Underwriting Spreadsheet Terms & Definitions Flashcards
Acquisition Details: Purchase Price
The total amount paid to acquire a property, reflecting its initial investment cost.
Acquisition Details: CapEx (Leveraged)
Capital expenditures financed through debt, covering property improvements or upgrades. Keeps cash reserves intact while enhancing property value.
Acquisition Details: DD, Legal & Civil Costs
Expenses for due diligence, legal, and civil requirements involved in the acquisition, including inspections, legal fees, and compliance checks.
Acquisition Details: Syndication Fee
A one-time fee paid to the General Partner(s) for sourcing, organizing, and structuring the investment, typically a percentage of the capital raised.
Acquisition Details: Closing Costs
All transactional expenses incurred to complete the property purchase, including legal fees, taxes, and lender fees.
Acquisition Details: Interest Reserve
Funds set aside to cover interest payments during periods of low or negative cash flow, typically during initial stabilization or renovation phases.
Acquisition Details: Down Payment/Cash to Close
Initial cash investment required to secure financing and close on the property, covering the loan down payment and associated closing costs.
Equation: Purchase Price - Loan Amount
Acquisition Details: Closing Credit
Seller-provided funds applied toward the buyer’s closing costs, effectively reducing the cash needed to close.
Purchase/Construction Loan: LTV
Loan-to-Value (LTV) ratio for financing, comparing loan amount to property value. Higher LTV means more leverage.
Equation: Loan Amount / Purchase Price
Purchase / Construction Loan: Start Quarter
The quarter when loan payments and interest accrual begin, marking the start of the financing term.
Purchase/Construction Loan: Term (Years):
Length of the loan period in years, affecting the loan’s interest schedule and amortization.
Purchase/Construction Loan: Interest Rate
The percentage charged by the lender on the loan principal, typically expressed as an annual rate.
Purchase/Construction Loan: Loan-to-Value (LTV)
The ratio of the loan amount to the property’s appraised value, determining leverage level and risk.
Equation: LTV = Loan Amount / Purchase Price
Purchase / Construction Loan: Construction Loan Type
Specifies if the loan is solely for property acquisition, construction, or both.
Purchase / Construction Loan: Loan Amount
Total capital borrowed to finance the acquisition or construction, based on LTV and property value.
Purchase / Construction Loan: Max Quarterly Debt Service (DS)
Maximum allowable loan payment per quarter, ensuring quarterly cash flow covers debt.
Equation: Max Quarterly DS = Annual Debt Service / 4
Purchase / Construction Loan: Max Annual Debt Service (DS)
Maximum allowable loan payment per year, ensuring annual cash flow can cover loan payments.
Equation: Max Annual DS = Principal + Interest
Purchase / Construction Loan: Debt Service Coverage Ratio (DSCR)
Measures property’s ability to cover debt obligations with NOI; a DSCR above 1.0 means income exceeds debt costs.
Equation: DSCR = NOI / Debt Service
Additional Loan (Interest Only - IO): Rate
The interest rate specifically for the interest-only loan, generally lower than an amortizing loan rate.
Additional Loan (Interest Only - IO): Amount
Total loan capital borrowed for the interest-only term.
Additional Loan (Interest Only - IO): Qts
Number of quarters during which only interest is paid, reducing initial debt service payments.
Refinance Assumptions: End of Quarter (Qt)
The quarter in which the refinance occurs, often planned based on stabilization or market conditions.
Refinance Assumptions: Interest Rate
The new rate applied to the refinanced loan, which may be lower than the original loan rate.
Refinance Assumptions: Cap Rate
The capitalization rate expected at refinance, based on current market conditions and property performance.
Equation: Cap Rate = NOI / Property Value
Refinance Assumptions: LTV (Refinanced)
Loan-to-value ratio for the refinanced amount, calculated based on updated property valuation.
Equation: Refinanced LTV = Refinanced Loan Amount / New Property Value
Refinance Assumptions: Years
Duration of the refinanced loan in years.
Refinance Assumptions: Type
Loan type designation as fixed-rate or adjustable-rate, affecting the predictability of future payments.
Refinance Assumptions: Annual NOI (next quarter)
Projected annual NOI post-refinance, based on stabilized income and expenses.
Refinance Assumptions: Implied Value
The estimated market value of the property at refinance, based on NOI and cap rate.
Equation: Implied Value = NOI / Cap Rate
Refinance Assumptions: Loan
The total amount refinanced, determined by updated property value and LTV.
Refinance Assumptions: Quarterly Debt Service
Quarterly payment required to service the refinanced loan.
Refinance Assumptions: Quarterly Debt Service
Annual payment required to service the refinanced loan.
Refinance Assumptions: DSCR (Refinanced)
Debt service coverage ratio post-refinance, evaluating the ability to cover new debt obligations with NOI.
Equation: Refinanced DSCR = NOI / Debt Service
Refinance Assumptions: Debt Yield
Measures the strength of refinance, calculated as NOI divided by loan amount.
Equation: Debt Yield = NOI / Loan Amount
Refinance Assumptions: Old Loan Amount
Remaining balance on the original loan before refinancing, impacting total refinance proceeds.
Refinance Assumptions: Refi Excess Cash
The cash remaining after refinancing the property, calculated by subtracting the original loan balance and refinancing costs from the refinanced loan amount. It provides liquidity for investors or reinvestment into the property.
Equation: Refi Excess Cash = Refinanced Loan Amount - (Old Loan Balance + Closing Costs)
Refinance Assumptions: Post Refi Basis ($)
The total property value or loan basis after refinancing, expressed in dollars. This reflects the updated financial structure after refinancing.
Refinance Assumptions: Post Refi Basis (%)
Property basis after refinancing, represented as a percentage. It indicates the new debt-to-equity balance in relation to the updated property valuation.
Operating Deficit
The shortfall between operating income and expenses when property cash flow is negative, often requiring cash reserves or additional capital to maintain operations.
Equation: Operating Deficit = Total Operating Costs - Operating Income
Raise B
A second capital raise structured to meet future funding needs, such as for additional improvements, operations, or debt service during stabilization.
Raise B: Amount
Total funds raised during the second capital raise, supplementing initial equity to meet ongoing or anticipated financial requirements.
Raise B: Raise Quarter (Qt)
The specific quarter in which the second raise takes place, coordinating with the project’s financial and operational milestones.
Sale Assumptions: End of Quarter (Qt)
The quarter in which the property is expected to be sold, marking the projected exit point for investors.
Sale Assumptions: Cap Rate at Sale
The capitalization rate anticipated at the time of sale, used to estimate the property’s market value.
Equation: Sale Cap Rate = Sale NOI / Expected Sale Price
Sale Assumptions: NOI at Sale
Net Operating Income expected at the time of sale, a key input for determining the property’s sale price using the cap rate.
Sale Assumptions: Implied Value
The estimated market value of the property at sale based on NOI and cap rate, used to calculate potential sale proceeds.
Equation: Implied Value = Sale NOI / Cap Rate
Sale Assumptions: Closing Costs
Expenses deducted from the sale proceeds to cover legal fees, broker commissions, and taxes at sale.
Sale Assumptions: Loan Repayment
The outstanding loan balance that must be repaid upon sale, reducing the amount of net sale proceeds.
Sale Assumptions: Net Sale Proceeds
Funds remaining after loan repayment and closing costs, distributed to investors as part of the exit strategy.
Equation: Net Sale Proceeds = Sale Price - (Loan Repayment + Closing Costs)
Limited Partner (LP) Returns: Total Distributions
The total cash flows and sale proceeds paid to Limited Partners over the life of the investment, including pref returns and profit splits.
Limited Partner (LP) Returns: Total Profit
Net profit earned by LPs after return of capital, including their share of property appreciation and operations.
Equation: Total Profit = Total Distributions - Initial Capital Invested
Limited Partner (LP) Returns: Average Equity Out
The average amount of LP equity invested in the property over time, useful for calculating return metrics like cash-on-cash.
Limited Partner (LP) Returns: Cash on Cash Return
Measures annual cash flow relative to equity invested, showing the cash income generated by the investment.
Equation: Cash on Cash = Annual Cash Flow / Total Equity Invested
Limited Partner (LP) Returns: XIRR (Extended Internal Rate of Return)
The annualized rate of return for LPs based on the exact timing of cash flows, accounting for both distributions and sale proceeds.
Deal Returns: Deal XIRR
The project’s total internal rate of return, annualized and calculated based on all cash inflows and outflows for both LPs and GPs.
Minimum Balance for Distribution
The minimum cash reserve required before distributions can be made to investors, ensuring the property retains enough liquidity to cover operations.
Purchase Cap Rate
Cap rate at acquisition, reflecting the property’s income yield based on its NOI and purchase price.
Equation: Purchase Cap Rate = NOI / Purchase Price
Preferred Return (Pref Return)
The priority return rate paid to LPs before GPs earn their share, typically a fixed percentage of capital invested by LPs. Ensures LPs receive a minimum return before profit-sharing.
LP Split
The profit-sharing percentage designated to LPs after preferred returns are paid. Commonly structured as 70/30 or 80/20 in favor of LPs.
Purchase Cash-on-Cash
Measures initial cash flow return as a percentage of cash invested, assessing immediate income yield.
Equation: Purchase Cash-on-Cash = Annual Cash Flow / Total Cash Invested
Price per Unit
The cost to acquire each individual unit within the property, used for comparative analysis across similar properties.
Equation: Price per Unit = Purchase Price / Number of Units
Operating Income
Revenue generated from the property’s operations, typically from rental income, parking fees, and other tenant-paid services. This metric indicates the property’s gross income potential before any expense deductions.
Operating Income: Operating Expenses
All recurring expenses required to operate the property, including utilities, repairs, property management, insurance, and property taxes. These costs directly impact Net Operating Income (NOI) and, therefore, cash flow.
Operating Income: Net Operating Income (NOI)
Income remaining after subtracting operating expenses from operating income. NOI is a critical measure of a property’s profitability before considering debt obligations and helps determine a property’s value.
Equation: NOI = Operating Income - Operating Expenses
Operating Income: Debt Service
Total loan payments required over a given period, including both interest and principal. Debt service impacts cash flow and the property’s debt service coverage ratio (DSCR).
Operating Income: Operating Cash Flow After Debt Service
The remaining cash flow after covering both operating expenses and debt service. It’s a primary metric for assessing profitability and cash available for investor distributions.
Equation: Operating Cash Flow = NOI - Debt Service
Operating Income: Operating Margin
A ratio that shows what percentage of the operating income is retained after covering operating expenses. It reflects the efficiency of the property’s operations and is helpful for comparing similar properties.
Equation: Operating Margin = NOI / Operating Income
Operating Income: All Money In (Investors/Lenders)
Total capital committed to the project, combining investor equity and debt. This metric represents the overall cost to acquire and stabilize the property.
Operating Income: All Money Out (Purchase, Build)
Total capital committed to the project, combining investor equity and debt. This metric represents the overall cost to acquire and stabilize the property.
Operating Income: Comprehensive Cash Flow
Total cash flow generated by the property, including operating income, expenses, capital contributions, and distributions. It provides a holistic view of all cash inflows and outflows.
Operating Income: Start Balance
The initial cash reserve at the beginning of a period, often set to cover early-stage costs or serve as a safety net for unexpected expenses.
Operating Income: Min Balance (Min Bal)
Minimum required cash balance to ensure adequate liquidity. This reserve amount protects against shortfalls in cash flow and ensures continuity in property operations.
Operating Income: Available for Distribution
Cash available for distribution to investors after covering operational needs and setting aside the required minimum balance.
Equity & Returns Section: Start Equity
The initial equity balance, including all capital contributions from investors and any retained earnings. This figure is foundational for calculating returns.
Equity & Returns Section: Contributions
Additional capital provided by investors beyond the initial investment, often used to fund renovations, operating deficits, or expansions.
Equity & Returns Section: Distributions
Cash payments made to investors, typically funded by operating cash flow or proceeds from a sale. Distributions can include returns of capital, preferred returns, and profit-sharing.
Equity & Returns Section: Preferred Return (Pref)
A priority return on capital given to investors before general partners (GPs) receive their share of profits. This is typically expressed as a fixed annual rate or quarterly return on invested equity.
Equity & Returns Section: Cash on Cash Return
The annual return on cash invested, showing the percentage of equity earned back as cash flow. It’s a measure of cash income relative to cash invested, focusing on annual performance.
Equation: Cash on Cash = Annual Cash Flow / Total Equity Invested
Equity & Returns Section: Quarters of Distributions (Qts of Dist.)
The number of quarters over which distributions are made, providing insight into the timing and frequency of investor payouts.
Equity & Returns Section: Cash Flow
Net cash generated from property operations and distributions over time, representing the ongoing profitability of the investment.
Equity & Returns Section: End Equity
Equity balance at the end of a period, accounting for initial investment, retained cash flow, and changes in property value. This is often used to calculate final investor returns.
Equity & Returns Section: Quarterly Return on Total Cost (Qt. Return)
The quarterly return on the property’s total investment cost, providing a metric for assessing short-term performance.
GP Distributions
Profit shares distributed to General Partners based on their agreed share of returns after investors have received preferred returns.
Equity & Returns Section: End Balance
Ending cash balance after accounting for all expenses, distributions, and retained cash flow for the period.
Equity & Returns Section: Deal Cash Flow
Total cash flow from the investment, factoring in all capital events and distributions to both LPs and GPs.
Income Details: Yearly Increase (Calc by Qt.)
The annual income growth rate, calculated and applied quarterly to reflect expected rent increases, economic growth, or inflation adjustments.
Income Details: Gross Income
Total potential revenue generated from rent and ancillary services before accounting for vacancies or collection losses.
Income Details: Less Vacancies
Estimated revenue lost due to unleased units, expressed as a dollar amount or percentage of gross income. It reflects occupancy shortfalls and market conditions.
Income Details: Net Income
Total income after subtracting vacancies from gross income, showing the effective rental income earned from occupied units.
Income Details: Vacancy Rate
The percentage of units not generating income due to being vacant, affecting the property’s effective gross income.
Income Details: Square Footage (SF)
The total rentable area of the property, measured in square feet. This metric is critical for pricing, leasing, and comparison against market standards.
Income Details: Units
The total number of rental units within the property, a key metric for multifamily underwriting.
Income Details: Total SF
The combined square footage across all units, impacting property valuation and rent potential.
Income Details: Monthly/Total Monthly
Monthly revenue before and after accounting for vacancies, showing effective gross income on a monthly basis.
Income Details: Total Quarterly (Total Qt.)
Revenue generated each quarter, typically broken down by units and other sources of income.
Income Details: Market Price (Monthly)
The monthly rent per unit achievable in the market, guiding rent projections for stabilized occupancy.
Income Details: Quarters to Market (Qt to Market)
The estimated number of quarters required to reach market-rate rents for all units, considering lease expirations and renewals.
Income Details: Total Max Market Monthly
The maximum monthly revenue possible if all units achieve market rents, representing the property’s income ceiling.
Income Details: Start/End/Spread Over
The starting and ending periods over which income adjustments are phased in, such as rent increases or lease-up schedules.
Expense Details: Yearly Opex Inflation (Calc by Qt.)
The annual inflation rate applied to operating expenses, calculated on a quarterly basis to reflect anticipated increases in costs.
Expense Details: Expenses
All regular costs associated with property operations, including maintenance, repairs, utilities, insurance, and property management.
Expense Details: Property Tax
Taxes assessed on the property by the local government, usually calculated as a percentage of assessed property value.
Expense Details: Insurance
Premiums for property insurance covering liability, casualty, and hazard risks. This is essential for protecting investment value.
Expense Details: Internet, Utilities, Electric, Gas
Ongoing costs for utilities provided to common areas or for tenant services if included in rent.
Expense Details: Landscaping, Snow Removal
Costs associated with maintaining property grounds, including seasonal requirements like snow removal.
Expense Details: Website and Software
Expenses for digital marketing, website hosting, and property management software.
Expense Details: Marketing
Costs for advertising and promotional activities to attract tenants and maintain occupancy.
Expense Details: Trash Removal
Regular costs for waste disposal services on the property, often contracted with waste management companies.
Expense Details: Repairs & Maintenance
Costs for routine maintenance and minor repairs, critical for tenant satisfaction and property preservation.
Expense Details: Replacement Reserves
Funds set aside for major replacements, such as roofs, HVAC systems, or appliances, ensuring the property remains in good condition.
Expense Details: Credit Card Processing Fees (CC Processing Fees)
Fees for processing rent payments made by credit card, reducing net income.
Expense Details: Management
Property management fees, either as a fixed fee or a percentage of total revenue, covering day-to-day operations and tenant relations.
Expense Details: Total Expenses
The total of all operating expenses required to run the property, directly reducing NOI.
Expense Details: Annual Start/End Quarter
The initial and ending quarters for projecting annual expenses.
Loan Schedules: Loan Balance
The outstanding principal amount on the property’s loan. This balance decreases over time with each principal payment but remains fixed during an interest-only period.
Loan Schedules: Debt Payment
The total payment amount required to service the loan, including both principal and interest portions. Debt payment affects cash flow and is essential for calculating the Debt Service Coverage Ratio (DSCR).
Loan Schedules: Land/Building Loan
A loan specifically allocated for purchasing land or an existing building, typically with terms based on the purchase price and appraisal value.
Loan Schedules: Additional Loan (Interest Only - IO)
A secondary loan structured with interest-only payments, often used to fund improvements or bridge operating deficits during stabilization.
Loan Schedules: Construction Loan
Short-term financing for covering construction and major renovations, typically converted into a permanent loan upon completion. It allows developers to build or improve properties without using full equity up front.
Loan Schedules: Refinance (Refi) Loan
Loan amount secured when refinancing an existing loan, often to take advantage of better terms, reduce interest, or extract equity.
Loan Schedules: Quarters (Qts)
The number of quarters over which the loan payments or interest-only periods apply. It provides insight into the duration of debt service and payment scheduling.
Loan Schedules: Start/End
The beginning and ending quarters for loan payments, whether interest-only or amortizing. Start and end periods establish the timeframe for debt obligations.
Loan Schedules: Increase Over
Describes any incremental adjustments to loan payments over time, which can account for escalating interest rates or payment increases due to loan terms.
Capital Schedules: Capital Contribution
Investor funds contributed toward the acquisition or improvement of the property. These contributions form the equity base used to fund the purchase and any planned capital expenditures.
Capital Schedules: Land/Building
The portion of capital allocated to acquiring the land and/or building, often combined with debt to achieve the necessary financing for the property.
Capital Schedules: Construction
Funds specifically designated for new construction or major renovations, ensuring the property meets operational standards or market demand.
Capital Schedules: Additional Loan (Interest Only - IO)
A secondary loan structured with interest-only payments, often acquired to bridge cash flow needs during a property’s initial operational period or significant upgrades.
Capital Schedules: Raise A / Raise B
Initial and subsequent rounds of capital raises structured to meet specific funding requirements at different project stages. Raise A is typically used for acquisition, while Raise B may cover ongoing or anticipated capital needs.
Capital Schedules: Refinance Excess Cash (Refi Excess Cash)
Cash proceeds generated from refinancing, which may be distributed to investors or reinvested into the property to fund improvements or reserves.
Capital Schedules: Sale
Total proceeds from selling the property, net of closing costs and loan repayment. Sale proceeds form the basis for investor returns and final distributions.
Capital Schedules: Capital Expenditure (CapEx)
Funds allocated for property improvements or value-add projects, often financed through a combination of debt and equity to enhance property value.
Capital Schedules: Purchase Price
The acquisition cost of the property, forming the basis for calculating returns and determining leverage.
Capital Schedules: CapEx (Leveraged)
Improvement costs funded through debt, allowing for property enhancements without depleting cash reserves.
Capital Schedules: Due Diligence (DD), Legal & Civil Costs
Expenses associated with due diligence, legal, and civil procedures necessary before acquiring the property, including inspections, compliance, and contract preparation.
Capital Schedules: Syndication Fee
A fee paid to the General Partner(s) for structuring and overseeing the investment, typically a percentage of raised capital.
Capital Schedules: Closing Costs
All transactional expenses required to complete the property purchase, such as legal fees, title insurance, and lender fees.
Capital Schedules: Closing Credit
Seller-provided funds or concessions applied to offset buyer’s closing costs, reducing the effective cash required to close.
Capital Schedules: Quarters (Qts)
The number of quarters over which capital allocations, contributions, and expenditures apply.
Capital Schedules: Start/End
The beginning and end quarters for capital contributions or distributions, outlining the timeline of investment.
Capital Schedules: Spread Over
The distribution period for capital contributions or debt service, indicating how funds are applied or repaid over time.
