Understanding Proformas / Deal Analysis

[Leilah Davis]

I'm a spec home builder, along with my husband. To this point we've stayed in our lane of doing ground up construction spec homes. That's been our niche. We have never used any lenders, we've never considered doing a JV project, or being a retail investor (I have to be honest, I don't even know what that means!!) We're starting to think that we may want to branch out and potentially get involved in other sorts of RE investments.

I'm looking for some resources where I can learn how to properly analyze deals, especially larger and more complicated deals with multiple sources of financing, multiple tiers of investors, rental income to consider, vacancy rates, etc. My husband and I have relied pretty heavily on "back of the napkin math" for analyzing our own deals, which worked fine when we're just using our own money, we're very familiar with all the costs involved, and nobody else is involved in the deal so there's just been no need to make it more complicated than that. 

My husband has a relationship with a larger commercial developer who sent us the proforma on a building they already own and are planning to renovate / develop into apartments with retail space below. We're just dipping our toes in the water, trying to familiarize ourselves with their processes. When I looked at the proforma I was lost, it was all Greek to me! Any specific resources you can recommend (maybe a YouTube channel or something) that might help me make sense of this? I have seen a few other "deal analysis" spreadsheets from investors looking for a JV or a lender, even on here, and I just don't get what I'm even looking at with some of the terminology and acronyms ... Can someone offer some resources to simplify this a little? I'd even take an online course if it was well organized (and affordable, which they never are).

[Matt Calnan]

Quote from @Leilah Davis:

Quote from @Matt Calnan:

Hi Leilah!

There are some really, really good tools on adventuresincre.com. They're the ones that I use most often to get models from. The downside is that they're not very adaptable/customizable. But if you know what you're doing in Excel, you can make some changes. 

Is there anything specific that you're looking for? I might have some templates that you can use as well.

Thanks! I'm not looking to create a proforma or deal analysis, I'm just looking for some resources on how to interpret them. In other words, if I want to invest in someone else's project or go in as a JV on a project that someone else has already crunched the numbers on, I need to be 100% confident in my comprehension of it. I don't need any templates, I just need some guidance on understanding the content itself.

Single family or even small multi-family is pretty easy and mostly self-explanatory, but the proforma I looked at for this renovation on a large apartment complex with retail space below was WAYYY out of my league. Just trying to step up and learn, that's all! The spreadsheet they sent had 13 tabs all of which were FILLED with info. It had the assumptions of the deal, the development budget, info on the historic tax credits, a proforma for the apartments, a proforma for the commercial space, info on the returns, etc. This is a multi-million dollar deal with many partners and multiple sources of funding.

 Got it, that makes sense! There are some really good videos on Youtube for analyzing real estate deals. As well as some good ones on adventuresincre.com. If you're interested, I'd be happy to review something with you as well if that would be beneficial. My real estate experience is focused mostly on the financial and pro forma side, so I live in those spreadsheet :)