Sensitivity Table

A Sensitivity Table, also known as a Sensitivity Analysis or What-If Analysis, is a table used in financial modeling to understand how different values of an independent variable affect a particular dependent variable under a given set of assumptions. This analysis is used within specific boundaries that depend on one or more input variables, such as the effect that changes in interest rates have on a bond's price.

In real estate financial modeling, a sensitivity table can be used to evaluate how changes in key assumptions (such as capitalization rate, rental income, operating expenses, vacancy rates, etc.) impact the potential return on an investment.

For example, a sensitivity table could show how changes in the market rent or vacancy rate would affect the Net Operating Income (NOI), and consequently the property's value.

A typical sensitivity table has the different scenarios for one variable along the top row and different scenarios for another variable along the first column. The remaining cells in the table will show what the result is for each combination of scenarios. This allows the user to see how changes in these variables can impact the results in a variety of scenarios.

In conclusion, sensitivity tables can be a very effective tool for risk assessment, allowing investors to understand and prepare for various potential outcomes.