Real Estate Business Plan, Financial Model, and Pitch Deck – Case Study

Background 

This case study is about a real estate developer who wanted to acquire investments based on a concrete commercial real estate business plan, financial model, and pitch deck. The client already had a real estate company operating in Mexico and was aiming to expand its operations in the US Real Estate Market.  

In this Case Study, we have presented the process and analysis techniques that we use to prepare a detailed real estate business plan and financial forecast model for our client. 

Challenges

• We performed market research to identify the client’s potential target market and estimated the achievable market share.
• The main challenge was integrating the two types of funding, equity, and debt-based, into the model structure so that they could be adjusted from input tables.
• Moreover, renovation costs, remodeling costs, and development costs are estimated, and dynamic rows are provided to calculate the cost of the project and further add data in case the project expands significantly. 
• Ultimately, we had to provide a Net Present Value and IRR to help the client make the best possible decision for future strategies.
• One of the major issues for us was to give them flexibility and to keep input dynamics, which required implementing complex logic through excel formulas.
• A challenge for us was to prepare a complete schedule for investment and returns management. This was important to estimate the best strategy for return distribution while keeping a cash reserve to avail a good opportunity.

Solution

• We researched several realtors and developers worldwide and found the number of competitors and, in the end, what portion of the market our client can capture. 
• We incorporated equity and debt funding to consider both financing forms in this real estate financial model template. 
• Different funding types with varying cost options are provided to calculate and adjust the model per the changes. 

PESTEL Analysis

To understand the external factors like political influence in the area, it was very crucial and relevant to perform a PESTEL analysis. Hence, we performed a PESTEL analysis for our client to analyze the political situation in the targeted areas of our client. Moreover, we researched the economic conditions of the area and its residents and whether they could afford our client’s products and services. 

Furthermore, we researched the social and technological aspects of the targeted region for this real estate business plan template, which helps in understanding the area’s demography. In addition, we explored the environmental and legal aspects of our client’s target market to understand the laws and regulations in the area so that our client could make decisions accordingly. 

SWOT Analysis

To understand the strength of a company, it is essential to conduct a swot analysis. For this reason, we performed a swot analysis of our client’s real estate business plan. In this analysis, the strengths include experience, local presence, specialized local contractors, local realtors scouting the areas, and strong connections with real estate agents and realtors. On the other hand, the weaknesses may involve slow market conditions, higher interest rates, and comparatively less capital/investment than the competitors in the area.

To identify the opportunities, we performed market analysis and market research. This helps in highlighting the opportunities in the market for our client. Some of them are partnerships with other realtors and developers, expansion in different counties, and lower interest rates (lowering the borrowing cost to the buyers, leading to increased demand). 

Moreover, the market research helped us identify threats in the market for our client. Some of them are new realtors and developers entering the market, economic and political instability, and extreme weather conditions that will always exist in the market for which the client has to determine a sustainable strategy.

Market Analysis

We performed the market analysis for our client’s real estate financial modelling excel template to understand their potential customer’s needs and wants. Also, how the realtor can fulfill these needs. It also includes understanding the realtor’s potential competition and why customers would choose them over the competition. Moreover, we analyzed our client’s target market and discovered two main areas to be targeted initially by our client. 

Competitor Analysis

Competitor analysis is very important for realtors. Because it helps to understand the realtor’s potential competitors and the industry in general. For this reason, we researched competitors in our client’s target market area and their approach and offerings to the public. So that our client could understand the competition and compete with them. 

Marketing Strategy

In order to attract potential customers, a comprehensive marketing strategy is very important. And  for that reason, we have formulated a marketing strategy for our client’s real estate business plan. This strategy focuses on marketing through the brokers who would list the properties on their website and develop brand awareness.

Customer Persona 

It is essential to analyze the customer persona to understand the target consumer group, grasp their desires and behavioral patterns firmly, and make decisions strategically. And for this reason, we have researched the customer persona for our client’s real estate business plan. From our findings, most customers are looking for single-family homes. This might be because they want to start their life independently. Or maybe, because they are mature families looking for a better standard of living in the area. In addition, other categories include multifamily and student housing. This refers to individuals looking for a multifamily project rather than a separate home. Students from all over the country and the world living nearby their university are looking for a reasonable residential solution.

Financial Highlights

Input Assumptions 

We developed the assumptions considering the startup real estate financial model template. Being a real estate startup, one cost was properties’ investment cost. Assumptions include renovation and development costs, employee payrolls, operating expenses, and rental assumptions.

Market Validation 

One of the most challenging parts of our research while creating this real estate business plan was determining the potential of our client’s target market. We identified the market revenue generation capacity and the current and future forecasted trends. 

Moreover, we did an in-depth analysis of other counties within the state to identify future markets for expanding the services.

Revenue Analysis

Revenue depends on the number of sold and rented properties. So, we built a dynamic revenue model that considers all factors affecting revenue generation. This allowed us to identify the areas to increase revenue and profitability. 

Financial Statements 

The company statements of our client showed a positive net profit margin for all ten years of the project. It was abecause of significant profit margins. Furthermore, the gross profit margin is also stable during the project’s tenure. This states that the company is financially in a good position. 

Cash Flow Statement 

In addition to the financial statements, we created a cash flow statement for our client. These statements considered the timing and amount of inflows and outflows from operations. This allowed us to quickly identify potential funding requirements for our client’s business.

Balance Sheet

You can see the total assets and liabilities calculated in this balance sheet.

Loan Schedule 

We have calculated the loan amount, the interest payment, and the principal payment for our client in the loan schedule table.

Depreciation Table 

We have calculated monthly and yearly depreciation for our client’s business in the depreciation table. 

Investment Summary

In this section, we present the investment summary, which summarizes the investment received and investment balance on a yearly basis. Moreover, we have also shown the number of investors entering or leaving annually. In addition, we have segmented the net profit from properties and the costs incurred on them.

Company Valuation 

We calculated the company’s Weighted Average Cost of Capital (WACC). Also, we calculated Company valuation based on discounted cash flow method to calculate NPV, and IRR. So that our client could convince the investors for the investment.

Pitch Deck 

A pitch deck pitches the company’s ideas to the audience and general investors. We developed the pitch deck in alignment with the real estate business plan for our client. An attractive and appealing presentation catches an eye. So we have utilized the latest applications and tools to enhance visibility. We also mentioned the crucial operational and financial factors for positive image creation.

Conclusion

The real estate industry has the potential to grow in the future. This is because real estate solutions like renovation and remodeling are always in demand due to the increase in population and changing lifestyles. Moreover, effective and quick residential solutions have already built trust among the people. And they are inclined toward quick solutions rather than traditional real estate solutions. In this regard, Oak Business Consultant makes businesses stand out and perform exceptionally well. We go through a deep analysis of market research and financial forecasting. Finally, we consider every aspect of the company to give our clients a critical viewpoint in developing their journey.