What is regarded as a best practice for model documentation?

Adding assumption notes and version control is considered a best practice for model documentation because it enhances the clarity and usability of financial models. Assumption notes provide context and rationale for the inputs and calculations used within the model, making it easier for users to understand how decisions were made and what factors influence outcomes. This transparency is crucial for effective communication among team members and stakeholders.

Version control ensures that all changes to the model are tracked and documented over time. This is important in a real estate finance context, where models may undergo numerous iterations due to changing market conditions, updated data, or revisions in project scopes. By maintaining version control, users can reference previous versions when needed, or revert to an earlier state if necessary, thereby preserving the integrity of the modeling process.

Both of these practices contribute to the overall robustness of the financial model, supporting better decision-making, effective collaboration, and easier future modifications. In contrast, minimizing comments, hiding formulas, or relying on complex algorithms may lead to confusion, lack of transparency, and potential errors, making it difficult for others to follow the model's logic or validate its outputs.