5 MISTAKES EVERY REAL ESTATE INVESTOR SHOULD AVOID FRANK GALLINELLI
Most of the homebrew presentations that I see
Cash Flow and Internal Rate of Return. If these
look to me like a Jackson Pollock painting with
items don’t stand out, or if the presentation is
numbers superimposed. The layout usually has a
disorganized, you might as well add a cover page
logic that I can’t discern, and I find myself hunting
that says, “I’m Just an Amateur Who Probably
for the key pieces of information that the
Can’t Pull This Deal Off.”
presenter should have designed to jump off the
page.
3. Errors, We Get Errors, Stack and Stacks of
Errors
The layout needs to be orderl y and logical:
revenue before expenses and both before debt
service.
Labels need to be unambiguous:
•
If you mention capital expenditures, are they
actual costs or reserves for replacement?
•
theme song (by the way, it was “letters,” not
“errors”), but the tune goes through my head when
I look at some investors’ spreadsheets.
•
When you label a number as “Price,” are you
before they scrutinize the entire pro forma, items
like Net Operating Income, Debt Coverage Ratio,
mathematically
attempting an IRR
impossible
calculation
that can’t
resolve.
presumed offer? Be clear.
looking for several key pieces of information
a
calculation, like division by zero, or also when
talking about the stated asking price, or your
Lenders and experienced equity investors will be
The #NUM error can appear when you try to
perform
Is the debt service amortized or interest only?
•
You may be too young to know Perry Como’s
•
#VALUE
usually
occurs
when
you
type
something non-numeric (and that can include a
blank space, letters, punctuation, etc.) into a
numeric data-entry cell. If there are formulas in
your model that are trying to perform some kind
of math using the contents of that cell, those
formulas will fail. In other words, if you try to
multiply a number times a plain-text word,
you’re violating a law of nature and Excel is
going to call down a serious punishment on
your head, a sort of high-tech scarlet letter.
It can get really ugly really fast because every
calculation that refers to the cell with the first
#NUM or #VALUE will also display the error
message, so the problem tends to cascade