After scouring app stores for a decent commercial real estate valuation calculator (and endlessly coming up with mortgage calculator after mortgage calculator) I stumbled across a post by Joe Stampone, Best CRE Mobile Apps, in which he listed Real Estate Back Of the Envelope as one. It sounds like the developer of this app had the same problem finding one, so they ended up building one:

Real Estate Back Of the Envelope is produced by Razak Company, a Philadelphia-based real estate development and consulting company. As commercial real estate professionals, we wanted something small and portable to do the kind of quick real estate analysis we do all the time, but we were frustrated by the limitations of financial calculators and existing smart phone apps.

This app is by far the best mobile commercial real estate valuation application I've ever used. It is the only app I know of which is robust enough to satisfy the needs of experienced CRE financial analysts who build discounted cash flow models to derive IRR calcs on a regular basis.

The app includes the ability to analyze office, apartment, retail, industrial and hotel assets. It appears that the office, apartment, retail and industrial model inputs are all the same increments (per SF or as a % of EGI), whereas the hotel model uses per room calculations.

With multifamily as hot as it is right now, it is curious that the inputs for this asset class are not on a per unit basis. Using this increment for apartment models seems a bit more intuitive to me.

There are 3 types of valuations you can run: Snapshot, Stabilized and Proforma.

The Snapshot analysis is just that, and uses the direct capitalization value approach. This option does allow the user to run sensitivities on different variables, including a range of cap rates, income and/or expenses.

Here is an example of the output from a cap rate and rental rate range sensitivity, in 10% increments:

On the surface, the result is deceivingly simple, but considering that building an Excel worksheet (from scratch) to provide the same output would take many people >15 minutes, so having this capability on a mobile device is quite impressive.

If you prefer to analyze investments based on Internal Rates of Return (IRRs), the Stabilized analysis option of this app allows users to perform straightforward DCF analysis. While the inputs only allow for one rental and inflation rate assumption, this app is the only app I am aware of which actually performs this level of DCF analysis on a mobile device.

The Stabilized analysis option allows users to detail out operating expenses, management fees, real estate taxes and insurance, as well as capital reserves. (Capital reserves are calculated as a % of NOI, which seems a bit unorthodox, I'd prefer to calculate reserves on a straight per square foot increment instead.)

Within the Stabilized approach, it also allows for detailed assumptions for leverage, going-in and exit cap rates, as well as closing costs on both the purchase and sale.

Using these assumptions, this app allows you to easily generate a 10 year cash flow model, and includes an IRR calc:

As it relates to this output, it would be helpful for the underlying assumptions to be included on this output form. Still, I'm  impressed with the Stabilized analysis option and the overall level of detail it yields (I've seen multi-million dollar office buildings sold using less analysis than the DCF model this app produces).

One minor area for room for improvement would be for the developer to build in the option to change the length of the hold period. While a 10 year hold is probably the norm, being able to manipulate this assumption could be useful to many users.

As for the Proforma (or Construction/Condo) model, while  the app does allow for a level of analysis which would be impossible on the average calculator, there are so many assumptions which need to go into this level of speculative analysis (understandably) it becomes difficult to compress them down into inputs which are still manageable on a mobile app.

I would be comfortable using the Proforma portion of this app to derive what I could pay for an outparcel of land for a STNL build-to-suit development deal, but that's about it. Any more than that and the results of the app's proforma analysis becomes a real stretch. (In other words, you won't be able to print off these results and use them for your next development deal loan request, but who's doing development nowadays, anyway??)

There several other great features within this app. For instance, users can save default settings and assumptions for each of the 3 approaches, making the input of standard assumptions much more manageable.

Another good feature is that the app allows you to run analysis in the field and email to yourself or others for later consideration (such as the ones provided above).

At the end of the day, buying this app will most likely save you some time and envelopes. Used correctly, it'd probably impress some clients, too.

Download this app: iPhone, BlackBerry

Have you used the Real Estate Back Of the Envelope App?

How do you think it performs?