Training > Real Estate Finance and Investment

“No man acquires property without acquiring with it a little arithmetic also.”
Ralph Waldo Emerson
American essayist, lecturer and poet


© simplexCT 2014-2015

Sharpen your real estate thinking

The Real Estate Finance and Investments course prepares real estate professionals—who do not specialize in finance—to understand and address the financial aspects of the opportunities and challenges facing their real estate projects.

Through theory, examples, exercises, case studies, and dynamic peer discussions, the program focuses on the application of real estate finance fundamentals used to develop new real estate projects, acquire existing ones, or value leases.



The goal of the program is to present real estate finance and investment principals and techniques that are used by management for decision making related to property investments. The course is designed in a simple and straightforward style and makes extensive use of practical real-world business situations.

Upon returning to work, you’ll be able to:

  • Apply the fundamental principal of finance: Time Value of Money.
  • Compute mortgage payments and balances for a variety of different types of loans (Interest-only, CPM, ARM).
  • Calculate and interpret standard industry measures of return: Net Present Value (NPV), Internal Rate of Return (IRR, MIRR), Payback Period and Profitability Index.
  • Construct industry standard discounted cash flow proformas including Potential Gross Income, (PGI), vacancy rates, Effective Gross Income (EGI), operating expenses (OP), Net Operating Income (NOI), capital expenditures, and property and equity level cash flows.

We designed the program for real estate professionals—in roles typically outside finance—with exposure to the real estate investment decision process but wanting to become more effective decision makers by taking their financial knowledge to the next level.

The program is intended for executives from functional areas such as sales, marketing, development, planning, property management, project management, engineering, legal and market research.


Day 1 - Basic financial economic concepts and tools


- Uneven cash flow stream
- Annuity in arrears
- Annuity in advance
- Growing annuity
- Perpetuity
- Growing perpetuity
- Delayed growing perpetuity


By the end of the training, you’ll sit through a 1-hour open-book written exam. The exam will consist of multiple-choice questions and is based on material and concepts covered during the course. Upon successful completion of the training assessment and satisfactory attendance of the course, simplexCT will provide feedback on your performance and award you a certificate of successful completion of the training.


The course includes extensive use of Excel to work through the problems and case studies. Hence, it’s imperative that you have a working knowledge of Excel before attending in order to maximize your learning experience.


A hallmark of the training is the real world case study that requires you to apply the course’s concepts and tools to build a financial model for an actual real estate investment transaction. The case involves a real estate developer seeking to enter into partnership with a land owner to develop a high-rise class A office space building. You will explore important questions and find answers as to what is the best deal structure that is fair and achieves each parties investment objectives. Typical questions would be:

• How much value will be put on the land?
• How much initial capital will the parties contribute and how will the parties contribute additional capital if needed in the future?
• How will the parties share in the annual cash flows to be produced from operating the property?
• How will the parties share in the cash flow received from the sale of the property?


Day 5 - Risk and return in real estate

Day 4 - Use of debt in real estate investments

- Single-period discounting
- Single-sum over multiple periods of time
- Simple versus compound interest
- Effective versus nominal rates

Introduction to real estate economics

Present value mathematics for real estate

Mortgage basics

• The real estate strategic analysis model
• Real estate space and asset markets
• The real estate system
• Real estate cycles

• Single-sum formulas

• Multi-period problems

• The four basic rules of mortgages
• Calculating loan payments and balances
• Interest only loan

• Constant payment mortgage (CPM)
• Adjustable rate mortgage (ARM)
• Construction loans

Day 2 & 3 - Real estate valuation and investment analysis

Measuring investment performance

Real estate valuation

• The payback period
• The discounted payback period
• The net present value (NPV)
• The internal rate of return (IRR)
• Capital accumulation process (MIRR)
• The profitability index (PI)
• Sunk costs and opportunity costs
• Side effects and allocated costs

• Price vs. cost vs. value
• Replacement cost
• Market comparable
• Direct capitalization (GRM, cap rate)
• Discounted cash flow (DCF)
• Typical mistakes in DCF application
• Market value and investment value
• Duality of real estate asset markets
• The residual value of land
• Highest and best use (HBU)

Real estate cash flow proformas

• Potential Gross Income (PGI)
• Market rent projection
• Vacancy allowance
• Effective Gross Income (EGI)
• Operating expenses
• Net Operating Income (NOI)
• Capital improvement expenditures
• Property level cash flow calculations
• Reversion cash flow (Terminal Value)
• Going-in vs. Going-out cap rates
• Property-level return calculations

Equity level calculations

The effect of leverage

• Depreciation and taxable income
• Equity level cash flow calculations
• After-tax operating cash flow
• After-tax reversion cash flow
• Equity-level return calculations
• Parsing the IRR

• Advantages and disadvantages of debt
• Positive and negative leverage
• Effect of leverage on risk and return to equity
• Effect of leverage on growth and yield
• Leverage and tax shelter

The opportunity cost of capital (OCC)

• Inflation and nominal risk-free rate
• Risk premium
• Historical evidence and survey evidence
• OCC from cap rates observation
• Weighted average cost of capital (wacc)
• Relationship between risk and return
• Capital asset pricing model (CAPM)
• Sensitivity and scenario analysis (tornado
 plots, spider charts and data tables)
• OCC model for development projects
• Simple financial feasibility analysis (SFFA)
 (front-door and back-door procedures)

We’ll place an emphasis on understanding how real estate value is created and recognized. You’ll enhance your real estate expertise and decision-making capabilities by exploring the latest approaches to real estate financial and investment analysis.

  • Use the different concepts of value to evaluate real estate projects and assets (Replacement cost, market comparable, income approach).
  • Use the mechanics of leverage, such as Loan-to-Value ratio (LTV), Mortgage Constant, Debt Service Coverage Ratio (DSCR) and effective interest rates and evaluate their effect on the risk and return to the equity investor.
  • Conduct sensitivity (Tornado Plots, spider graphs) and scenario analysis.
  • Use different models to evaluate the opportunity cost of capital.
  • Apply advanced topics such as the residual value of land, the investment value versus the market value of a project, the capital accumulation process and parsing the IRR among others.

The program may also be beneficial to financial executives who want to strengthen their understanding of real estate finance strategies.