Excelproject – real estate investment 1.0

Start Excel. Download and open the   file named Excel_Project.

In   the NOI sheet, calculate the Total Rentable   Square Feet (RSF) by Unit Type in range F3:F7 by multiplying the number of   units for each type by the square footage of each unit type. Then calculate   the Total rentable square footage of the building in cell F8.

In   cell I4, enter a formula that calculates the annual insurance expense for   Year 1. As the building owner, you obtain insurance at a rate of $400 per   residential unit. Commercial units pay their own insurance. So you only pay   insurance on the residential units.

In   cell I5, enter a formula to calculate the Repairs & Maintenance expense   estimate for Year 1. You assume that each month,   there will be a repair expense of $120 for half of the residential units.   Commercial units pay for their own repairs and maintenance.

In   cell I6, enter a formula to calculate the annual Utilities expense estimate   for Year 1. All tenants will pay their own utilities. But you, the owner,   will pay $0.40 per square foot per month for the 1200 square feet of common   area space (E13) of the building (lobby, hallways, elevator, gym, etc.).

In   cell I9, enter a formula to calculate the annual Janitorial Cleaning expense   estimate for Year 1. A cleaning company can clean the 1200 SF common area   twice per week at a rate of $150 per day. Enter the annual cleaning expense,   assuming 52 weeks in a year.

In   cell I10, enter a formula to calculate the annual property Management fee.   Management companies charge 5% of rental income. (Use monthly rent estimates   in range C3:C7 and the number of units per type in range D3:D7 to determine   annual rental income.) 

In   cell I12, enter a formula to calculate the annual doorman security expense   estimate for Year 1. You will employ 2   doormen. Each one spends an 8 hour shift each day, 6 days per week. Assume 52   weeks per year and $12/hour wage for each doorman.

In cell I13, enter a formula to   calculate the Brokerage Fee to find tenants for all of the residential units.   Realtors charge the equivalent of one month of rent for each unit leased. 

In cell I14, enter a formula to   calculate the Brokerage Fee to find tenants for all of the commercial units. Each   commercial lease is negotiated for a 5-year term of fixed rent. So the   brokerage fee for each unit is an upfront charge of 5% of the total rent for   the entire 5-year lease period. 

In   cell I15, enter a formula to calculate the Capital Reserves estimate for Year   1. Capital Reserves are savings put aside in case there is a large unforeseen   repair or expense incurred. You estimate a capital reserve of $0.50 cents per   RSF of the building.

In   cell E19, enter a VLookup function to calculate the annual base rent for the first unit based on Unit Type. Use the Year   1 Rental Assumptions table in your formula and make sure to calculate annual rent. Copy your formula down   the column to cell E42.

You   assume that Residential Rent will increase by 2% each year (see cell E11).   For each residential unit, calculate annual rent estimates for Years 2 to 10   by applying the Residential Rent Increase to the previous year’s rent.

Base   rents for the commercial unit leases are fixed for 5 years. And you assume a   Year 6 rent increase (see cell E12) that will be fixed for Years 6 through 10   as well. For each commercial unit, enter the annual rent for Years 2 to 10, taking   into account that in the 6th Year, there will be a new increased   rent that is fixed for the remaining 5 years.

Calculate   Total Base Rent for each year in row 43. Apply Bold font to this row and   format the values as Currency format with no decimals.

You negotiate a percentage rent   component of the lease with the Large   Commercial tenant in Unit G1. The Percentage Rent clause says that the   tenant will pay you 2% of their gross sales, not to exceed $12,000   in percentage rent. The Large Commercial tenant has given you their sales   projections for the next 10 years (row 79). Enter an IF function in cells E45:N45   that calculates the percentage rent based on the tenant’s   sales projection for that Year.

Calculate   Potential Gross Rent for each year in row 46 by adding Percentage Rent to   Total Base Rent. Apply Bold font to this row and format the values as   Currency format with no decimals.

You   can expect a certain amount of vacancy and uncollected rent each year, which   is accounted for in the Vacancy and Collection Loss estimate (cell E14). Calculate   Vacancy and Collection Loss estimate by multiplying the loss factor to the Potential   Gross Rent for each year in row 48.

Subtract   Vacancy & Collection Loss from Potential Gross Rent to determine   Effective Gross Rent for each year in row 49. Apply Bold font to this row and   format the values as Currency format with no decimals.

In cell E54, enter an HLookup formula   based on the Year to determine the real estate tax rate using the table in   the Taxcast sheet. (Do not enter the hardcoded tax rate.)

You multiply the real estate tax rate   per square foot (found by the HLookup) to the residential square footage. The   commercial units will pay their own share of taxes. Copy your formula to   Years 2 to 10.

Hint: See Tax Expense formula in cells   I3 and J3.

Set cell E55 equal to the Year   Insurance expense in the Operating Expense Assumptions table at the top of   the sheet. Copy the formula down to cell E60. For each of the expenses in   rows 55 to 60, calculate Year 2 to Year 10 expenses using their respective   annual percentage increases displayed in column B.

Management Fees are calculated as a   percentage of Total Base Rent. In row 61, enter a formula to calculate the   Management Fee for each year using the annual percentage fee displayed in   column B. 

You negotiate a maintenance contract   with the elevator manufacturer for a fixed cost of $900 per year for 10   years. Set cell E62 equal to the appropriate cell in the Operating Expense   Assumptions table. Enter a formula in cells F62:N62 to display the annual   Elevator Maintenance cost for each year.

Set cell E63 equal to the appropriate   cell in the 2020 Operating Expense Assumptions table. Enter a formula in   cells F63:N63 to display the annual Security expense using the annual   percentage increase displayed in column B. 

Set cell E64 equal to the appropriate   cell in the Operating Expense Assumptions table. 

Assume you’ll   pay a brokerage fee to either rent out or renew all of the residential units every   2 years. The brokerage fee for each unit will be 1-month of that year’s   rental rate. 

Enter a formula every two years   starting in Year 3 to calculate the Brokerage Fee for Residential units. 

Set cell E65 equal to the appropriate   cell in the Operating Expense Assumptions table. 

Assume you’ll   pay a brokerage fee to re-rent or renew each commercial unit every 5 years.   The brokerage fee for each unit will be a percentage of the total rent over   the entire 5 year lease period.

Enter a formula to calculate the   Brokerage Fee for Commercial units. Hint: Commercial unit brokerage fees will   only be paid out in Year 1 and Year 6.

Set cell E66 equal to the appropriate   cell in the Operating Expense Assumptions table. Enter a formula in cells   F66:N66 to display the annual Capital Reserves using the annual percentage   increase displayed in column B. 

Calculate Total Expenses for each   year in row 67. Then calculate Net Operating Income for each year in row 69.   Net Operating Income is calculated as Effective Gross Rent less Total   Expenses. Apply Bold font and format the values as Currency format with no   decimals for both rows.

Select the 2020 Expense Assumptions   in array H3:I15 and make a pie chart. Move it to its own sheet named Expense Chart.

Apply Chart Style 7 to the pie chart. Change the Chart Title to Expense Comparison. Position the   Legend on the righthand side.

Using the Data Labels task pane,   remove the Values and display the Percentages and Categories. Close the task   pane. Position the data labels as Data Callout.

Change the Legend Font to Times New   Roman size 8. Change the Data Labels to Times New Roman size 6.

Place the Expense Chart sheet between the NOI sheet and the Taxcast   sheet.

For Extra Credit, calculate the Cash   Flow After Debt Service. Assume you can purchase this building for $6.1   million. Calculate the Down Payment, Loan Amount, Monthly Debt Payment and   Annual Debt Payment based on the information given in the Mortgage Finance   table in the NOI sheet.

In row 72, enter the total annual   debt service for each year. In row 73, calculate the Cash Flow After Debt   Service for each year. Apply Bold font and format the values as Currency   format with no decimals for both rows.

Save the workbook under FirstNameLastName_ExcelProject.   Close the workbook and then exit Excel. Submit the workbook as directed.