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CRE MODELING - BASICS > KEY INVESTMENT METRICS > Flashcards

KEY INVESTMENT METRICS Flashcards

1
Q

CAP RATE

A

NOI AS PERCENTAGE OF PURCHASE PRICE

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2
Q

CAP RATE IS ALSO CONSIDERED

A

UNLEVERED RETURN

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3
Q

GOING-IN CAP RATE

A

CAP RATE AT PURCHASE

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4
Q

EXIT CAP RATE

A

CAP RATE UPON SALE

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5
Q

CAP RATE - FORMULA

A

= NOI / PURCHASE PRICE

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6
Q

CAP RATE VALUATION

A

PROPERTY VALUE BASED ON NOI & CAP RATE

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7
Q

CAP RATE VALUATION - FORMULA

A

= NOI / CAP RATE

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8
Q

GOING-IN CAP RATE - VALUATION

A

= NOI YR1 / CAP RATE

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9
Q

EXIT CAP RATE - VALUATION

A

= NOI (YR AFTER SALE) / CAP RATE

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10
Q

NET PRESENT VALUE

(NPV)

A

PRESENT VALUE OF CF’S BASED ON OUTFLOWS, INFLOWS, RATE & TIME

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11
Q

NPV - FORMULA

A

= NPV(RATE, FUTURE CF’S) - INITITAL INVESTMENT

INITIAL INVESTMENT: $200,000

CF’S 1 - 5: $75,000

RATE 5%

RATE: 5%

CF0: - $200,000

CF1: $75,000

CF2: $75,000

CF3: $75,000

CF4: $75,000

CF5: $75,000

NPV = $124,710

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12
Q

(+) NPV

A

VALUE CREATED

ACTUAL RETURN > HURDLE RATE

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13
Q

(-) NPV

A

VALUE LOST

ACTUAL RETURN < HURDLE RATE

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14
Q

RELATIONSHIP BETWEEN RATES & VALUE

A

INVERSE RELATIONSHIP

HIGHER RATES = LOWER VALUE

LOWER RATES = HIGHER VALUE

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15
Q

EVALUATE (+) & (-) NPV

A

EVALUATE BASED ON HOW RATE MUST BE MOVED TO GET NPV TO ZERO

CONSIDER 0 AS THE ACTUAL RETURN RATE

(+) NPV - MUST INCREASE HURDLE RATE TO GET NPV TO 0 - ACTUAL RETURN > HURDLE RATE

(-) NPV - MUST DECREASE HURLDE RATE TO GET NPV TO 0 - ACTUAL RETURN < HURDLE RATE

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16
Q

UNLEVERED NPV

A

NPV IF NO DEBT USED

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17
Q

UNLEVERED NPV - FORMULA

A

INITIAL OUTFLOW = TOTAL PROJECT COST

OPERATING CF’ = CF BEFORE DEBT SERVICE

RESALE CF = AMOUNT REALIZED

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18
Q

TOTAL PROJECT COST

A

PURCHASE PRICE

+ CLOSING COST

+CONSTRUCTION/REHAB COST

TOTAL PROJECT COST

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19
Q

CF BEFORE DEBT SERVICE

A

= NOI - CAPITAL EXPENSES

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20
Q

AMOUNT REALIZED

A

= SALES PRICE - SALES COST

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21
Q

LEVERED NPV

A

NPV WHEN DEBT CONSIDERED

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22
Q

LEVERED NPV - FORMULA

A

INTITIAL OUTFLOW = NET INITIAL EQUITY

OPERATING CF’S = BTCF

RESALE CF = NET SALES PROCEEDS

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23
Q

NET INITIAL EQUITY

A

= TOTAL PROJECT COST - LOAN AMOUNT

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24
Q

BTCF

A

NOI

- CAPITAL EXPENSES

CF BEFORE DEBT SERVICE

- DEBT SERVICE

BTCF

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25
NET SALES PROCEEDS
SALES PRICE - SALES COST - LOAN PAYOFF _- PREPAYMENT PENALTY_ **NET SALES PROCEEDS**
26
INTERNAL RATE OF RETURN | (IRR)
RETURN BASED ON GIVEN OUTFLOWS & INFLOWS DISCOUNT RATE THAT YIELDS NPV OF $0
27
UNLEVERED IRR
IRR WHEN NO DEBT USED
28
UNLEVERED IRR - FORMULA
INITIAL OUTFLOW = TOTAL PROJECT COST OPERATING CF = CF BEFORE DEBT SERVICE RESALE CF = AMOUNT REALIZED
29
LEVERED IRR
IRR WHEN DEBT CONSIDERED
30
LEVERED IRR - FORMULA
INITIAL OUTFLOW = NET INTITAL EQUITY OPERATING CF'S = BTCF RESALE CF = NET SALES PROCEEDS
31
EQUITY MULTIPLE
CUMULATIVE RETURN ON TOTAL EQUITY INVESTED
32
UNLEVERED EQUITY MULTIPLE
CUMULATIVE EQUITY RETURN WHEN NO DEBT USED
33
UNLEVERED EM - FORMULA
(CF'S BDS + AMOUNT REALIZED) / CUMULATIVE EQUITY INVESTED
34
LEVERED EQUITY MULTIPLE
CUMULATIVE EQUITY RETURN WHEN DEBT CONSIDERED
35
LEVERED EM - FORMULA
= (BTCF'S + NET SALES PROCEEDS) / CUMULATIVE EQUITY INVESTED
36
EQUITY MULTIPLE CONSIDERS CF'S OVER WHAT PERIOD OF TIME?
THE ENTIRE HOLDING PERIOD
37
CUMULATIVE EQUITY INVESTMENT
INITIAL EQUITY INVESTMENT + NEGATIVE OPERATING CF'S _+ NEGATIVE RESALE CF_ **CUMULATIVE EQUITY INVESTMENT**
38
EQUITY MULTIPLE = EXCEL CALCULATION
=SUMIF(CF'S \> $0) / ABS(SUMIF(CF'S \< $0)) OR =SUMIF(CF'S \> $0) / -SUMIF(CF'S \< $0)
39
AMOUNT REALIZED
$ RECEIVED UPON SELL WHEN NO DEBT USED
40
AMOUNT REALIZED - FORMULA
SALES PRICE _- SALES COST_ **AMOUNT REALIZED**
41
NET SALES PROCEEDS
$ RECEIVED UPON SALE WHEN DEBT USED
42
NET SALES PROCEEDS - FORMULA
SALES PRICE _- SALES COST_ **AMOUNT REALIZED** _- UNPAID DEBT_ **NET SALES PROCEEDS**
43
CASH ON CASH RETURN
ANNUAL CASH RETURN ON CASH INVESTED
44
CASH ON CASH RETURN IS ALSO CONSIDERED
INVESTOR'S ANNUAL DIVIDEND
45
UNLEVERED CASH ON CASH RETURN
CASH RETURN WHEN DEBT NOT USED
46
UNLEVERED CASH ON CASH RETURN - FORMULA
= CF BEFORE DEBT SERVICE / CUMULATIVE EQUITY INVESTED
47
CUMULATIVE EQUITY INVESTED - UNLEVERED CF'S
SUM OF NEGATIVE TOTAL UNLEVERED CF'S
48
LEVERED CASH ON CASH RETURN
CASH RETURN WHEN DEBT CONSIDERED
49
LEVERED CASH ON CASH RETURN - FORMULA
BTCF / CUMULATIVE EQUITY INVESTED
50
CUMULATIVE EQUITY INVESTED - LEVERED CF'S
SUM OF NEGATIVE TOTAL LEVERED CF'S
51
CASH ON CASH RETURN - EXCEL FORMULA
OPERATING CF / SUM OF NEGATIVE TOTAL CF'S
52
OPERATING CF'S - EXCEL FORMULA
UNLEVERED OCF = CF BEFORE DEBT SERVICE LEVERED OCF = BTCF
53
TOTAL CF'S - EXCEL FORMULA
TOTAL UNLEVERED CF'S OR TOTAL LEVERED CF'S
54
POSITIVE LEVERAGE
USE OF DEBT INCREASES RETURN LEVERED RETURN \> UNLEVERED RETURN
55
NEGATIVE LEVERAGE
USE OF DEBT DOES NOT INCREASE RETURN LEVERED RETURN \< UNLEVERED RETURN
56
LEVERAGE & CASH ON CASH RETURN
(+) LEVERAGE - CASH ON CASH RETURN INCREASES WITH DEBT (-) LEVERAGE - CASH ON CASH RETURN DECREASES WITH DEBT
57
LEVERAGE - CAP RATES & LOAN CONSTANTS
(+) LEVERAGE = CAP RATE \> LOAN CONSTANT (-) LEVERAGE = CAP RATE \< LOAN CONSTANT
58
XNPV
CALCULATES NPV USING EXACT DATES
59
XNPV - FORMULA
=NPV(RATE, CF'S, DATES)
60
XNPV DOES NOT REQUIRE WHAT?
DON'T HAVE TO SUBTRACT INITIAL INVESTMENT AT THE END INITIAL INVESTMENT IS INCLUDED IN THE CF'S USING DATES ELIMINATES NEED TO SUBTRACT INITIAL INVESTMENT AMOUNT
61
XIRR
IRR CONSIDERING EXACT DATES
62
XIRR - FORMULA
=XIRR(CF'S, DATES)

CRE MODELING - BASICS (10 decks)

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