What (is a modelling test?): A cash-flow forecast of a real estate investment to numerically assess the risk-return profile of a potential opportunity.
Why (are they asking you to undertake a modelling test?): Excel-based modelling tests are used to understand the level of understanding a candidate has in real estate investment in addition to how well they can perform under pressure with tight deadlines.
How (do you run a model?): Think of running an appraisal like buying your first flat, there are four key components:
The thought of undertaking a modelling test for a prospective employer can be daunting.
Rest assured, the purpose of the modelling test is not to trip you up!
Your prospective employer wants to ensure that they understand what it is they will actually be paying for. The modelling test is a sure-fire way to verify technical ability and whether this coincides with what you have included in your CV.
Your new employer will use the model as an opportunity to benchmark your ability and competency in line with the existing talent employed at the company. From an employer’s perspective, they want to understand how you will add value to their firm and where you can fit within the team.
However, the question remains, how can you set yourself apart from the competition during an excel modelling test?
Of course, the difficulty of any modelling test will vary depending on the seniority of the position. We have broken the test into four salient points, which, if followed, will leave a significant lasting impression on your prospective employer, regardless of your experience:
One – Dynamic & Flexible
Two – Time
Three – Formatting and justification
Four – Do not panic!
To conclude, if you can create a dynamic/flexible, well-formatted, and realistic cash flow model, in which you have demonstrated your knowledge of basic real estate metrics (Cap Rate, IRR etc.) you will be well on your way to making a lasting impression and securing your dream role!
Why not challenge yourself to build a bespoke and dynamic model from scratch using our example here!
Do you know how to model debt (bullet payment, interest roll-ups or equity drawn first on construction loans), waterfall, and LP/GP distribution hurdles?
If your answer to this question is yes, then brilliant! You are well on your way to impressing your future employer.
If your answer is no, why not? Granted, this may not be a part of your current day-to-day role. However, to truly stand out, take the opportunity to up-skill/educate yourself and, ultimately, become more employable.
If you are in need of training or improving your modelling skills take a look at Farley Cove, a brilliant and Rockbourne recommended Real Estate Modelling course!
Very professional and diligent throughout the process of finding a role for me. Always available to provide advice, highly recommend Rockbourne's services.
Rockbourne was highly professional and efficient. The team gave me good advice and support throughout the recruitment process. I would definitely recommend working with Rockbourne.