Leveraged Breakdowns

Breaking down REPE Course

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  • #13861
    REPE enthusiast
    Participant

    Hi Lev,

    I have a question regarding Part 2 of the Breaking Down REPE course.

    Specifically, at the very end of the video titled “Forecast Entry and Exit Value” the Unlevered IRR in the cash flow section is 11% and the MoC stands at     1.6 x.

    Then in the opening of the subsequent excel video “Forecast Real Estate Taxes” I believe you have already added a Returns section that is meant to link to the Unlevered IRR and Unlevered MoC in the cash flow section yet the values are completely different (i.e. Unlevered IRR of 6.6% and Unlevered MoC of 1.33x in green ) Can you please clarify the steps that you took outside the video because from that point onward I can’t get the same results as you in the model.

    Much appreciated!

    #13897
    Lev
    Keymaster

    Thanks for your watchful eye. The cash flows between the two videos “Forecast Entry and Exit Value” and “Forecast Real Estate Taxes” are the exact same. The forecast 6.6% UIRR was a holdover artifact from when I had just constructed the backend for the RE tax reassessment. When I went in to investigate your question, I checked that the model used for both videos had the same cash flows. When I refreshed, that 6.6% turned back to an 11%. I’ve carefully reviewed and revised the video to show the proper 11% return the entire time. Thanks!

    Just a small note. It is good that you’re paying attention to the UIRR as we build the model, because it shouldn’t ever change unexpectedly. However, the UIRR is not meaningful until we’ve finished projecting all cash flows. I understand why you got hung up on this, but I assure you the continuity of the videos is sound and you can continue relying on the cash flows that you built.

    #14298
    REPE enthusiast
    Participant

    Great, thank you Lev!

    #23097
    roryhcompton
    Participant

    Lev,

    What does MoC stand for?  When it was introduced during the 1st part of the course it was not explained.

    #23105
    Lev
    Keymaster

    Sorry – MoC means Multiple on Capital (sometimes also called Multiple on Cash). It’s a really basic concept. You put in X dollars, you get out Y dollars. MoC = Y/X. So if you buy a building for $100 and sell it for $220, your MoC is a 2.2x.

    #23109
    roryhcompton
    Participant

    Thank you sir.

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