Investment Modeling

Investment modeling is the quantitative analysis process projecting property cash flows, applying valuation methods, and stress-testing scenarios to evaluate acquisition decisions.

Model ComponentElements
Acquisition analysisPurchase price, fees, financing structure
Operating projectionsRent growth, expense inflation, vacancy
Cash flow forecastAnnual NOI, debt service, net cash flow
Exit assumptionsHold period, exit cap rate, selling costs
Return metricsIRR, equity multiple, NPV, cash-on-cash
Sensitivity Analysis VariablesRange Tested
Rental growth rate0% to 5% annual
Exit cap ratePlus or minus 0.5% to 1% from entry
Vacancy assumption2% to 10%
Expense growth2% to 4% annual
Interest ratePlus or minus 1% to 2% for variable rate


Related Terms

Discounted Cash Flow (DCF)IRR Sensitivity AnalysisNet Present Value (NPV)Mortgage UnderwritingRisk Assessment

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