REIF helps determine if an offer to sell your existing property is the right one. The model reverse-engineers the net proceeds to provide insights on the potential sale.
Below is a step-by-step process on the key items to enter when configuring the model to analyze selling a property you already own.
1) On the "Model Basics" worksheet:
Select "Current Property Evaluation" = "Yes".
2) On the "Project Summary" worksheet:
Under "Initial Project Develop Inputs"
Enter the "Purchase Date"
Enter any "Initial Project Development Costs" if you need to renovate the property now
Under "Current Property Evaluation"
Enter the "Current Property Value (Gross)" - do NOT net out debt
Enter the Current Basis (PRE-Depr) - do not reduce the basis by Depreciation, as you do that on the "Income Tax INputs"
If you are not looking at on an after-tax basis, this can be blank; however, the values also flow to the Balance Sheet
Under "Sale Inputs"
While counter intuitive, we suggest leaving "Property Sale Date" ="None"
We are looking at the model as if you're holding this property in perpetuity
Under "Equity Capital Contributions t=0"
Enter your "Current Cash Balance"
All other item below it ("Start Up Costs", "Working Capital", etc.) can likely be left blank unless you want to use the formulas (see Notes) to add additional Cash
If you are financing any of the "Initial Project Development Costs", enter that % under "Tot Develop Costs: % Down"
3) On the "Loan INputs" and "LOC INput" worksheets:
Enter your ORIGINAL Loan Terms:
If you have "Initial Project Development Costs" this will prepopulate "Loan 1" and as such you can enter your Original Loan Terms in "Loan 2"
If you had additional principal payments before the start of the model, please enter those in the corresponding "OUTput" worksheet
Enter your CURRENT Line of Credit information
4) Go back to the "Project Summary" worksheet:
Under "Return: Equity Capital Contributions t=0" you will now see the consolidation of the Current NET Value and Cash, which will be used as the amount invested at the start of the model
Note the "Current Loan Balances" will updated automatically based on the data entered on the Loan and LOC INputs and OUTputs
You can adjust this amount as needed, adding (increasing the equity) or subtracting (decreasing the equity)
5) Enter Data:
Enter data as you otherwise would based on the financial projections of the property
Cash Inflow, Expenses, Renovations, Property Value, Cash Account, Comps, Contributions, Distributions, Income Tax
Where to Start Your REIF Model is a helpful guide where you can start at "4) Cash Inflow INputs tab:" (1) to 3) is covered above)
IMPORTANT NOTE: This is where the reverse engineering takes place, the model assumes that you're taking your existing equity and using it as the capital contributed current property
Thus, the Project Score and Project Grade and Conditional Formatting operate in the same way:
Low Metric Score = Low Metric Grade = Red = Selling Property May be More Attractive
High Metric Score = High Metric Grade = Green = Holding Property May be More Attractive
This can seem backward in some instances, for example when selling a lower Cap Rate is better; however, the model assumes that you're essentially purchasing the property with your current equity (reverse engineering) and as such a higher Cap Rate is better
If you have any further questions after reviewing the information above or would like a custom report or metrics built to your specifications, please email us at info@buildreif.com.