21⟩ Tell me what is an IRR?
The IRR is the discount that makes your NPV zero. It is metric used to analyze investor returns and is often associated with IRR hurdle rates and promotes.
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“Real Estate Analyst based Frequently Asked Questions in various Real Estate Analyst job interviews by interviewer. These professional questions are here to ensures that you offer a perfect answers posed to you. So get preparation for your new job hunting”
34 Real Estate Analyst Questions And Answers
22⟩ Please explain what is the impact of depreciation on the project IRR?
No impact. Project IRR is calculated on the basis of cash flow and depreciation is a non-cash flow item.
23⟩ Explain me where would you put your money in Real Estate?
Have a succinct answer for this. Know who you are interviewing with. If the company invests in value-add deals in Oklahoma do not say that you would put your money in a REIT like Vornado. Try to be clear which part of the capital stack you are investing in. Are you putting money into Public debt, private equity, public equity, or private debt? This structured response will be clear to the interviewer and show a sound thought process. Try to mention diversification!
24⟩ Tell us do you know how to structure a joint venture?
Basically what a JV does is provide a co-investment by multiple parties to fund a real estate deal. This could be a general partnership, limited partnership, or an LLC. Ultimately it is simply a way to link money (capital) providers and people who specialize in real estate services. What a JV tries to accomplish is utilize this link to provide all parties with above average risk adjusted returns and also assess structuring details with regards to a if the deal goes bad.
25⟩ Explain what do you think is the most important statement of a company?
This is more of a debt side question you would get when looking at tenant quality. You want to look at the cash flow statement to understand how the company makes money and generates cash flow. It will also allow you to analyze growth prospects and market share. Of course the Income Statement (Revenue and Expenses) and the Balance Sheet are very important also. When it comes to analyzing key ratios and debt structure look at the balance sheet. But the real estate industry is about Cash and having the ability to generate cash is king.
26⟩ Walk me through a DCF?
This is a short answer, but basically a DCF is a way to project out future cash flows and discount those CF’s back to present value. You are saying that this property is something that is going generate income (while having operating expenses) over some period of time fluctuating with market conditions, and that this potential needs to be taken into consideration when valuing the building.
27⟩ Explain me in mixed-use development how do you allocate the infra cost / land cost / service charge?
Infra cost and land cost can be allocated on the basis of gross floor area (GFA), net sellable area (NSA) or in proportion to the projected revenue.
Service Charges can also be allocated on similar basis.
I personally prefer the allocation based on GFA as it makes life easier (accounting reasons).
28⟩ What is a cap rate?
Cap rate = NOI/ Value
A high cap rate is associated with a riskier property or market, and a lower cap rate is a more stable property or market. Cap rate is also the discount rate minus growth rate. Another way to look at this would be from an investor POV. An investor will require some rate of return on their investment, called the discount rate. They will expect to receive the cap rate + some growth in the property. This is just a rearranged version of the previous formula. {Cap Rate = Discount Rate – Growth} or {Discount Rate = Cap Rate + Growth}
29⟩ Tell me with interest rates so low these days what do you see in store for real estate investing and more specifically acquisitions and dispositions activity?
You need to mention two things. One is the ease of financing. A deal might not be deal without the ability to lock in artificially low rates. Two, discuss investor sentiment. By that I mean that investors are searching for yield with rates so low, and will be looking to real estate to provide that consistent cash flow and above average risk adjusted return.
30⟩ Tell me why should choose one over other?
There can be various reasons, but we should go with the industry practice in our area of operation.
31⟩ Walk me through your resume now?
Practice this one over and over. Try to make it roughly 2-4 minutes. Go in order of most important. The key is to highlight not only what you did, but how it has shaped your skill set for the position. For example if you worked in brokerage but are applying for an analyst role at a private equity shop, discuss your knowledge of the markets and ability to understand tenant demands and lease structure. These are valuable skills that analysts need to have.
32⟩ What is the relationship between IRR, NPV, and the discount rate?
The IRR is the discount rate that makes the NPV zero. Boom!
33⟩ Tell me how do you value a building?
3 approaches again. Talk about credit quality of tenant’s also.
34⟩ Tell me what are the best / worst performing asset classes in the current market situation? Why one should invest in these assets or why not?
In any given market, one asset will be better performing than others. Assume in my area, hotel is the worst performer and residential is the best performer.
But a developer cannot just keep building residential assets, as soon oversupply will make it the worst performing asset.
Also, a large development cannot be successful without having a proper mix of various assets.
