Commercial real estate analysts agonize over market assumptions such as rents, inflation rates, tenant improvement allowances, renewal probabilities and vacancy, cap and discount rates to produce discounted cash flow files that are the backbone of the decision-making process to proceed with or turn away from important business opportunities. What many of these same analysts don’t realize is there may be modeling policy “switches” within their existing discounted cash flow software that, depending on how they are set, can have a larger impact on their cash flow projections than changes to underlying market assumptions. A simple change in modeling policy from “yes” to “no” or from “annual” to “monthly” can generate material differences in cash flows.

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