Watch: Building a back-of-the-envelope CRE model in under 10 minutes
Shortcut Excel AI automates CRE property valuations, building direct cap and DCF models 5x faster than manual Excel work by automatically calculating NOI, rent rolls, and returns from uploaded property documents in just 3-6 minutes.
Building property valuations in Commercial Real Estate is essential to driving investment decisions within firms.
These valuations require meticulous attention to detail, pulling values across OM PDFs, rent roll summaries, and even standardizing arbitrary firm-wide preferences from meeting notes.
To successfully complete valuation models in Commercial Real Estate, brokers and real estate professionals must consolidate information across various war room documents to build a unified opinion on property investment decisions.
Here's how CRE valuation models are typically built and how you can use Shortcut to expedite your work.
The first part of a direct cap valuation is calculating Total Effective Gross Revenue of a property through a sequence of calculations on rental revenue + other income (e.g. storage, parking) minus general vacancy and credit loss. From there, calculate Total Operating Expenses based on projected growth assumptions (e.g. grow all controllable expenses by 3.5% of T12) and find the Net Operating Income by subtracting Total Operating Expenses from Total Effective Gross Revenue.
Calculating the initial revenue values is typically done by using Rent Roll values to manually calculate Market Rent, Loss-to-Lease, Vacancy & Credit Loss, and Concessions.
Let's say you are evaluating a multi-family apartment property data with 4 floorplans, each with values for # of units, avg. SQFT, etc. In Excel, to calculate the market rent you'll multiply the value of the average market + addl. and # of units x 12 months for each floorplan type.
Given a Rent Roll spreadsheet, you would calculate market rent using a simple formula like=E6*B6*12 then pull the total to a different tab using ='Rent Roll Summary'!M10.
Calculating actual loss-to-lease would similarly take the average market + addl. minus average leased, then multiply by # units occupied x 12 months for each floorplan type.
Instead of manually calculating these values as you build a direct cap valuation, Shortcut can help through a simple prompt:
"use the rent roll values to calculate Market Rent, Actual Loss-to-Lease, Vacancy, and Rental Revenue for each floorplan. bring these totals to the Direct Cap tab and calculate the net operating income using broker assumptions and historicals"
In the prompt, you can add firm-specific preferences like:
Any of these preferences can be included in the initial prompt or in a follow-up prompt once Shortcut finishes the initial run.
Shortcut broke down the task into three steps and completed the full task in 3 minutes. Direct Capitalization modeling can take an experienced real estate professional anywhere from 15-45 minutes to build by hand in Excel.
Shortcut is 5x faster while maintaining human-grade accuracy.
All formulas are dynamic and will update automatically if underlying values change. Shortcut achieved full parity with the human-completed direct cap model.
Using the same property war room and input values, real estate acquisition professionals use Discounted Cash Flow analyses for a more thorough determination of property value and market/seller proposed purchase price.
After setting assumptions, the first step of a Discounted Cash Flow model is adjusting initial revenue values for Market Rent, Loss-to-Lease, Vacancy & Credit Loss, and Concessions from the Rent Roll to fit the set assumptions.
Note the formula structure that adjusts Market Rent based on rent roll values and assumptions:
='Rent Roll Summary'!M12*(1+$C$19)These calculations include other underwriting assumptions based on your firm's preferences. For example, if we set concession assumptions to use 2% of the market rent in year 1, 1% in year 2, and 0% thereafter, we'd write formulas to multiply market rent by 0.02 in year 1, x 0.01 in year 2, etc. and set these to negative.
You would calculate this manually by writing =-I48*0.02 for year 1, change to =-J48*0.01 for year 2, and set the rest to zero.
"use the assumptions to adjust rent roll values (Market Rent, Actual Loss-to-Lease, Vacancy, and Rental Revenue) for revenue in the DCF tab. calculate the total effective gross revenue, operating expenses, and net operating income from broker assumptions and historicals and project all values through year 11. complete the exit calculations for sale price, expense, and proceeds, then calculate unlevered cash flow (IRR) and equity multiple using the exit assumptions"
You can add firm-specific preferences like:
Pro Tip: One easy way to consolidate your underwriting assumptions is to attach them as a PDF to your prompt.
Shortcut broke down the task into seven steps and completed the full task in 6 minutes. Rough DCF modeling can take an experienced real estate professional anywhere from 30-60 minutes to build manually in Excel. More complex multi-asset portfolio structure DCFs can take up to 8 hours in total.
Shortcut is at least 5x faster while maintaining human-grade accuracy.
All formulas are dynamic and will update automatically if underlying values change. Shortcut achieved full parity with the human-completed DCF model.
Beyond the prompt, Shortcut helps you expedite your valuation modeling with a few key tools:
When using the web app version of Shortcut, save standard company template files under the "New File" button in the upper right. You can prompt Shortcut to complete these files, update existing historicals, and add new data.
Have extra war room files? Add up to 50+ PDFs, CSVs, JPEGs, PNGs, etc. to the prompt using the Attach feature. Shortcut will read values in these documents and include them in all relevant calculations.
When you've perfected your prompt, save it to the Prompt Library to reuse on future model builds. This ensures consistency across property analyses.
Add color codes, formatting rules, and universal instructions here (e.g. "always put assumptions in a separate tab"). These apply to all future models automatically.
Curious how Shortcut calculated a value or auditing your work? Toggling to "Ask Mode" allows you to ask the spreadsheet how each section was completed. Extra useful for junior CRE professionals trying to learn modeling for the first time!
Export Tip: If using the webapp version of Shortcut, use the Export File button to save as .xlsx files!
Manual valuation model building in Excel no longer requires manually toggling between tabs to link cells, memorizing formulas, or meticulously copying number values from PDF offering memorandums.
With Shortcut, evaluating properties and investment opportunities is as simple as a single prompt.
Yes, Shortcut processes rent rolls with multiple floorplans, varying lease terms, market vs leased differentials, and occupancy rates. It automatically calculates market rent, loss-to-lease, and vacancy across all unit types.
Include your firm's underwriting standards directly in the prompt (RUBS pricing, turnover costs, tax assessment rules, etc.) or attach a PDF with your assumptions. Shortcut applies these consistently across all calculations.
Absolutely. All formulas are dynamic and update automatically when you change underlying values. You can also prompt Shortcut to "update rent growth from 3% to 5%" and it will adjust the entire model accordingly.
Shortcut achieves full parity with human-completed models, maintaining professional-grade accuracy. We benchmark against experienced CRE analysts to ensure calculations match industry standards for direct cap, DCF, and waterfall models.