Real Estate Analyst

This totally depends but you might want to go with something that creates value and provides above average returns to investors. Maybe you purchase it at a discount to replacement cost, lease it up, stabilize the asset, and then sell it.

It is really just the disproportionate share of the fund’s profit (achieved by above average returns) which the GP receives thus incentivizing them to perform better in their role.

A levered IRR is just the Internal Rate of Return when you take financing into account. So basically you run a DCF, take out interest payments and calculate the IRR over the hold period. This will be higher mainly because taking on debt juices your returns and more specifically the first year cash flow will be lower because you have debt.

This is your opportunity to show your personality. Do not ramble, but rather provide a succinct explanation of who you are as a person, what you like to do, and THEN transition that into real estate. For example you might be a very outgoing person who enjoys staying busy and doing a lot outside of school. Talk about this and how it relates to involvement with the program. Maybe you have done multiple case competitions, traveled, taken the REIT course (shameless plug), or have a position in Real Estate Club.

Cost of equity is the return a firm theoretically pays to its equity investors. Capital Asset Pricing Model (CAPM) is the most commonly used method of determining the appropriate cost of equity. According to CAPM:

Cost of Equity, Re = Rf + b (Rm-Rf), where;

Re = Cost of Equity

Rf = Risk-free rate of return

Rm = The historical return of the stock market / equity market

b = is a number describing the correlated volatility of an asset in relation to the volatility of the benchmark that said asset is being compared to.

RICS and BOMA are the two most commonly used area measurement standard in the industry. RICS is the area measurement standards from Royal Institution of Chartered Surveyors, whereas BOMA is the area measurement standards from Building Owners and Managers Association, USA.

Closed- end means that the fund is limited in life. The investment managers must make acquisitions, manage, and enhance their assets, within a given time period.

Open-end means that the investment period is infinite and the fund will achieve success through cash flow, sales, and equity offerings.

☛ Office- GDP, Employment, and access to transportation.

☛ MF- Population (20-35), housing affordability, and employment.

☛ Hotel- Tourism, GDP, Employment

☛ Industrial- GDP, Employment, and Manufacturing

☛ Retail-Employment, GDP, Income

☛ Self-Storage- GDP, Employment, Single Family Housing

☛ Medical Office- Elderly population, transportation, health care employment

☛ Senior Housing- Same as medical office but just look at employment

IRR!

Why? Because it is easiest to calculate and least prone to subjective judgment error.

Hope you enjoyed this post on the real estate analyst interview. Use the comment section below to add any more questions to the list.

Discuss building construction, amenities, management, credit quality of tenant’s, age, environmental factors, occupancy, etc.

No, project IRR doesn’t take into consideration the financing cash flows. Equity IRR does.

By definition IRR is the discount rate at which the project NPV equals zero. Hence the project IRR will be 10%.

A waterfall is a structure that provides incentive to the GP or developer. The GP will get some percentage of cash flows up to a certain IRR hurdle rate, and then will get an increasing percentage of cash flows once the IRR hits additional hurdle rates.

There are many formulas you could mention to show your knowledge but the one’s that the interviewer is looking for are VLOOKUP, CONCATENATE, IF, SUMIF, and MATCH. If you mention any one of these it will separate you from the rest of your fellow undergraduates.

Here is your opportunity to discuss your passion. Maybe you love hotels because of the complex structure with the operating partner and the cyclical nature of the asset class, which might present opportunities that other food groups do not. Or maybe you love multi-family because you are most familiar with it and you like the growth prospects with more people renting and the shift to urban areas.

An equity multiple is another metric used to analyze investor returns. It is calculated as the sum of total cash distributed to the investor including appreciation from sale over the holding period divided by the initial investment.

Shortly, just mention a few approaches. Run a DCF to take into account future cash flows, use comps in the market, and look at what it would cost to replace the building.