Underwriting Commercial Real Estate Investments [My Excel Model]

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Күн бұрын

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Running numbers on commercial real estate investments can be quite complicated unless you have sophisticated software to assist you along the way. Unfortunately, most of these investment models either cost a fortune or aren't the easiest to use. That's why Apt Guy Bruce Petersen and I collaborated on these spreadsheets - to provide an affordable, simpler way of underwriting your potential real estate investments.
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// ABOUT TYLER
Tyler Cauble is Founding Principal and President of The Cauble Group, an East Nashville-based commercial real estate brokerage serving the Greater Nashville Area. He's a native Nashvillian that has not only been a witness to the city's tremendous growth, but is also involved in it through his developments, renovation projects, and volunteer work.
As President of The Cauble Group, Tyler helps bring together buyers, sellers, landlords, and tenants in retail, office, industrial, and multi-family real estate. He’s committed to helping business owners understand the market so that they can grow their business and be part of Nashville’s future. Cauble is also the best-selling author of Open For Business: The Insider's Guide to Leasing Commercial Real Estate.
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#underwritingcommercialrealestate #underwritingcommercialdeals #commercialrealestateunderwriting

Пікірлер: 100

@TylerCauble 2 жыл бұрын

Ready to start underwriting investment deals? Get our latest underwriting models here: www.tylercauble.com/models

@davidmurff540 2 жыл бұрын

Would this spreadsheet be useful for small multifamily (5+ units?) OR syndicated deals only?

@TylerCauble 2 жыл бұрын

Yes - I would use the multifamily model we have since it’s specifically built for that use

@Destroyer-vd8rl 2 жыл бұрын

Hey Tyler. When you underwrite deals, do you then do it before signing the purchase contract and going into escrow, or after?

@Katvannag 3 жыл бұрын

Great channel Tyler!! Keep videos coming. Learning so much.

@TylerCauble 3 жыл бұрын

That’s great to hear, Brendan! We’ll keep ‘em coming 🤙🏼

@carlcuesta2157 3 жыл бұрын

Really enjoyed this and glad you took the time to break it down. Underwriting is truly understanding a property

@TylerCauble 3 жыл бұрын

Absolutely! Underwriting is so critical to making a strong investment

@stevenwelch1231 2 жыл бұрын

Appreciate this video! Thank you for getting into the details of what numbers are conservative and why! Great content everytime

@TylerCauble 2 жыл бұрын

Glad you enjoyed!

@mohammedrahman4905 2 жыл бұрын

Tyler this content is so helpful - even though CRE is a niche community in the KZfaq sphere, your content resonates strongly!

@TylerCauble 2 жыл бұрын

Thank you, Mohammed! Glad you’re finding value in it all 🙌🏼

@HEOEvgeny 3 ай бұрын

Great stuff. Keep showing up and we will watch it

@TylerCauble 3 ай бұрын

I appreciate that!

@AlexRodriguez-hs2ib 3 жыл бұрын

Great video! Thank you for sharing !

@TylerCauble 3 жыл бұрын

For sure!

@jovekuang1955 2 жыл бұрын

Cool content! Thanks for sharing!

@TylerCauble 2 жыл бұрын

Of course!

@MuhammadAli-bp6iq 2 жыл бұрын

Amazing information ℹ️

@TylerCauble 2 жыл бұрын

Glad it was helpful!

@40EntrepreneurDrive 3 жыл бұрын

1. I never realized that "underwriting" was something that an individual could/should do before investing. 2. I learned a lot in terms of what to include in my financing needs BEFORE asking the bank for money. I'm completely new to this industry. Looking to purchase a property as an owner occupied buyer while leasing out the extra space. I hadn't thought about including the rehab costs beforehand (I know, nube thinking) so thanks for making such an informative and thought provoking video.

@TylerCauble 3 жыл бұрын

Absolutely! Glad the video helped with your understand those pieces. Definitely want to make sure you’ve got enough capital set aside for everything when you’re getting into a project. I’ve seen too many investors dive into a project and run out of funds because of that!

@TylerCauble 3 жыл бұрын

Have any questions about underwriting commercial deals? Ask away!

@jondaley1094 3 жыл бұрын

Hey Tyler love the videos man i have a question: Do you need proof of income when under writing on a property? Even when you calculated that the property will cover the NOI?

@TylerCauble 3 жыл бұрын

Thank you! I appreciate that. Do you mean proof of income for yourself as in you're applying for a loan from a bank or do you mean tax returns and proof of income from the property?

@jondaley1094 3 жыл бұрын

@@TylerCauble Right what I meant to say was do I need to show proof of income for myself when applying for a loan from a Bank for a property ? And also on a loan that is owed on the property?

@TylerCauble 3 жыл бұрын

@@jondaley1094 Yes, you will. The lenders I have worked with have required 2 or 3 years of tax returns and a personal financial statement. Usually that will be sufficient for a commercial loan, depending on the type of property you're acquiring. The loan that is owed on the property will be paid off at closing by the seller, but that should be addressed in your purchase & sale agreement, just in case.

@tiffanyrodriquez8460 3 жыл бұрын

Not necessarily an underwriting question, but I'm curious if you think it would be lucrative to build a firm of CRE-focused marketers and lawyers to support/contract with developers in the development process. The idea is to provide sophisticated integrated marketing plans + legal protection, working as fractional legal and marketing teams. Would you hire that firm? Appreciate your advice! -Tiffany

@mnventuresinc.8292 2 жыл бұрын

Just purchased a Bundle Package and these Tools will definitely help me be successful on my first deal here pretty soon. The next step is to talk to brokers in the area I would like to invest in as well. Looking for a discounted, value add multifamily and/or small commercial shopping center in Southern California. Great Content, Tyler!

@TylerCauble 2 жыл бұрын

Love to hear that! Let me know how we can continue to support you

@fernie988 2 жыл бұрын

So how is it going

@bernardotorres4561 2 жыл бұрын

excellent video

@TylerCauble 2 жыл бұрын

Thank you, Bernardo!

@TylerCauble 2 жыл бұрын

Thank you, Bernardo!

@ethanfoote7456 Жыл бұрын

Hi Tyler, your info is straight forward & love it. Coming from the residential underwriting lending side into commercial underwriting, I think the definition of underwriting differs. In residential underwriting, I am used to reviewing and validating all of the income, assets, title, credit, cash-flows, and property value from an appraisal to issue a commitment to lend/loan terms approval with reliable third-party documentation. Is the commercial lender's underwriter validating each and every one of these inputs into these spreadsheets using third-party engines like CoStar for Sales/Marketing info, Comp Stack for comparable sales & leases, and RCA for sales and refi information? Trying to get a better understanding of exactly what the commercial lender's underwriter validates and uses to issue an approval/term sheet.

@TylerCauble Жыл бұрын

Absolutely - glad you're enjoying it! Commercial lenders look at global aspects of the deal / you to determine the loan approvals. They'll look at your cash flow, debt and assets, the value of the property and your purchase price, what your plans are with the site, and the current cash flow of the property. It can be far more intense than residential, for sure

@erginsadikaj8838 2 жыл бұрын

Tyler, thank you for sharing this video, it's extremely helpful. Is it okay to use this spreadsheet for Industrial as well?

@TylerCauble 2 жыл бұрын

Absolutely! And yes - you can use it for any type of commercial properties. You will need to modify it a bit depending on tenants / lease structure /etc., but it'll get the job done

@eugenenetanel714 2 жыл бұрын

Great analysis, very useful. Minute 23:05: what values go into the calculation of the IRR 10.78%? How is it calculated?

@TylerCauble 2 жыл бұрын

That's a great question - IRRs are incredibly tough to calculate and take into account the returns over a period of time. We use excel to calculate the IRRs for us

@ZachPierceRowe 2 жыл бұрын

Great video! Consuming a lot of your content. CRE is very quiet on content.

@TylerCauble 2 жыл бұрын

Glad you're enjoying it, Zach! That's why I decided to create it all - there was nothing out there when I first got started

@fernandomejia1526 2 жыл бұрын

Just purchased the bundle package. Been listening to many of the videos. Do you have a program where you would walk us through one of ours? I would pay for that just to get hands-on experience.

@TylerCauble 2 жыл бұрын

Glad to hear it! Sure - I'd be happy to walk you through the packets. I have a few videos on my channel about them, but if that isn't enough, you're welcome to book a time with me here: www.calendly.com/tylercauble/30min

@jonathanchan6052 Жыл бұрын

Are the calculations in Z83 and Z117 relevant to the spreadsheet or any other calculations? Why are the Year 5 and 3 IRR tables taking initial investment into account, but not year 2?

@genzoutdoor234 3 ай бұрын

Hi Tyler, great video. Been studying a lot and it is easy to understand this whole spreadsheet. You do a great job explaining. My misunderstanding comes with the cap rate. Why is it when you take it from an 8% to 7% the value goes up? Aren't you basically saying the property only makes 7% income compared to value as opposed to 8%? Wouldn't 8% be a higher percentage of income? Thanks for your time in advanced.

@TylerCauble 3 ай бұрын

Glad you liked it! Yes - if the cap rate goes down, that means that overall you're making less of a return off the same amount of cash flow because the price of the property is higher. Here's an example: $100,000 NOI on a $1,000,000 sale price = 10% cap rate $100,000 NOI on a $900,000 sale price = 11.1% cap rate Same cash flow but the different prices give you different cap rates

@jonathanchan6052 Жыл бұрын

On the Commercial Underwiting Spreadsheet...cell V83 has a formula to show 0 if the year 1 CF is less than 0. However, it looks like this cell should be the same as cells V94 and V104. Why are we not allowing a negative CF come through in the IRR calc for year 5, but allowing it to come through on years 2 and 3? I also noticed that a lot of the year 1 pro forma calculates are based on the information contained in Column D. Should the increases be based on column E, which contains the current owner information?

@Woodshadow 2 жыл бұрын

I've never looked at a property with only the refinance in mind when it comes to calculating the IRR. I was wondering why the clients would be okay with a 10% IRR but if they continue to get 10% CoC returns or higher after the fact then that makes sense. I haven't found any crazy off market deals like this before. The best I am finding is ones with 13-15% IRR after sale and definitely not 10% CoC

@TylerCauble 2 жыл бұрын

I think they certainly could be good with a 10% IRR if they're investing for cash flow today instead of investing for appreciation. Ideally, you have both, but that's not always possible on a deal

@jyobaccio1 Жыл бұрын

@tyler cauble does your commercial calculator sheet show a 10 year hold and the increase in value based on rentvincreases, say 3% a year? does it automatically increase expenses ea year? does it have exit purchases with an exit cap rate? Also, I want to ask what crm you use to track property.

@TylerCauble Жыл бұрын

I believe I emailed you back - let me know if that was someone else and I'd be happy to get you an answer!

@bethel2143 2 жыл бұрын

What are your thoughts about CCIM or Appraisal Institute spreadsheets?

@TylerCauble 2 жыл бұрын

I think the CCIM spreadsheets are great - that’s where I got my start with underwriting. They helped me get a grasp around what’s going on, but we now create our own spreadsheets for deals because there can be so many little nuances that just aren’t taken into account with some models

@fernandomejia5712 2 жыл бұрын

I like everything but wish there was of better expense calculator to figure out per sq foot expense.

@TylerCauble 2 жыл бұрын

Are you talking about estimating your operating expenses or calculating what they are on a square footage basis? If the latter, you just take the total annual number and divide it by the total square footage of the building

@lemlavarin Жыл бұрын

Great video! How would I determine a good rule of thumb for operating expenses? Should I reach out to a property management company in the specific market for the same class of property I'm looking for or is there a general rule of thumb for operating expenses? Thanks in advance!

@TylerCauble Жыл бұрын

It's really tough to get a rule of thumb for opex because it depends on the product type, the market, tenants, etc. I recommend reaching out to local management companies or asking the seller for their historical opex (which should definitely be in your due diligence box when evaluating a property) because that will give you a better idea of what to expect.

@lemlavarin Жыл бұрын

@@TylerCauble Makes sense! Thanks for the reply.

@TylerCauble Жыл бұрын

@@lemlavarin anytime!

@Mdg949 Жыл бұрын

Does your program include SFR underwriting?

@TylerCauble Жыл бұрын

It does not - I do have an SFH construction model but we don't do any investing in SFH

@shaheemalam9397 Жыл бұрын

Hey Tyler, how did going from 8.0% CAP to 7.0% cap make the returns higher? Doesn't that mean that either the NOI went down or that price went up?

@TylerCauble Жыл бұрын

No - the cap rate is the valuation of the property. If the NOI is $100,000, the property would be worth $1,250,000 on an 8% cap rate and $1,428,571 on a 7% cap rate

@cohenkeller5064 Жыл бұрын

How can I study REI/Syndication terms? There’s a lot of words/phrases I need to learn.

@TylerCauble Жыл бұрын

Bruce Petersen's book, Syndicating is a B*tch is a good one. We have plenty of blog posts at www.tylercauble.com/blog that walk through terms, as well. Best way is to listen to podcasts on the topic and read commercial real estate books. But it definitely is its own language!

@baronartis7918 Жыл бұрын

Will the software work for Multi-family investors?

@TylerCauble Жыл бұрын

Yes - we have a spreadsheet geared directly for multifamily investments here: www.tylercauble.com/resources

@fernandomejia5712 2 жыл бұрын

If purchase you software will I get the upgrade at no charge? Your Proforma is only for 5 years

@TylerCauble 2 жыл бұрын

Yes - anytime we make updates to the software, we send it out to everyone that has purchased it from us previously

@fernandomejia5712 Жыл бұрын

Saw this ffew times, now that I have been using it this video make sense to me now . Thanks

@nickruffini5405 2 ай бұрын

Is this Google Sheet available somewhere?

@TylerCauble 2 ай бұрын

Yes it is - you can find it here: www.Tylercauble.com/resources

@nickruffini5405 2 ай бұрын

@@TylerCauble Thanks. I saw that it’s an excel download so I’m assuming you just import into google sheets. I was thinking it was a separate download.

@christopherjuntura4439 3 жыл бұрын

Mic volume is super low.

@TylerCauble 3 жыл бұрын

Got it fixed on the next video - thanks for letting me know 🤙🏼

@nedmarkey8324 2 жыл бұрын

How do I find guys like you to invest with?

@TylerCauble 2 жыл бұрын

It's pretty tough. You can schedule a time to speak with me about getting into our investments here: calendly.com/tylercauble but usually you have to get out and network to find deal sponsors. Real estate investor groups are a good start

@rahul848 Жыл бұрын

can u share the excel ?

@TylerCauble Жыл бұрын

Yes - you can get it here: www.tylercauble.com/resources

@thebestken 2 жыл бұрын

20:31 Do you think investors can wait for 2 years to get 11% preferred return?

@TylerCauble 2 жыл бұрын

Depends on their other investment options - do you mean 11% total over the 2 years? If so, I doubt it - that's only 5.5% per year

@thebestken 2 жыл бұрын

@@TylerCauble I mentioned your video at 20:31 where first two years there is no return. That's what I was referring to. Your own example. Why should I be interested in this deal when 11% CoC is on 3rd year?

@ShaftShackDotCom 2 жыл бұрын

I don't get it, so basically GP only gets $45k/year and $100k LPs only get $20k after 5 years...doesn't seem that fruitful??? What am I missing??? Thanks...

@TylerCauble 2 жыл бұрын

Not sure which point of the video you're talking about, but a $20k return after 5 years would only be a 4% total return and the IRR would be next to nothing. Maybe you're thinking of the annualized cash on cash return which means they're averaging $20k in returns per year?

@warhammerfaction Жыл бұрын

Still selling this excel?

@TylerCauble Жыл бұрын

Yep - it’s still available at www.tylercauble.com/resources

@Ricocase 2 жыл бұрын

Inflation = 8% Interest = 5% > 13% break even. Why buy an IRR of 10%?

@TylerCauble 2 жыл бұрын

If that were the case, then the majority of Americans would be losing significantly in the stock market, too. It's not actually a break even - inflation at 8% increases the value of the property, too, so you'd likely exceed that IRR when you sell the property if that was the case. You'll also be able to justify rent increases because most pricing goes up in an inflationary environment

@Ricocase 2 жыл бұрын

@@TylerCauble unless wages increase to keep pace, is there an 'invisible limit' at which consumers will stop buying, e.g. cars, houses, food?

@TylerCauble 2 жыл бұрын

I’m sure there is but I’m not enough of an economist to know what that is. Even in 2008, consumers were spending

@onehundreddoors5715 2 жыл бұрын

Thats an insanely oversimplified analysis that misinterprets IRR. It's about the time value of money @rx-pert. You can have the same IRR but have dramatically different profits on the same initial basis, with the only variable being when you receive the money over the course of the investment. IRR is pretty complex to figure. You should look it up.

@Ricocase 2 жыл бұрын

@@onehundreddoors5715 😆 'dramatically different profits over the same initial basis' = word salad 🥗, which wasn't explained simply or with any #s. Just take L, admit the BS, and save yourself the $.