up the process for investors looking for their next deal.

Does this mean that lower to middle level investors are at a severe disadvantage when it comes to identifying deals compared to major financial institutions? After all, not every investor has the capital nor the time to hire and train internal financial analysts. This used to be the case, but not anymore thanks to 3E Management.

3E Management provides institutional-quality underwriting, performs asset management, and creates pitchbooks. Our investment services are for both acquisition and development projects. By choosing 3E, you get a team of experienced analysts ready to help you win your next deal at a fraction of the cost of hiring and training your own financial analysts.

Our team of experienced analysts will build the initial models and run all model iterations/scenarios up until you close on the deals. These underwriting models will be internally reviewed and compared to similar projects before they are sent to you.  

We also sell custom development and acquisition underwriting models for every property type through our affiliate company, Top Shelf Models. These models are fully customizable, precise and error-free. We have 16 different templates for most property types to meet your needs. These models use iterative calculations to ensure accuracy and efficiency, and these models give you more functionality and control over the assumptions.  As a bonus for ordering a personalized financial model, you will be provided with a 1-hour complimentary consultation with the analyst assigned to develop your real estate financial model. To check out the custom model builder, head over to tsmfinancialmodels.com.

Identifying a good deal means having accurate, digestible information. While Excel has been the institutional standard for financial modeling for several years, understanding how to use the software is a time-absorbing skill in and of itself. 3E Management and its affiliates are here to help you expedite the underwriting process while mitigating common mistakes so you get the most accurate information possible in order to help you make good investment decisions.

Before founding 3E in 2016, Managing Member Eric Bergin was Director at Rockpoint Group, where he was responsible for for the Finance Group, as well as acquisitions, asset management, and investor reporting activities.