Your commercial real estate analyst might be good, but nobody is immune to human error. Long hours and monotonous PowerPoints will cause even the most diligent real estate analyst to make mistakes.
Mistake 1: Old deal information in new model
Commercial real estate cash flow models can take hours to make from scratch. Most analysts will reuse old models to save time and brain damage. This works great, so long the old model is blank! When re-using an old model with a prior deal pre-loaded, your analyst runs the risk of leaving old deal data in the new model. Needless to say, this can lead to inaccurate results.
Solution: Make sure your cash flow model template is blank – not pre-filled.
Mistake 2: Old property name in a new investment memo
Investment memos are timely endeavors. Most of the time, some language from old memos will be applicable to your new memo. Don’t re-create the wheel, but be sure to do a search on the old property name in the new memo. Few things are more embarrassing than having the wrong property name in an investment memo.
Solution: Do a “ctrl+f” on property names that might still be in the investment memo. Read the memo word for word before sending it to the boss.
Mistake 3: Forgetting to update all the numbers in a PowerPoint
Real estate models constantly change through the diligence period, and the investment memo needs to keep up! When tables are statically insert in an investment memo, you run the risk of forgetting to update the numbers, tables, and charts in your memo.
Solution: Insert tables and charts in PowerPoint with links to their source content in the cash flow model. When changes are made to the model, content in the investment memo will automatically update.
Mistake 4: References to outside workbooks
When old commercial real estate models are used for new projects, analysts run the risk of leaving legacy links to old workbooks in their new model. Outside references are a big indicator of mistakes in a model.
Solution: If when opening a workbook you are prompted to update links, review the links, and search for their source in each worksheet. Remove all outside workbook references until no links are present in the “Edit Links” prompt.
Mistake 5: Edits made to the wrong version
Have you ever made new corrections to the wrong version of a model or investment memo? The frustration and re-work is exhausting. Your entire edit needs to be re-done. Document control is critical to preventing these annoying mistakes.
Solution: Create a new version of the model or memo each time that you iterate and save on a collaborative network like Dropbox. Though not always a viable option, the use of google docs to create the deliverable makes collaboration quite easy.