What should my knowledge level be?
Trying to transition from IB into RE acquisitions. I’ve gotten pinged from a lot of recruiters as I’m sure a lot of you have before. I’m good in excel and generally understand how to build a real estate cash flow and model. My real question is how sharp should my knowledge base actually be? Obviously spending the last year+ in IB I’m not extremely well versed in real estate. Is the expectation in these interviews that I know everything and will answer every question correctly or is there some sort of leeway for junior employees being that we are so new to the business?
Bump
Not sure where you're at but pick up Peter Linneman's textbook (Real Estate Finance and Investments) and read through all or a majority of the chapters. Great baseline and you'll understand all you need coming in. You can't expect to come in knowing nothing and land a job, think of it as coming out of school was there any leeway in IB interviews for a junior not knowing x answer (doubt it), RE may be more lenient but I'd treat it with that mindset.
This is a fair point, although IB interviews were easy albeit stressful to prep for at a younger (and less knowledgeable age) and being that you were a college junior, the expectations were pretty low
You should know general finance and then some basic RE concepts like cap rate, rent reimbursements, tenant improvements, leasing commissions, etc.
you don’t need to be an expert. You should just know enough to build a cash flow model and how the things I listed above affect returns. The employee should train you on all the rest. Or you learn on the job.
Probably the biggest thing you'll have to learn is how RE is valuated, as it's fairly different from valuing a business. Instead of thinking in EBITDA and multiples, you'll have to show that you can think in terms of IRRs and cap rates, for example. It would also be good to speak intelligently about the general trends in the industry and have an opinion. It doesn't necessarily need to fit what everyone is into, but needs to have some validity.
Good luck on the transition!
I think if there's one thing I'd want you to wrap your head around it's the fact that real estate is a risk business. Like project management, finance, etc., figuring out what can go wrong is the name of the game (see Murphy's Law). Understand the risks inherent in a real estate deal. Think about different product types. Why is class B multifamily in NYC less risky than a high end hotel in the middle of nowhere? Why is existing less risky than a light rehab which is less risky than a new construction? What are the biggest factors to look at when penciling a deal? What kind of assumptions do you think are reasonable for rent growth versus expenses? How will rising interest rates change the valuation of a deal (think about cap rates)? How will uncertainty in hard costs impact the contingency padding the deal? Then of course think about what kind of investors are interested in what kind of risk. I.e. a pension fund is looking for 8% IRR versus a value-add PE fund looking for 14% IRR (making these #s up to exemplify the point). Start answering some of these questions on your own, posting follow up questions here, etc. It's all about immersing yourself in the thought-process and the lingo.
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