The Indian Real Estate Industry has been constantly in the news for the tremendous alterations in its policies and regulations. This change has been looming in the air impacting every department in corporate real estate and all stakeholders.
While most focus on improving sales, keeping an eye on the financial health of the company from various angles becomes absolutely necessary.
What if I give you an easy way to visualise at the finances of your organization from the stakeholders’ perspective?
Real Estate Financial Modeling comes as an answer to individuals seeking to make the best investment decisions through accurate reading and analytics. To put it simply, it refers to the process of documenting your company’s expenses and income on a spreadsheet, based on company’s historical performance. Such data is invaluable when it comes to calculating the future impact of an event or decision.
Why is it imperative to understand Financial Modeling from a stakeholder’s perspective
- Financial modeling reflects your organizational operational competence numerically
- It helps you evaluate your organizational performance and growth opportunities
- Models are based on inputs and assumptions – you can pick the one that suits you best
Primary types of Real Estate Financial Modeling
- Real Estate Acquisition Modeling: Acquiring and selling an existing property, while making little or no change to it
- Real Estate Renovation Modeling: Acquiring an existing property and making significant changes to it before selling
- Real Estate Development Modeling: constructing on a new land; finding tenants and then selling it upon stabilization
One of the other models quite in demand is developing a new property, but pre-selling the units before completion. It applies to residential real estate.
Pro tip
It’s critical to assess the important factors specific to real estate. However, is also important to decide the amount of time and resources you allot for the given task. There are companies who understand this need and offer automated financial modeling support service to real estate enterprises One of the big names is Retransform™. But no software works without human intervention. Hence it makes it vital for professionals to understand and read the financial models.
For companies, understanding financial modeling would be to accurately present the working capital requirement in the present, future or an idealistic valuation for sale or investment
For equity investors, it would be evaluating the company’s potential of growth
For debt investors, it would be to assess the risk inherited in its investment in the company