4 Strategies To Ace a Real Estate Financial Modeling Case Study

Excel modeling case studies are becoming more and more common in the real estate interview process, especially at some of the biggest firms in the industry (that also tend to pay the most).

But in the vast majority of cases, you won’t know exactly what’s going to be on one of these tests. This means that beyond making sure your Excel and financial modeling skills are where they need to be, you also need an exam strategy that you can apply in any case you work on.

So to make sure you have a game plan going into one of these exams, this post breaks down four of my biggest pieces of advice when working through a modeling case study, and how to maximize your chances of making it past this stage.

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Strategy #1: Prioritize Accuracy Over Completeness

My first piece of advice is specific to timed modeling case studies, and this is to prioritize accuracy over completeness if you have to choose between the two.

Many Excel modeling case studies are in-office, timed exams where you’ll have anywhere from about 1-4 hours to complete the test. This can create a really stressful situation, which can often lead people to rush and make mistakes.

But rushing just for the sake of answering every question on a test (or even just building out all components of a model) usually isn’t the right move if you’re strapped for time, and you’ll want to prioritize getting things right before just getting things done in the vast majority of cases.

Some Companies Intentionally Make Exams Too Long

In some cases, companies will intentionally make these exams take longer to complete than the timeframe they’ve given you, just to see how you might work under pressure and how you might respond if you can’t meet a deadline.

Whatever you submit within a case study setting will inevitably be seen as the kind of work product that you would produce on the job, so if you hand in something that’s sloppy or incorrect just for the sake of finishing on time, this is usually even worse than not finishing at all.

If you think about this from an employer’s perspective, a hiring manager would much rather have an analyst who takes a few extra hours to get something done right, rather than someone who routinely makes mistakes because they’re rushing to finish every project they’re given as soon as possible.

What to Do If You Run Out of Time

If you don’t end up finishing an in-office exam on time, don’t just take random guesses to answer questions. Instead, just take a minute at the end of the test to add a note that you wanted to prioritize accuracy over completeness, and you weren’t able to finish up everything within the assignment, but you’d be happy to complete this at home or back in the office at a later date.

Strategy #2: Explain Your Assumptions When Anything Is Unclear

This next piece of advice is surprisingly applicable to many Excel modeling case studies, and this is to explain your assumptions if anything in the exam prompt is unclear.

In a modeling case study, you’ll usually be given a set of inputs that you’ll need to use to build out a model, but in some cases, these inputs might be missing some information.

This type of issue often comes up related to topics like:

• The application of market rent growth (either monthly or annually)
• The timing of capital expenses, and when these start and end
• A target IRR you should be using to value a potential acquisition

How to Document Your Assumptions

If there’s any grey area in the information you’ve been given, one of the best ways to make sure you’re on the same page as the person who will be reviewing your exam is to add a comment next to a cell where you’ve made an assumption. Include both what was unclear to you in the prompt, and then explain why you made the assumption you did.

This way, even if your numbers are incorrect, a hiring manager can still track your thought process. And if this ends up throwing off other calculations in the model, this error can at least be isolated from the rest of the work you’ve submitted.

Even if you want to include a small “Assumptions” section at the bottom of your model that lists all of these assumptions in detail, this will help you talk through your thought process more thoroughly and can help explain any issues that might come up in your projections.

Strategy #3: Step Back and Think About the Property Itself

My next piece of advice when going into a modeling exam can be tough to do in high-pressure situations, but this is to step back and think about the property you’re underwriting itself, rather than just the numbers.

Without pictures of a property and a tangible asset you can think about in your head, it can be easy to forget that you’re underwriting a piece of commercial real estate, and to come up with some wildly inaccurate projections as a result.

Examples of Red Flags to Watch For

For example, if you’re tasked with underwriting a shopping center that’s priced at $10 million, but the NOI you’ve calculated in year 1 is projected to be $4 million, a 40% going-in cap rate on any commercial real estate deal probably isn’t realistic. It’s very likely that you’ve either added an extra zero somewhere in your model, or you’ve used an annual assumption within your monthly cash flow projections by mistake.

If your IRR is in the triple digits, your cash flow is projected to be negative throughout the majority of your hold period, or your revenue projections are more than 10x higher than your expense projections on an annual basis, it’s very likely that something is wrong within your model, and you’ll need to go back and check your work.

The key takeaway here is to keep in mind that you’ll be analyzing a property that just so happens to generate the assumptions you’ve been given. This can make it a lot easier to spot potential mistakes that might have otherwise caused major issues in your cash flow and return projections within an exam.

Strategy #4: Focus on Non-Financial Details and Formatting

The last thing I want to bring up here should really be a given, but I don’t see people paying nearly enough attention to this, and this is to also focus on the non-financial details of your model.

Even if your numbers are correct, if you submit a model with sloppy formatting or spelling errors throughout the pro forma, this is not going to reflect well on you as a candidate, and these things can significantly reduce the chances of you landing an offer.

Why Formatting Matters

In the vast majority of real estate analyst and associate roles, you’re not only going to be tasked with plugging in assumptions into a prebuilt Excel file, but you’ll also need to create detailed market research reports, write up compelling investment memos, and regularly correspond with brokers, lenders, and other third parties in a professional way.

And if the model you submit in an exam setting includes no (or very little) formatting and is full of grammatical or spelling errors, this will indicate to a potential employer that you aren’t able to do the things that will be required of you on the job, and this can put you out of the running entirely for these types of positions.

What Good Formatting Looks Like

There’s no need to add things like the company’s logo or fancy font styles to your model, but you will want to make sure that things like:

• All of your currency values are in the same currency format
• All of your date values are in the same date format
• The formatting of your revenue and expense line items is differentiated from your timing headers
• Your return metrics are incorporated into their own specific section

The goal here is to make this clean, professional, and easy to read for a hiring manager. This person is very likely going to be short on time and relying on you to create a model that’s going to naturally draw their eyes to the most important parts of the file, and you want them to feel confident that they could send off the work product you submit to clients or partners with very little review.

How To Prepare For a Modeling Exam

If you want to make sure you have the real estate financial modeling skills you’ll need to ace an Excel modeling exam that might be given to you during the interview process, make sure to check out our all-in-one membership training platform, Break Into CRE Academy.

A membership to the Academy will give you instant access to over 120 hours of video training on real estate financial modeling and analysis, you’ll get access to hundreds of practice Excel interview exam questions, sample acquisition case studies, and you’ll also get access to the Break Into CRE Analyst Certification Exam, which covers topics like real estate pro forma and development modeling, commercial real estate lease modeling, equity waterfall modeling, and many other real estate financial analysis concepts that will help you prove to employers that you have what it takes to tackle the responsibilities of an analyst or associate at a top real estate firm.