Excel Tests for New Hires
Hi there,
Working at a small fund-backed development shop, and we are about to hire an analyst or two. We're considering some people with <1 year of experience, and a few more experienced, but I was curious what kind of modeling tests are actually useful for an employee like this?
Our full-scale development models are pretty robust, so I wouldn't expect them to perform anything like that, but as far as some quicker, more technical models/questions, does anyone have specific successes or failures to this end?
Thx in advance!
Having them run your mode would be worthless.
Something like giving them a set of cashflows and running a NPV, IRR, MOIC, etc. is a bit more realistic
I send them an OM of a property we're selling (not one we're buying due to confidentiality) and ask them to come up with a valuation model with metrics we'd like to test them on (C-o-C, IRR, LIRR etc). That's the quant part.
The qualitative part is to ask them to present it in PPT (3-5 slides) to see how they communicate things. I give them 3-hour to do the assesment. Seems to do the trick just fine.
For kids right out of school I give them a very simple case study (e.g. stabilized multi acquisition with a given set of debt terms, 5 year hold). Calculate CoC for each year and IRR, EM, etc. Give it to them as homework since many of them have never built a model before.
Like the comment above, I also do a simple qualitative portion (here's a development site we're looking at, what questions would you ask to determine value and development potential?") Basically a "show how you think" type exercise that also exposes if they've ever picked up a book on RE.
Went through an excel test recently for a developer. They basically gave me a site that was on the market at the time and the feasibility study, gave me target returns and told me to build a full development cashflow and present on 5-10 slides.
Fictional single tenant asset lease abstract and debt assumptions (refi in there), site, and entry/exit considerations. DM me and I'll share it.
For an analyst fresh out of school or with less than a year of experience, I'd rather stick to conceptual/case study style questions and try and figure out how they think. The kid who gets it at a high level should be able to figure out the excel parts. At that age/exp level I figure they're basically all going to need some hand holding on the excel portion and so picking the 22 y.o. whos excel skills are 20% better than the others seems like it doesn't really mean much. Just my $.02.
For an analyst with 1-2 years experience, I'd give them an argus run and have them model out a 10 year hold period unlevered and levered with some given debt assumptions (and maybe ask them to size the debt based on some given debt stips) and then ask them for IRR/EM both levered and unlevered and your bottom-line levered cash return for each year and then strike an average over the hold period. Or maybe give them a unit mix for multi and ask them to build out the cashflows themselves with some very basic give numbers for expenses.
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