hi. i have an upcoming investment banking interview with a MM real estate bank. i was wondering how best to prepare. i couldn't really find any material on real estate DCFs on the internet. should i be prepared for standard finance/technical questions or anything unusual geared toward real estate? what's the best way to get briefed on the industry?
thanks
Know IRR, cap rates/yeilds, tax structure of a REIT, NOI, FFO, NAV, discount/premium to NAV and what it theoretically means. Learn the basics of mortgages so Constant Payment mortgage, Interest Only, fixed rate vs. variable rate. If you are really keen, knowing the basics of a CMO structure would impress me and same with knowledge of secondary mortgage markets and how the subprime came to be. Also, understand financial statements that are asset heavy, what happens to all the statements when you dispose of a building.
On the non-technical side, you have to be able to articulate why real estate specifically. I think this is the most important question. Prospective monkeys who do well on this question usually make it past the first round.
Hope this helps
thanks for the reply. i actually already got passed the first round and am going into the final round. someone there were no technicals in the first round whew.
i seem to understand everything you mentioned above except the disposal of a building? is that just the regular sale of an asset on the financial statements? so on the balance sheet Cash increases, Property decreases, RTD may change. on the net income side you have income from the sale, and on the cash flow statement cash increases?
thanks!
that sounds right. you are prepped well if you can seak of all those things. the disposal of a building was just an example of financial statement analysis, but you have a good understanding.
one more thing, i would also know what a sale-leaseback is. otherwise, good luck
Help with real estate ib interview. (Originally Posted: 06/24/2011)
I have the technicals down and have done some research, but I'm struggling to come up with a good answer to why I'm interested in real estate. Can anyone who works in real estate IB share their own perspective on what makes real estate interesting?
I always win in Monopoly.
Take a look here http://www.wallstreetoasis.com/forums/answering-the-question-why-real-e…
I have a great answer for this question, and I feel a lot has to do with where you live and where you were brought up. Real Estate as an asset class functions differently then traditional equity or senior fixed income investments.
Most of the time equity and fixed income is made up of a product(s) which operate on a international scale. However, real estate, is the 1 asset which is 99% comprised of the local market. So when it it boils down to it, real estate is an asset made up of people.
Growing up in New York, the first thing you always asked a stranger at a party was, "which neighborhood do you live in, and how much is your rent." With such history, ability, and style of living people are always drawn to live in New York. And nothing quantitatively shows this more, then the real estate market.
Real estate is a tangible investment asset that can produce more stable cash flows and less fluctuations compared to equities. It takes less risk, but higher returns.
Real Estate is a cool industry, where I feel excited about seeing a development rising up from the ground, and you make people living in it, and you earn the profits by operating the asset. Real Estate is definitely something needs a lot of people to be involved with, and diversified knowledge aspects utilized.
REITS investment or investment management is different, I would rather say them as finance than real estate. People who knows how to make reits investment might not even understand real estate itself.
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