Case Study
RESIDENTIAL APARTMENT BUILDINGS
[BUILD TO SELL]
Residential build to sell real estate projects are very peculiar in nature.
Of course, upside of building and selling residential units is attractive. And since the efforts are huge, you deserve to be commensurately remunerated for all the toil you undertake.
The cashflows come in and go out in wild waves. First there’s cash outflow when you spend on buying land and getting various building approvals and running strong marketing campaigns. Then there’s some cash inflow when you collect some advances from your homebuyers. Again, cash goes out as you start the construction process in full swing.
Then depending on your collection plan, you could be awash with money by the time your project ends. Of course, provided you successfully managed to sell all the units by the end of the construction.
You’d wish to capture all this and think through your strategies in an excel sheet first. Here’s a financial model that helps you do just that.
Special Features of this Model:
1. Check which option will be more lucrative – joint development with the landowner or buying the land outright.
2. Present your financial model in your base currency as well as a bunch of foreign currencies.
3. Read your numbers in the abbreviated ‘millions’ if you’re from a country like India or Korea or Japan.
4. This A.CRE style financial model helps you take your audience through the entire lifecycle of the asset under your watch. Right from development to Operations to Final Exit. (Operations and Exit are the same in a Build to sell model).
5. Equity distribution on an IRR based waterfall formula.
6. Complementary 3-part financial statements – Balance Sheet, P&L and Cashflow Statements (drawn from the Cash based financial model)
7. Simple and easy to understand formulas and minimal use of Macros