Asset Management - Excel / Argus Test in Office
Hey guys,
Anyone have an asset mgmt modeling test for 1-2 hours in the office? What should I do to prepare?
Unsure if it is in Excel or Argus.
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To prepare for an asset management modeling test that could be in either Excel or Argus, here's a strategic approach based on the most helpful WSO content:
Brush Up on Excel Skills: Ensure you're comfortable with Excel, focusing on functions relevant to real estate financial modeling. Familiarize yourself with advanced formulas, pivot tables, and financial functions. Websites like Chandoo, MrExcel, and Peltier Tech offer excellent tutorials to sharpen your Excel skills.
Learn ARGUS Enterprise Basics: Given the uncertainty of the test format, it's wise to understand the basics of ARGUS Enterprise, a standard in real estate asset management for modeling and forecasting. Look for introductory videos on YouTube or ARGUS's own tutorials to get a grasp of the interface, key functionalities, and typical modeling workflows.
Understand Real Estate Financial Modeling: Dive into the fundamentals of real estate financial modeling, including how to build cash flow projections, calculate net operating income (NOI), and understand key metrics like internal rate of return (IRR) and net present value (NPV). The WSO offers resources and lessons that cover these topics in depth.
Practice with Case Studies: If possible, practice modeling real estate deals using both Excel and ARGUS. This dual approach will help you adapt to whichever platform you're tested on. The WSO's ARGUS training section, which includes step-by-step case studies, is an invaluable resource.
Network for Insights: Reach out to peers or professionals who have undergone similar tests in asset management roles. They can offer specific advice, potential test formats, and what to focus on during your preparation. Engaging with the WSO community can also provide insights and tips from those who've faced similar challenges.
Review Standardized Software: Since the test could involve standardized software like ARGUS or MRI, familiarize yourself with these platforms beyond just the basics. Understanding how to input data and interpret outputs in these systems can be crucial.
Mental Preparation: Finally, ensure you're mentally prepared for the test. Get a good night's sleep before the day, and approach the test with confidence. Remember, the goal is to demonstrate your analytical skills and your ability to use these tools effectively under time constraints.
By following these steps, you'll be well-prepared for whatever the test throws at you, be it in Excel or ARGUS. Good luck!
Sources: CRE Asset Management Learning Materials, ARGUS - Training, Real Estate Development Modeling, How to prepare for an assessment center?, Q&A: Just Passed Argus Exam
Be able to accurately get the NPV of a leasing deal. If you understand DCF valuation and/or Argus modeling you should be fine.
Can you expand on the NPV part? Curious for myself. I’m not OP.
Not sure how much you know about NPV so I'll speak simply. Every investment has a NPV, which is just the total return minus the initial investment, accounting for the time value of money.
If I have a lease that gives me $10k in Year 1 and $15k in Year 2, and I also have to pay $10k in Year 1 to get the deal done (TI's + LC's + free rent, etc.), then my NPV would be $15k, discounted by some rate (typically the cost of capital or the opportunity cost of that money). That's $10k + $15k/(1+discount rate) - $10k. Compare that to a deal where you get $15k in Year 1 and nothing more, but you put no money in – second deal would yield a higher NPV. Or compare it to a deal where you get $5k in Year 1, $25k in Year 2, and invest $15k initially – this would yield a different NPV, potentially better or worse than the other two; it would depend on your discount rate (how much value you put on future cash flows).
So NPV is a way to compare the value to me of different investments, today. Executing a lease is an investment, and NPV helps me decide what the terms of my "investment" should be. (Note that some deals are so bad, especially in today's market, that they produce a negative NPV, which means you're losing money by executing and shouldn't do the deal.)
Thanks so to clarify the NPV of taking a certain discount rate to discount future cash flows (x% above rfr and is cap rate + a margin) is the same as taking your total return - the initial investment? I've only ever heard of NPV being used to get a minimum return and you want it to be above $0 and for discount rate IRR is used.
Is that correct? Trying to think through your explanation.
Yes, and you can summarize it like this: The sum of discounted present & future cash flows = your total discounted return - initial investment Note that your "total return" in the 2nd half of the equation also needs to be discounted. NPV takes into account discount rate/time value of money, as does IRR. They are two ways of evaluating an investment. IRR is "initial investment"-agnostic, meaning you get the same relative return, regardless of initial investment. NPV on the other hand does factor in initial investment, and will give you an absolute value. That's why IRR is often paired with equity multiple; it's not enough to know what my relative return is, I also want to know my absolute return (how much money (cash) am I getting back for the amount I put in). So NPV is helpful for coming up with the absolute returns of a set of deals and determining, not only the minimum-return deals, but the highest-return deal.
Did a quick comparison in Excel and the reason Scenario 2 is the highest is because there's no initial input and still getting the same $15k in cash flows (same as all 3 scenarios). I used the same DR for simplicity.
Scenario 1 is the middle with $10k input and 3 is the lowest with $15k input, all 3 scenarios produce the same cash flows over the period.
Understanding it more.
Correct, but I worry about your logic. You're right to imply that the initial investment has a big impact on NPV ($15k > $10k > $0). But also think about timing of subsequent cash flows. Try this one:
Compare these:
$13k initial investment + positive $25k in Year 1 + positive $3k in Year 2
$5k initial investment + positive $10k in Year 1 + positive $10k in Year 2
You won't know by just looking at initial investment and your profit. It matters (1) when you get your money and (2) how much you care about getting paid now vs. later.
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