SmartHelping / Real Estate Deal Analysis / Excel
Real Estate IRR Sensitivity
Test how vacancy, exit cap rate, leverage and interest rates affect a real estate investment’s internal rate of return. Compare three sensitivity tables alongside monthly and annual cash flow and debt service coverage over an analysis period of up to 20 years.
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See the template in action
Follow the acquisition assumptions through the return analysis.
Watch the walkthrough to see the cash flow model and sensitivity analysis. Open the screenshots below to preview the workbook layout.
Three IRR sensitivity tables
See how vacancy interacts with the exit and financing assumptions.
The current template includes these three comparisons. Each table varies a pair of assumptions to show the resulting IRR under the modeled deal.
Vacancy vs. cap rate
Compare vacancy assumptions against the exit cap rate to review how operating occupancy and the sale valuation assumption affect IRR.
Vacancy vs. leverage rate
Compare vacancy assumptions against the amount of leverage used in the acquisition to review the effect on IRR.
Vacancy vs. interest rate
Compare vacancy assumptions against the financing interest rate to review the effect on IRR across different borrowing-cost scenarios.
Acquisition and operating inputs
Build the analysis around the property and the proposed deal.
Enter the acquisition, financing, rent, expense and exit assumptions for the real estate opportunity you are evaluating.
Acquisition costs
Set the acquisition costs used to establish the investment’s starting cash requirements.
Debt financing
Include debt financing when applicable and set the financing assumptions for the deal.
Starting rent and rent growth
Enter the starting rent and rent-growth assumptions used in the operating forecast.
Operating expenses and growth
Define starting operating expenses (OPEX) and the expense-growth assumptions over the analysis period.
Exit month
Choose the exit month within an analysis timeframe of up to 20 years.
Exit cap rate
Set the exit cap rate used in the sale analysis and compare alternative cap rates through the sensitivity table.
Cash flow, coverage and returns
Review the cash flow behind the IRR.
Analyze a holding period of up to 20 years and review the operating and financing results alongside the sensitivity tables.
Monthly and annual cash flow
Review cash flow in both monthly and annual views to follow the investment through the modeled holding period.
Monthly and annual DSCR
See the debt service coverage ratio (DSCR) displayed for each month and year when reviewing the financing assumptions.
Inputs and sensitivity on one page
All inputs, monthly cash flow and sensitivity tables are together on one page, keeping the assumptions and their results close at hand.
Latest template update
Review the updated financing sensitivity tables.
The bottom two tables now compare vacancy against interest rates and vacancy against leverage rate. Watch the update video to review those changes.
How to use the template
Move from the base deal to a range of potential outcomes.
Set up the acquisition
Enter acquisition costs, financing if applicable, starting rent and OPEX, growth assumptions, exit month and exit cap rate.
Choose the sensitivity ranges
Define the range of vacancy, cap-rate, leverage and interest-rate assumptions you want to evaluate with the three tables.
Review the scenarios
Use the built-in Excel data tables to review IRR across the combinations of assumptions. Compare base, upside and downside cases relevant to the deal.
Read returns alongside cash flow
Review the IRR results with monthly and annual cash flow and DSCR. Identify the assumptions that most affect the investment and use those findings to guide further deal analysis.
Who this template is for
For real estate buyers, investors and deal analysts.
Acquisition analysis
Build a cash flow view of a proposed property acquisition and examine the return sensitivity to vacancy, financing and the exit cap rate.
Scenario comparisons
Use the three sensitivity tables to compare assumptions and explain which changes have the greatest effect on the modeled IRR.
Also available in these bundles
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This template is included in the Real Estate bundle. The Super Smart Bundle provides access to the complete public SmartHelping template collection.
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A few useful details.
Which sensitivity tables are included?
The current version includes three IRR sensitivity tables: vacancy versus cap rate, vacancy versus leverage rate, and vacancy versus interest rate.
How long can the analysis run?
The template supports an analysis timeframe of up to 20 years, with an input for the exit month.
What inputs do I need?
Inputs cover acquisition costs, debt financing if applicable, starting rent and rent growth, starting operating expenses and expense growth, exit month and exit cap rate. Vacancy and financing assumptions are also used in the sensitivity analysis.
Are cash flow and DSCR shown monthly and annually?
Yes. Cash flow has monthly and annual views, and DSCR is displayed for each month and year.
Where are the sensitivity tables located?
All inputs, monthly cash flow and sensitivity tables are on one page. The template uses Excel data tables for the sensitivity calculations.
What changed in the latest update?
The bottom two sensitivity tables were updated to show vacancy against interest rates and vacancy against leverage rate. The update video above explains the changes.
Test the assumptions behind the deal
See how the return changes across scenarios.
Get the Real Estate IRR Sensitivity Template for $45 and compare vacancy, cap-rate and financing assumptions in Excel.
