What can I expect: a REPE Top 5-10 modelling test?
Hi all!
End of this summer I have to do a modelling test for a top 5-10 fund which will take 2-3 hours.
Given the current job market I really want to pass the test and practice well, though I only have an old commercial modelling test (CFs, return metrics, sensitivities, taxes and waterfall).
What more could I expect, and do you guys have (good sources for) additional modelling tests with solutions?
I am studying finance in uni now and as I have less experience with real estate modelling the solutions or a finished model would really help :)
Hope one can help!
Ps: I have been practicing with speed, though only with the one model
Admin Update: New RE Modeling Course Now Available Here
Is this remote or monitored in any way?
Yes it is! I will make it in their offices
Went thru this last year for similar company and got the job essentially cuz I crushed the extremely difficult modeling test that I know the other candidates failed. I only had an hour, but had to build a quick office pro forma, generate unlevered returns. Add in debt. Generate levered returns. Sensitive exit cap/purchase price, hold period, and leverage (so the model needed to be dynamic for most inputs). Then a simple sources and uses. Lastly was build a 1 stage promote based on given equity investment percentages. If you can do this in an hour, which is extremely difficult to do, you’ll likely get the job. Good luck!!! Would recommend making it annual, not monthly, and as simple as possible in order to save as much time as you can to get thru as much of the test. Lastly, would recommend quickly reading/skimming the entire case study/prompts before getting started on the model so that you know upfront what inputs will need to be dynamic/able to be flexed.
Hey, just finished a similar test but I was given some other intricacies like renewal probabilities and some lease roll, IO-to-amort debt, pretty complex expense reimbursements, 4-tier waterfall, and it was monthly. Finished in 2:28 (limit was 2:30) with about 5 low-impact errors. When you sensitized those variables, did you do one-variable sensitivities or did you do a series of 2-variable ones? Not sure what is expected there.
There was a two variable blank sensitivity table that I was supposed to fill in. Believe it was purchase price vs. exit cap. Then there was a 1 variable question asking for returns if hold period extends for additional year
I’ve rarely ever seen one variable sensitivities utilized (though a friend of mine’s firm uses them) and I personally always show two variable sensitivities. I then typically show the corresponding psf exit/basis or whatever metric below or to the right of each variable. For example, for each exit cap (say there’s five 25bp increments) I’d show the corresponding psf/per key/per unit metric. Then if I’m comparing exit cap rate to purchase price (say there’s 5 purchase price increments), I’ll show the going in, all-in, and corresponding yield on cost for each of those purchase price increments. Note this is completely overkill for a modeling test, but very powerful for actual underwriting.
This is really useful! If you (or somebody) would have a test like this I can practice with, that would be very useful
Thank you! And what could I expect on top of that (since mine is 2-3 times longer)?
waterfall
perhaps renewal probabilities
more suggestions?
waterfall with 3-4 tiers, probably some kind of recommendation (or at least "give us 3 sensitivities"), a few tenants with lease roll and corresponding renewal probabilities during the hold period, probably somewhat complex reimbursements for each tenant, debt assumptions with IO which rolls into amortizing during the hold period (or maybe floating debt with a LIBOR curve provided) and maybe a refi.... this is about as hard as it would get for office I think
It will be nothing like the tests you see at a top 6-34 fund, that's for sure
I would absolutely expect a waterfall
curious on this process...is this for associate position? when did process kickstart?
The process started already in January, though because of COVID it was delayed a lot
what position is this for. analyst?
Would really appreciate a DM if you would have a (worked out) model, since I can never practice enough! :)
I used Justin Kivel’s courses on Udemy to prep for modeling exams; highly recommend it if you’re looking for a much cheaper alternative to REFM. Landed me in a top 5 REPE. Plugging this guy because I actually owe my career to him.
what courses of his did you take?
Almost all of them. I thought the RE financial modeling bootcamp was so good I bought 8 or 9 more courses including the pro forma one, equity waterfall, development, etc.
these are cheap as fuck. is it worth it to buy them at $14 a course?
Yes, I bought them at $10. Full dynamic models with monthly schedules—the whole 9 yards. They’re definitely worth it in my opinion.
Should I expect a development model at all for top REPE firms? Or usually acquisition/renovation?
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