Common REPE internship interview questions?
Hey everyone! As a rising sophomore, I want to start preparing for repe internships and I was wondering what questions are common during technical interviews. I’ve talked to interns at mega funds, and they told me that they weren’t asked to do a modeling test, but they did have technicals like “where would you invest 100mm?” and “two indentical buildings.” What other questions should I prep for and which ones are very standard for sophomores and juniors? Thank you again.
If I buy a building for $100 at a 5% cap rate, lever it at 70% LTC, 3% I/O, what's my cash on cash Y1?
Is the answer 9.67% y1 cash on cash return?
Yes it is. What do I need to sell the building for at the end of Y1 to get a 20% IRR?
How did you get to that #?
Is it $120? I actually don’t know how to do the problem and 120 definitely sounds wrong. Could you explain how you do it? Sorry.
You invested $30 so in order to get a 20% IRR at the end of Y1 you need to end up with $36 by the end of the year to get a 20% return on your investment (yeah I'm assuming it's an annual model and all cash flow happens at the end of the year, have to for this kind of "napkin" problem). I received $2.9 in cash (the 2.9 divided by 30 is where you got the 9.67% Cash on Cash), so I need an additional 3.1 in order to get to my $36. So I need to sell the building for $103.1 to get to a 20% IRR.
This is obviously simplified and doesn't include transaction costs etc., which you could mention during the process, but isn't really the point of the question.
That makes a lot of sense. Thank you for the help!
Best advice I can give you having interviewed dozens of candidates (while taking special note as I'll need to rely on them on my team to lessen my workload...)
I'm not looking for specific or correct answers, I'm digging into how they think. Don't focus on the questions, focus on the answers. My ace in the hole question isn't the first, it's the follow up... "Please walk me through the rationale behind your answer" and so on.
For opinion based questions or scenarios, I'm looking for conviction and your basis, objective, subjective, anecdotal whatever. I may completely disagree with your opinion or it may not contemplate major hurdles I know about... but that's beside the point and you'll learn on the job. I just want to know you can think for yourself. This isn't as important initially, but it helps me identify the extroverts vs introverts (at least initially). Conviction is the toughest part of PE, takes some guys years just to believe in their own underwriting and pitch to IC, meanwhile just chatting with the team they can be the smartest guy in the room.
At the end of the day my best interns and hires have been miles ahead of their competition. Naturally showing 2nd level thinking and interest just during the natural conversation between any "test questions." The majority of the kids I interview (mostly ivy-league) can't demonstrate anything outside of their "game-plan" when they walked in. I like to take some left turns and throw them off to get a look at the genuine candidate, but it's like pulling teeth just to get some genuine thoughts or opinions out of them even after handholding and asking leading questions... Better to just be natural and go in blind than over prepare and act robotic.
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