Core9 sheets~50 minPEIB
Property acquisition model
Underwrite an income-producing property from the rent roll to a levered IRR, size the loan to the tightest of three constraints, and run the sponsor’s promote through a waterfall.
Real estate models
Real estate modelling values a building from its leases rather than from a multiple. An acquisition buys income that already exists: the rent roll is read lease by lease, net operating income is built from it, a loan is sized to the tightest of loan to value, debt service cover and debt yield, and the equity is split through a waterfall. A development creates the income: a budget is drawn over construction, funded equity first and then with a construction loan, the building is let up to stabilisation and refinanced, and the scheme is judged on its development spread, the yield on cost less the cap rate the building would sell at. A listed REIT owns hundreds of such buildings and is priced every day: it is valued on funds from operations and adjusted FFO per share and on its premium or discount to net asset value, the portfolio valued building by building at a cap rate.
By Surojit Chakraverti, founder of L3VLUP and an investor running a long-short healthcare and technology equities strategy.
On this subject: real estate.Updated 2 October 2026
The models
Advanced8 sheets~45 minPEIB
Real estate development model
Build a development budget and its draw profile, fund it equity first and then with a construction loan, lease the building up to stabilisation, refinance and sell it, and say what the development spread and the levered return are.
Core8 sheets~35 minER/HFIBPE
REIT model: FFO, AFFO and NAV
Build same-store and acquisition NOI, reconcile net income to FFO and AFFO, fund acquisitions with debt and new shares, and say what the REIT is worth against its NAV and whether its next acquisition is accretive.
Other areas: Core modelling · M&A and private equity · Credit and restructuring · Infrastructure and project finance · Healthcare · Technology · All 19 models
How to work through it
Start with the rent roll lab, which is the first thing an acquisitions analyst does with any building. Then open the acquisition model to see the same leases carried through a ten-year hold, a loan and a promote. The development model builds the kind of asset the acquisition model buys: change the absorption or the exit cap rate and watch the development spread move. The REIT model then owns a portfolio of them: change the share price and see whether its next acquisition adds to AFFO per share. Each model has a starter workbook that leaves one schedule for you to build.
The mechanics they share
Each schedule is one reusable calculation, explained on its own page with the rows it occupies in every model that uses it.
Real estate schedules
Rent roll
Every lease, year by year, with expiries priced in
Real estate schedules
NOI build
Gross rent to net operating income
Real estate schedules
Loan sizing: LTV, DSCR and debt yield
The lender lends to the tightest of three constraints
Real estate schedules
Mortgage debt schedule
Constant payment, interest, principal, balloon
Real estate schedules
Property returns
Unlevered and levered IRR, multiple, cash-on-cash, exit cap sensitivity
Real estate schedules
Equity waterfall: preferred return, catch-up, promote
How the levered cash is split between investors and sponsor
Real estate schedules
Development budget and draw profile
Land, hard and soft costs, contingency, fee, S-curve
Project finance schedules
Construction funding
Draws, interest during construction, fees, equity
Real estate schedules
Lease-up and stabilisation
Absorption, occupancy, NOI, TI and commissions
Real estate schedules
Development returns and spread
Yield on cost, development spread, profit on cost, IRR
Real estate schedules
Same-store NOI and portfolio growth
Growth on buildings owned, plus what was bought and sold
Real estate schedules
FFO and AFFO
From net income to the measures REITs are priced on
Real estate schedules
REIT capital allocation
Funding deals, the dividend, leverage and the investment spread
Real estate schedules
REIT net asset value
NAV per share, the premium or discount, the implied cap rate
Practise first
Rent Roll Underwriting · 12 min
Turn a rent roll into income, read mark to market and the reversion, price the first lease expiry with downtime and leasing costs probability-weighted, and state the WALT.
IRR by Eye · 3 min
Say the IRR for any multiple and hold before the interviewer finishes the sentence, and the multiple for any IRR.
Exit Waterfall Lab · 12 min
Run a liquidation waterfall at any exit value, say where a preferred holder chooses to convert, and explain what a 1x non-participating preference actually costs the founders.
Where this work is done
Infrastructure & Real Assets
Long-dated, cash-yielding assets. Different maths, much longer horizons.
Private Equity
Buy control of established companies using debt, improve them, sell them.
How to get in and prepareEquity Research
Cover a sector, publish a view, defend it to clients. The best writing training on the map.
How to get in and prepareAsset Management
Long-only funds against a benchmark. Longer horizons, more process, better hours.
Read
- Real Estate Financial Modelling: Why Corporate Finance Mechanics Break Here · What changes moving from corporate models to real estate: NOI instead of EBITDA, cap rates instead of multiples, DSCR-driven debt and the equity waterfall.
- Credit and Covenant Modelling: What a Lender Actually Tests · Modelling from the lender side: sizing debt against leverage and coverage tests, building the covenant schedule, and the downside case that sets headroom.
- Financial Modelling Best Practices: The Conventions That Make a Model Auditable · The formatting, structure and formula conventions that separate a bank-grade model from a spreadsheet nobody else can open, and the anti-patterns to avoid.
- Project Finance Modelling: Cash Flow Waterfalls, DSCR Sizing and the Debt Sculpt · How project finance models differ from corporate ones: the non-recourse SPV, construction and operations phases, the cash waterfall, and sculpting to a DSCR.
- Equity Research Interview Questions: The Coverage Mindset · The equity research interview question bank: stock pitches with price targets, estimate-building, earnings reactions, and how ER differs from IB.
The vocabulary
Net Operating Income (NOI)Cap Rate (Capitalisation Rate)Debt YieldLoan-to-Value (LTV)Cash-on-Cash ReturnEquity MultiplePromote (Real Estate)GP Catch-UpRent RollYield on CostDevelopment SpreadLoan to Cost (LTC)AbsorptionStabilisationTenant Improvements and Leasing Commissions (TI/LC)Profit on CostReal Estate Investment Trust (REIT)Funds From Operations (FFO)Adjusted Funds From Operations (AFFO)Same-Store NOIREIT Net Asset Value (NAV)Implied Cap RateStraight-Line Rent
Questions
How is real estate modelled differently from a company?
There is no revenue line or EBITDA multiple. Income is built lease by lease from the rent roll, with vacancy as an event at each expiry; value is net operating income over a cap rate; and the loan is sized on that income rather than on a leverage multiple. The returns are then split between investors and the sponsor through a waterfall.
What is the difference between an acquisition and a development model?
An acquisition buys existing income and asks what it is worth and what the equity earns on it. A development spends money to create income and asks whether the income will be worth enough more than its cost: the yield on cost against the exit cap rate, which is the development spread.
How is a REIT valued differently from a building?
A building is valued on its own income at a cap rate. A REIT is a company that owns many buildings, so it is valued on earnings per share measures built for real estate (FFO and AFFO, because depreciation makes net income misleading) and against its net asset value, the buildings valued one by one less debt. Whether the shares trade above or below NAV decides whether it can grow by issuing them.
Which numbers do real estate interviews test?
Cap rates and NOI, the three loan-sizing constraints, cash-on-cash and the equity multiple, the waterfall with a preferred return and a promote, for development roles the yield on cost and the spread, and for REIT coverage FFO, AFFO and NAV. The rent roll lab drills the first step, and each model page lists the mistakes a reviewer looks for.