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Leveraged Breakdowns

Real Estate Private Equity Skills: Continuous Improvement

One of the greatest lessons we have learned in our REPE careers is that you never actually “arrive.” There is never a point when you can say with any confidence that there is nothing left to learn and you actually have things figured out. This points to a critical real estate private equity skill: continuous improvement.

You are in no danger of experiencing a sense of arrival as an analyst just starting your career. Your first few months will feel like you are drowning as you try to figure out what you are supposed to do (Leveraged Breakdowns exists to help prepare you and minimize this feeling). Eventually you will settle into a rhythm that, while exhausting, will begin to feel familiar. Your confidence will rise. This is all normal and good.

Continuous Improvement

One of the catchphrases in business lexicon a while back was “continuous improvement.” It may not be used as frequently today, but the concept is critical. Even when you’ve built a reliable and flexible real estate private equity LBO model that you feel confident in, don’t rest on your laurels. Look for ways to make it better.

From personal experience, we know that as you are working on your model, you will think to yourself “there has to be a better way to do this.” Or you may realize exactly what you need to do in order to make your model better, but you don’t have time to spare in order to overhaul it. We recommend keeping a record of those ideas- a note on your phone, a Word or Google doc, or whatever works for you. You can go back and make the improvements to your model when you have more time to adjust and test.

For instance, one of our preferred methods is to keep a tab named ‘tbu’ (which stands for “To Be Updated”) at the front of our model. In one column, we write what should be improved as clearly and thoroughly as possible. Then to the left, we write the date of submitting this idea, and its status (open, in progress, closed). This does four things: 1) it helps us get the idea out of our heads and onto a list; 2) it allows us to prioritize each individual improvement when we have the free time to tweak our models; 3) the date keeps us honest with our pacing (if it’s been sitting there for a month, we’re probably being lazy); and 4) the closed-out items help us remember how far we’ve come forward. This is just one of many ways we implement continuous improvement in our own models.

Learning from Others

You will have opportunities to see others’ real estate private equity LBO models. An Excel or Sheets model is always a window into another person’s thought process. By studying someone else’s model, you may stumble onto a better formula, a nice visual presentation, or some other element that could improve your own model. When you have to dissect another’s model, keep notes on components that you like. When you have time, you can implement those changes in your model. If you don’t keep notes, the only time you will think about making a change is when you’re in the middle of building a model under the pressure of a deadline.

Developing your real estate private equity investment skills is a lifelong process. Don’t fall into the trap of thinking you will only need a few months or years to master the skill, and then you’re set. Continuous improvement is a skill that will serve you in your REPE career. Online courses from Leveraged Breakdowns will help you get started in your real estate private equity career. You can also keep learning and networking by engaging with others in the discussion forums.

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