What you'll learn

  • Identify the methodologies used to calculate the primary components of return in income-producing real estate.

  • Establish reasonable financial return targets for each of these primary return components.

  • Determine the level of debt financing that a project is likely to achieve based upon applicable underwriting criteria

  • Prepare simple operating pro forma, capital cost pro forma, and sources and uses of funds statements.

  • Understand the most common real estate industry measures of return and the relative importance of each measure.

  • Understand the significance of Purchase, Operating, and Exit Cap Rates. Understand a simple Waterfall/Promote structure.


Course description

We will focus on real estate finance fundamentals that are important to either develop and/or invest in varied types of real estate assets, or to enhance your ability to understand how real estate finance fundamentals relate to your primary role as a member of a real estate development or investment team, all with emphasis on understanding how real estate value is created, measured, and managed.

Expect a lively and engaging interactive classroom experience! Key topics will include: establishing realistic financial objectives; identifying and calculating the primary components of return in income-producing real estate including cash flow, tax benefits, and futures; preparing operating and capital cost pro formas and sources and uses of funds statements; understanding debt-financing underwriting basics (net operating income, debt service coverage factors, annual constants, debt/equity ratios, and other lender underwriting requirements); appreciating the importance of achieving positive financial leverage; calculating and interpreting standard industry measures of return: Return on Total Asset Cost (Cap Rate), Cash-on-Cash Return, leveraged and unleveraged Net Present Value (NPV), and Internal Rate of Return (IRR); and Equity Multiples. Other topics will include preparing sensitivity analyses and understanding simple Waterfall/Promote structures (the priority and amount of cash flow distributions to the respective financial and operating partners in a real estate joint development or investment joint venture).

We will teach and discuss these principles that are applicable worldwide using examples drawn from a wide variety of asset classes.

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