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Bilty format in excel for Real Estate

the more institutionalized the real estate industry becomes the more is expected from people entering the business today especially at the analyst and associate level at the top real estate investment and brokerage shops across the globe and to make sure these companies are getting what they're paying for more and more firms are including excel financial modeling assessments during the interview process itself to test a candidate's excel knowledge specifically applied to real estate and to verify what a candidate says they can do on their resume in real time and if you're applying for an analyst or associate role in the real estate industry this is a really important step in the process especially since this is often one of the final steps before receiving an offer and getting dinged here would mean a lot of wasted time and effort during the many other steps of the interview process getting to this point so if you're trying to break into cre this year and trying to land a new role there are a few key things that you can do to set yourself apart from the competition during an excel exam and in this video we'll break down exactly what those things are and how you can use those to ace whatever is thrown your way on an interview day so the real estate hiring process tends to be a pretty long road with multiple rounds of phone screenings in-person interviews and meetings with people you may not even end up working with on a day-to-day basis on the job and at the end of this process to make sure your skill set was everything that was advertised companies are often going to throw in some variation of a timed excel exam usually consisting of a case study for a sample project that might represent something you would be working on on the job so in this video to help you prepare for that if an interview exam is thrown your way on interview day what we're going to do is walk through a few big things that you can do to show really well on exam day and the specific things you should be doing to set yourself apart from the competition on interview day so in general most real estate excel interview assessments involve some variation of a sample case study scenario and the requirement to build out pro forma cash flows based on some key assumptions given in the case and in almost all cases these assumptions are going to fall into one of four main categories you'll have your purchase assumptions so these are going to be your assumptions about your purchase price your closing costs and potentially the date the property is acquired you'll have your operating assumptions so these are going to be things like your operating revenue your operating expenses and potentially even some construction cost assumptions or releasing assumptions you'll have your sale assumptions so these are going to be things like your exit cap rate your cost of sale and your hold period and then you'll also have your financing assumptions so these are going to be things like your loan proceeds your interest rate your amortization period and your loan payoff date as well and from that information given most exams are going to ask you to do two specific things the first is to create a pro forma cash flow statement to project out cash flows into the future using that information that you've been given and then the second piece of this is to answer questions regarding return metrics or risk metrics based on those pro forma cash flows that you've created and there are a lot of different ways to build a real estate financial model but there are a few must haves in these exams that many people miss when working through these assessments and getting these things right can make a huge difference in how you present yourself during the interview process and whether or not they decide to take you over someone else for the role so number one on this list and probably most importantly when working through a real estate financial modeling interview exam you want to make sure that your model is as dynamic as you can make it even if it's not explicitly requested in the exam for you to do so this means creating a model where the assumptions on those four points that i mentioned a minute ago your purchase operating sale and financing assumptions can be quickly and easily changed and everything else in the model related to those assumptions are going to change automatically for the user now obviously to the extent you do this is going to be dependent on how much time you have to complete the exam but at the bare minimum you should be able to change things like your purchase price your rents and expenses your loan amount your interest rate your amortization period and your exit cap rate and your cash flows should change automatically in your model to reflect those assumption adjustments like i mentioned even if the exam prompt doesn't specifically ask for this the expectation of you as an analyst or associate at a real estate investment or brokerage firm is going to be that you can create models that can be used more than once to analyze various different scenarios and even run stress tests on different operating metrics that might come up on a deal and by making your model dynamic you're essentially showing your potential employer that you can make their lives easier with a model that they can use to change one or two assumptions quickly and see how those changes affect the cash flow metrics of the deal as a result now creating a dynamic model is important but you'll also want to make sure that in any model you build that your cash flow timing is realistic and accurately reflects a sample scenario that you might see on a live deal and with that the next point on this list is to make sure that your cash flow model shows cash flows on a monthly basis unless directed otherwise ideally with the specific dates associated with each of those cash flows cash generally flows in and out of a real estate investment every 30 days whether that's through collecting monthly rental payments paying out employees and vendors as operating expense payments or paying a lender your monthly loan payments on a deal and because of that real estate investment in brokerage firms almost always build out pro forma models on a monthly basis to accurately project out cash flows and specifically the timing of those cash flows and this is what should be reflected in a modeling exam as well this is especially important for calculating time-weighted return metrics specifically the irr and the npv since monthly cash flows will produce slightly different values than annual cash flows for these metrics and this could skew your answers on the exam as a result because both of these calculations factor in the time value of money the irr and npv functions weigh cash flows earlier on in the analysis more heavily than those same cash flows received later on in the analysis so if a property generates ten thousand dollars in net leverage cash flow per month and 120 000 in net leverage cash flow per year showing 12 10 000 cash flows each month is going to produce a slightly higher irr and npv value than one 120 000 payment shown at the end of the year and as part of this to make sure your return metric calculations include this time weighted analysis you'll also want to make sure that you have specific dates associated with each of these cash flows these date values are going to be required to use the x irr and x and pv functions and even if a sample acquisition date or analysis start date isn't explicitly given to you using an acquisition date that's somewhere between one to three months in the future and then creating one cash flow in the last day of each month in every month from there is a very reasonable assumption to make and is what i'd recommend for an exam now once your model is dynamic and you've created your monthly cash flows you'll also want to make sure that your model is clean and clear from a formatting perspective and that your assumptions and your thought processes are clearly explained as well employers are going to look at what you create in this assessment as indicative of what you'd likely put together on the job so if you turn in sloppy cash flow projections without borders or shading or it's unclear where your assumptions end and where your cash flows start this just shows your potential employer that the work you put out might be sloppy or hard to understand when you're actually working for the company and really that you're lacking attention to detail which is a huge trait that employers are looking for in analyst and associate candidates before you head into any sort of real estate financial modeling excel exam take the time to learn excel formatting shortcuts to clean up your model quickly and pick a consistent font style shading color and currency format to use across the board also as just a general blanket statement make sure that all of your manual inputs and your model are in blue text and all of your formulas are in black text because this is really the industry standard across the board in real estate financial modeling and this should be used in any excel document that you create on the job or in an assessment and aside from just formatting as part of making the model clear you should also be making comments on your assumptions when necessary to help explain your thought process or why you did certain things that you did oftentimes you'll find that the questions or prompts on these exams are kind of ambiguous and leave you with incomplete information where you'll have to make some sort of assumptions to answer the questions given to you and you want to be as clear as possible as to what you assumed and why you assumed those things just in case your interpretation of the question wasn't the same as the interviewer intended the interpretation to be thought process matters a lot in these exams and the more clarity you can give around why you took certain actions or made certain assumptions that you did the better off you're going to show and the more you're going to demonstrate that your work product is clean clear and makes the hiring managers job easier at the end of the day and finally as a bonus tip here as intimidating as these exams can be keep in mind that you almost never have to get everything correct on these exams in order to land the job many of these assessments are created to be unrealistically difficult or much more work that can be completed in the time given to complete the exam and these assessments are often set up that way intentionally to see how you work under tight deadlines and stress at the end of the day these exams are created for companies to see you in action doing work that would represent things you might do on the job if you were hired and the goal here is really to see how you present your work product and how you think about real estate finance related problems presented to you and with all of that if you can create a dynamic clean clear monthly cash flow model explaining your assumptions when necessary and showing your understanding of basic real estate metrics like the cap rate irr equity multiple and cash on cash return you're likely going to be in very very good shape for interview day so if you're preparing for an excel interview exam during the interview process or you just want to make sure you're ready when the time comes i hope this was helpful in giving you some sort of a framework to tackle whatever might come your way on an interview day and if you're looking for more guided interview exam practice sample case studies and guided excel training to help you prepare for an upcoming assessment or the interview process in general as always make sure to check out breaking the cre academy which is going to give you instant access to sample case studies and excel practice files step-by-step walkthroughs of excel interview exams and solutions to those exams and direct support from me to get your questions answered as you're preparing for the big day and if you're watching this and you've taken excel exams during the interview process make sure to let me know in the comments some of the main topics that you've seen covered on those exams and if you like this video and want to see more content related to interview prep on the breaking to cre channel make sure to let me know by hitting the like button and make sure to subscribe if you haven't already so you don't miss any new videos as soon as they're released as always guys thanks so much for watching if you're heading into an interview exam soon good luck and i'll see you in the next video you