An Introduction to Real Estate Financial Modelling was the fourth webinar in the Bayfield Real Estate Webinar Series and the first one presented by me. So far webinars have covered: An Introduction to Real Estate; Financial Mathematics and Property Valuations.

Real Estate Financial Modelling is more complex than financial modelling of other assets. This is because the income generated from real estate assets is more complex than either equities and bonds. Therefore, I dedicated one of my four slides allowed to the rent function.

In this webinar, we covered what Real Estate Financial Modelling is and what a Real Estate Financial Model might look like in the first couple of slides before we discussed how you might model a Rent Function.

Bayfield Real Estate Webinar Series: An Intro to Real Estate Financial Modelling – Slide 3

The upward diagonal (orange line) represents the market rental growth and the upward step, aka the rent function (blue line), represents the actual rent collected under the terms of the contract, each of the steps indicating a rent review. The orange line is rarely an upward diagonal, more of a squiggle, dipping and rising with the volatility of the real estate market, and the blue line may be subject to more than just rent reviews e.g. indexation, break clauses and lease expiries. All these variations must be modelled to get a true picture of your real estate asset.

The final slide took an extract of an actual real estate financial model and I explained some of the issues to look out for when error checking others or your own models.

You can request all four slides from Sonia at [email protected] or by visiting the webinar page of our website

Our next two webinars are an Introduction to Property Company Accounts and an Introduction to Retail Property. Sign up to either on the webinar page and keep checking back for more Real Estate Webinars scheduled monthly.

Written by Natalie Bayfield, Chairwoman of Bayfield Training