Real Estate Interview Questions Master Thread

In my opinion, there are only so many questions that can be asked in a real estate interview. But I still find myself slipping up because a question is worded slightly differently than I'm used to. I'd like to use this thread to compile as many technical / fit interview questions specific to real estate so that we can all be better prepared in the future. I'm dumping some questions I've collected over the years so that I'm not only leeching off you all.

Basic questions you can expect in every real estate interview:

  • Tell me about yourself, walk me through why you’re here
  • Why are you looking to leave your current firm?
  • Why do you want to work at our firm?
  • Why do you want to switch to the equity side / debt side / development / etc?
  • Have you done any research on our group? Tell me about a deal we did that you found interesting

Technical Questions:

  1. If you buy a property at a 6 cap, using 60% Leverage (5% Interest only), what is the year 1 cash on cash return?
  • $100 purchase price implies $6 of NOI
  • $60 loan at 5% IO implies $3 of interest expense and $3 of Cash flow after debt service
  • $60 Loan implies $40 of equity
  • $3 of CFADS / $40 of equity = 3/40 CoC; (3/40)*2.5 = 7.5 / 100 = 7.5% Year one Cash on Cash
  1. Continuation of previous question, this is pen and paper question – if you hold this building for 10 years and NOI grows by 3% each year (compounding), what is your unlevered equity multiple and IRR?
  • For unlevered, you now that you’re starting year is $6 of NOI and given that 1.03^10 is 1.34, year 10 NOI will be approximately 1/3 higher so call it $8 of year 10 NOI. The trick here is to know 1.0x^10 for several numbers
  • Because you hold for ten years and income increases from 6 to 8, you should assume that the average NOI level between years 1 and 10 is ~7. So 7 * 10 = 70 of income from life of project
  • Then cap the Final year income of $8 at a 6 cap. 8 * 100 / 6 = 133 in proceeds from the sale. Income + proceeds from the sale = $200 and there was no leverage so equity multiple is around 2x
  • For IRR you have to do some estimating. Given that Income trends from 6 to 8 you can assume that your average income over the 10 years is $7. If you had 10 years of $7 cash flows, and no principal appreciation (sell for $100), you’d have a 7% IRR. But given that you sold for an increased price in year 10, IRR would have to be above 7%. If you took all of the profit you made ($200), and averaged it out between the 10 years and sold at $100, your IRR would be 10%. So given that the income is weighted more towards the end due to increasing NOI and the $133 sales price, you know the IRR is somewhere between 7% and 10% and you’d have to make a best guess. The actual IRR is 8.77%
  1. If you have $100 million of equity to invest where would you invest it and why? What type of returns could you expect?
  • You can give a wide variety of answers here. Goal is to show that you’ve been reading the news and have your own view on the market
  • Also know the types of returns you could expect from your investment idea. You don’t want to tell an interviewer that you think there is a good opportunity in Multifamily development in Austin and you’d look for deals with a 11% yield on cost
  1. Walk me through a deal that you worked on. Would you have invested in this deal? Why or why not? If you wouldn’t invest, what could you change about the deal to make it more attractive?
  • Old thread on this Here
  1. Assume you buy a property, and the NOI grows 5% every year for 100 years. What are some reasons the property could still go bankrupt?
  • Basically you need to point out items that are “below the line”. The answer is if you’re overleveraged and unable to refinance your debt or if you have significant deferred maintenance / large capex projects
  1. A hotel and multifamily project are next to each other. Which one trades at a higher cap rate and why?
  • Hotels are a riskier / more volatile asset class
  • Hotels require more capex on average
  1. If you have two office buildings side by side that were identical in every way physically, why might one property be valued differently than the other?
  • Credit of the tenants
  • Diversification of the tenants – if every tenant is in the financial services industry, that can be more risky than having a diverse tenant base from several industries
  • Weighted average lease term – longer leases are better
  • For expiring leases – if the rent is below market, that would make the building more attractive
  • Capital structure - one is offered debt free and the other is encumbered with high leverage / high prepayment penalty debt
  1. If you have $12 of NOI valued at an 8-cap, what is the property value?
  • Trick is to remember that dividing by .08 is the same as multiplying by 100/8 which makes the mental math way easier
 

Definitely, only so many technical questions one can ask, but probably just worded differently so can be tricky sometimes. Below are a couple I've gotten that I remember:

  1. Buy a property at a 5 cap and your expenses drop 20%. At what cap rate do you have to sell the property to maintain the same purchase price?

  2. Buy a property for $100m, 60% LTV, $0 NOI. What sale price do you need to get a 2x EM?

 

My attempt would be:

Assume property price at $100. 5 cap means the NOI would be 100*5/100=5.

Expense dropping by 20% is equivalent to NOI increasing by 20%. This means new NOI is 5*1.2=6.

To hold the same purchase price of 100 with NOI of 6 means a cap rate of: 100/6= 16.67%

 

Thanks for the questions. My attempt for 2:

Buying at $100m with 60% LTV means $60m in debt and $40m in equity.

For an EM of 2x, cash distribution would need to be $80m.

So selling, at 60+80=$140m would yield 2x EM.  

 
Most Helpful
Analyst 2 in IB - Ind:
* Tell me about yourself, walk me through why you’re here

So this may seem counter intuitive, but I think this is one of the most important questions you get, as it is typically one of the first (in what ever variation it comes in), and frankly you can make or break a lot with how you answer it.

Some advice from an interviewer type perspective....

  1. There really isn't a 'right' answer to this, being honest, personable, and dare say, interesting, is what matters. How you answer relates to how you may 'fit' within the firm culture, and if you give a first impression that is favorable, every other question will be judged better.

  2. Be honest, complete, and thoughtful. College students in particular really stumble with explaining why they want the job quite often. If you started out in college wanting to be a doctor and then realized blood was icky, say it. If your dad made you major in business and then you found real estate by some happy accident, say that. We won't judge you if this wasn't some passion since elementary school. And if you did watch the Apprentice in grade school and decided you wanted to be a developer (I would avoid any Trump references lol), say it. So long as it sounds true and sincere we will like it.

  3. Tell a story. Don't really worry about the answering the exact 'phrasing' of how it's asked. Whether its 'tell me about yourself', or 'why are you interested in this job', or 'why you' or anything else that is open ended; just tell your story. Explain the what/why of who you are and how you got there. The best answers end with you fitting into the type of job/firm at which you are being interviewed.

  4. Practice this story and its possible variants. You need this 'story' in interviews, networking events, even in email exchanges with mentors. You should practice giving it ahead of time. Be sure to have 30 second, 2 minute, 5 minute, and even 10 minute versions. Clearly, you don't want to seem scripted or rehearsed per se, but rambling and stumbling is terrible for what should be such as easy question. Hint, if you have relevant experience, training, skills for the job, be sure to weave it into the story as it best fits.

  5. Talk. One of the worst comments I've heard about some interviewees from UG (intern/first job) is that they were too quiet. Like gave short answers, seemed nervous, and thus unprepared. You need to keep talking and be interesting, if you can nail the first question, the rest are easy.

Final bonus points, technical questions are rarely about seeing if you know the 'right' answer, its more about seeing how you handle the pressure and stress. Better to give solid answers even if they contain some 'I don't knows' or 'I'm not sures', mumbling as you search your brain for the answer is really not ideal. Nor is clearly just bullshitting it, unless that's what the firm wants (I wont comment further on that one....)

 

Super old thread, I know, but someone linked to it. And I agree 100% with this, if you have the relevant experince. When I was interviewing for development jobs I included a "Project portfolio" sheet that had the construction projects I worked on with pictures and a few key points about each project. It gave them more color on what my actual experience was in. It's hard to get across that you worked on some baller projects since verbally, 300k SF of office is 300k SF of office. But if you can show them a building that was designed by a hot-shot Chicago architect with some beautiful curtain wall it shows the level of quality you're working on, compared to say an exurban office park of grey stucco. Interviewers were definitely impressed. 

 

Agree these are fairly common questions. #2 is probably a little more rare but I'm sure you'd get hit with that as an entry-level analyst at most megafunds.

To add a few I've encountered:

1. What are the different ways you can value a property? Walk me through a DCF.

Sales comps, income method (make sure to mention both direct cap and DCF), and replacement cost.

Always walk through the pro forma in detail when going through this (i.e. don't just start at "so you take your NOI..."). I've heard of people being asked to build out a paper DCF with some simple provided assumptions, but never run into it myself.

2. If you invest $100 in a property today and sell it four years later for double that, what is the property's IRR assuming it was breaking even over the investment period?

Pretty easy one, but some people really stumble on it since you can't actually just calculate the IRR on paper. The interviewer is really just testing the way you approach the question (i.e. are you just going to throw out a guess, or approach it logically).

The correct answer is "about 20%" - you would be shocked at how often people shout out 25% right away... You can just take a second to try out a few ballpark numbers mentally and compound it out over four years.

3. What do you think about the state of the market right now?

The interviewer might build on this by asking about specific types of assets or even sub-types. This is the gold standard question in addition to the hypothetical "where would you invest $100MM" to test if you're genuinely interested in and keeping up with the market.

Be sure to explain the WHY and get in-depth.

4. What trends do you see impacting X asset class in the next 5-10 years?

Similar to the previous question in terms of what they're digging for. For example, you might talk about how you think the increasing popularity of e-commerce and need for next-day and same-day delivery systems will be a huge benefit to industrial in the next decade.

At a retail-focused fund, maybe you'll talk about how e-commerce and instant fulfillment are eating away at traditional retail, and you think there is an urgent need to change the tenant mix at malls and power centres to increase the entertainment and F&B allocation to increase foot traffic, and that retailers need to recognize the need to create an experiential, omnichannel experience to keep consumers engaged.

Also, here's a link to an older thread with a great list of potential questions:

https://www.wallstreetoasis.com/forums/analyst-interview-common-questio…

 

For #3 what asset and type of returns. I can answer the first part, on the second part regarding returns it may be obvious but is the reason your answer is it's not 11% YoC and that would be insane is because cap rates in 2020 would be say 4-4.5% cap rate for quality multi in that market and in general due to higher construction costs, cap rates compressing (which leads to more debt service on the property) it would be way lower than 11%? Just want to confirm my thinking is correct since I have interviews coming up.

 

Voluptates voluptas ut perferendis sed. Rerum accusamus ullam maxime ab numquam doloremque. Maiores qui autem voluptatibus in provident dolorem ut. Accusantium qui eaque est dolorem minus nostrum. In animi quis voluptate.

Voluptas aperiam est nostrum natus nihil repellendus. In sunt magnam sed itaque et atque qui voluptas.

Recusandae natus aut qui excepturi reprehenderit pariatur. Blanditiis ducimus nisi dolorem dolorum minus. Rerum atque et et quam provident esse dolor qui. Ex dolor aut delectus fuga reprehenderit officia. Rem incidunt aut qui repellat.

Ipsum autem libero aut error laboriosam. Dolore aut unde enim qui. Omnis est molestias eveniet illum esse. Nihil temporibus aut amet et dolor.

 

Adipisci voluptas dicta laboriosam. Corporis et laudantium ex itaque laudantium. Dolor quis atque beatae neque totam praesentium nam aut.

Dignissimos dicta quo ut earum itaque. Consectetur voluptates accusantium asperiores mollitia labore velit repellat. Nam unde nisi et et consequatur accusantium. Accusamus impedit voluptas quo ut. Culpa ratione omnis et corporis voluptatem. Pariatur qui corrupti et perspiciatis ut repellendus expedita et.

Career Advancement Opportunities

March 2024 Investment Banking

  • Jefferies & Company 02 99.4%
  • Goldman Sachs 19 98.8%
  • Harris Williams & Co. (++) 98.3%
  • Lazard Freres 02 97.7%
  • JPMorgan Chase 03 97.1%

Overall Employee Satisfaction

March 2024 Investment Banking

  • Harris Williams & Co. 18 99.4%
  • JPMorgan Chase 10 98.8%
  • Lazard Freres 05 98.3%
  • Morgan Stanley 07 97.7%
  • William Blair 03 97.1%

Professional Growth Opportunities

March 2024 Investment Banking

  • Lazard Freres 01 99.4%
  • Jefferies & Company 02 98.8%
  • Goldman Sachs 17 98.3%
  • Moelis & Company 07 97.7%
  • JPMorgan Chase 05 97.1%

Total Avg Compensation

March 2024 Investment Banking

  • Director/MD (5) $648
  • Vice President (19) $385
  • Associates (86) $261
  • 3rd+ Year Analyst (13) $181
  • Intern/Summer Associate (33) $170
  • 2nd Year Analyst (66) $168
  • 1st Year Analyst (202) $159
  • Intern/Summer Analyst (144) $101
notes
16 IB Interviews Notes

“... there’s no excuse to not take advantage of the resources out there available to you. Best value for your $ are the...”

Leaderboard

1
redever's picture
redever
99.2
2
Secyh62's picture
Secyh62
99.0
3
Betsy Massar's picture
Betsy Massar
99.0
4
BankonBanking's picture
BankonBanking
99.0
5
dosk17's picture
dosk17
98.9
6
DrApeman's picture
DrApeman
98.9
7
kanon's picture
kanon
98.9
8
CompBanker's picture
CompBanker
98.9
9
GameTheory's picture
GameTheory
98.9
10
Jamoldo's picture
Jamoldo
98.8
success
From 10 rejections to 1 dream investment banking internship

“... I believe it was the single biggest reason why I ended up with an offer...”