How much Finance should you be comfortable with in the real estate world?

ayy's picture
Rank: Orangutan | 262

How much finance should I be comfortable with?

I am in the verge of registering for CFA Level 1 Exam. Should I rather spend my money and time going thru Real Estate Financial Modeling course or Argus certification?

I want to learn more about real estate finance, but I feel like CFA doesn't cover them a lot. And, at the same time, I feel like REFM or Argus will require some of the real estate finance knowledge. Would knowing basic basic finance concepts be ok for going thru the REFM course or Argus certification?

I don't know which one I should go for. My indecisiveness is killing me. Please advise me.

PS. I know this kind of question has been covered by many threads; I read thru them and the comments, but still couldn't find the right answer.

Comments (36)

Aug 9, 2018

Hard to answer without any background info but REFM and Argus will help

Aug 9, 2018

I have worked approx 8 months as an associate broker in the CRE brokerage firm. I realized that I am very much into real estate, but not into sales/brokerage. I want to make a move, but I feel like I am behind everyone in terms of real estate/finance knowledge.

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Aug 9, 2018

I've never actually seen the CFA material but would suggest your time would be better spent diving into more RE focused learning. In addition to REFM /Argus, grab the 3 best RE financial textbooks and get after it. What do you want to do in RE?

Aug 9, 2018

Honestly honestly honestly speaking. I don't actually know what I want to do in RE. I am trying to figure that out. I am hoping to know as I apply and look for jobs, but there aren't so many job postings right now. Is it kinda stupid for me to want to dive into real estate without knowing what I exactly want to do?

Aug 9, 2018

CFA materials are going to be largely irrelevant to RE. Skip it if you 1) have an undergrad finance background already and 2) definitely want to stay in RE.

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Aug 9, 2018

I do have undergrad finance background. But, I am not sure if I learned them right. I was very procrastinating guy who would just absorb all the materials a day before the exam, pass it, and forget most of them the next day.

Aug 9, 2018

So I've taken level 1 and will be taking level 2 this coming 2019. One thing I can say is the CFA is more helpful for the portfolio management/securities side of the business. If you want to get into that aspect then I say go for it. If you want to stay in the property focused side of CRE then I wouldn't necessarily take this path.

CFA level one gives you a very strong understanding of finance and accounting concepts, so it is definitely helpful in that regard, however it is more tailored toward companies and has very little exposure to real estate case studies. It only gets more and more portfolio management heavy after that.

Aug 9, 2018

After reading your comment, I think I want to be involved in the property focused side of CRE. What initially made me get interested in CRE was looking at the properties and thinking that I want to own one in the future.

May I ask what kind of jobs are available in the property focused side of CRE?

Aug 9, 2018

I just moved into the CRE side and am currently working at one of the large brokerages, but property focused there are tons of opportunities. You can go into acquisitions at a REIT/REPE fund, brokerage/investments sales, valuations/appraisals, capital markets placements etc.

Think of real estate like any other asset class, except that it is tangible. Usually the types of jobs available in any other financial market are available in real estate. With that said, real estate being tangible allows for other opportunities such as being a developer or property manager.

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Aug 9, 2018

CFA provides a good grounding for financial concepts and certainly adds credibility across the board, I imagine. I've never seen a RE job posting that mentioned CFA, but if I was interviewing someone with it I would be pretty confident they knew at least some pretty fundamental and advanced finance theories/formulas. I know people who have worked on Wall Street for years and still lament when they have to study and take the CFA, even though they probably know the material best. So, there's that. However, see below.

Anecdote: I know someone on the structured finance/debt lending for a MM bank. they could have been joking, but they said "I'm one of the many finance guys that has a CFA and doesn't 'use it." Take that with a grain of salt, but I feel like the CFA is a bit tailored to very specific securities, hedging strategies, equity research/investments than your more plain vanilla debt lending, especially when it comes to real estate.

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Aug 9, 2018

Funny thing is, the few real estate jobs that I have seen that would like a CFA (excluding PM/AM) are structured finance jobs. However this is also more of a request for European/Canadian banks, which seem to put more of a value on it.

Aug 9, 2018

Well, I stand corrected. That's one of the beauties of this forum. Everyone has different insights to share. This is good to know/maybe this helps the OP with his decision.

Aug 9, 2018

I've seen plenty of RE job postings including acquisitions roles list CFA under the preferred section. That said, they usually say "MBA/MSRE/CFA preferred". and I've never seen anything list CFA as a requirement.

Aug 9, 2018
Forex Swings:

FHowever this is also more of a request for European/Canadian banks, which seem to put more of a value on it.

The designation is more valued in Canada and Europe. I believe that Canada still has the highest proportion of charter-holders to population.

I had an interview with an European fund, where they were explicitly targeting it.

However, in contrast, I feel that some places might feel threatened by it.

Aug 9, 2018

Thank you for the insight. I am leaning towards not registering for CFA exam. I should get some real estate finance materials first and then go thru REFM or Argus.

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Aug 9, 2018

I'm on the GP side and a lot of MDs I've talked to don't even know what the CFA is. I also have a buddy who is a MD who has completed all three levels of the CFA and he has said that only 10% is really relative to what he does on a day-to-day basis. (He says the CFA did not help him land his MD role).

If you're sure you want to work in RE, you are better off cranking out practice models and studying RE specific concepts. Save your money and time.

Aug 9, 2018

Thanks for the comment. If you don't mind, can I ask what the "GP side" is? From googling, it seems like it stands for General Partnership in private equity. What do you do? I am genuinely curious.

Aug 9, 2018

In most deals there are two parties on the equity side - the LP and the GP. The LP typically provides 80%+ of the equity, and the GP will cover the rest. The GP's responsibility is to source the deal, manage the asset, and execute on the investment strategy. The benefit to the GP for the additional labor comes in the form of fees and disproportionate returns on investment based on performance of the deal.

For a basic intro to real estate I'd recommend reading Poorvu's book The Real Estate Game, and for a desk reference/textbook Peter Linneman's Real Estate Finance and Investments.

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Aug 9, 2018

Based on the sheer amount of time required to study and pass the CFA, I would say it is close to absolutely useless for traditional RE finance applications. Spend your time elsewhere.

    • 1
Aug 9, 2018

Got it. I have been looking at many real estate job postings, and many, if not all, of them require strong financial modeling and Argus experience. I should stick to learning those. Thanks.

Aug 9, 2018

I would recommend practicing any modeling assignments/interview tests that users post here as well as combing through AdventuresinCRE's models.

Aug 9, 2018

Everyone above me pretty much hit the nail on the head, however I do have to make one cryptic observation.

In this industry, I am honestly perplexed by the large amount of people who truly don't have a simple understanding of how capital markets work. I am not expecting someone in acquisitions, to have an innate knowledge of the math behind a CDS swap - however, he/she should be able to understand how the markets affect CRE.

At the end of the day, an investment decision should go beyond on whether it has a good cap rate or levered IRR. You need to have a strong macro-view to formulate your investment thesis.

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Aug 9, 2018

What would you recommend for a person to get a better understanding of how capital markets work? Is there a specific book or textbook that you insist on reading?

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Aug 9, 2018

Honestly, just reading various new sources would be efficient, i.e. Bloomberg, FT, WSJ...

For books, the PERE Real Estate Mathematics had a good section on how markets affect the investment process. Also, while I don't have the latest edition, Linneman's books are strong.

If you want to delve further, you can skim through the Schweser notes for the CFA level 1 curriculum. Again, it doesn't have to be intense, but try to understand the basic mechanic of a bond, etc.

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Aug 9, 2018

You won't need CFA as producer/underwriter, but if you want to get into investment/capital market/structured finance, CFA is very helpful

If you just work for a broker, they don't have finance product and they don't do hedging/securitiation so there's no need for CFA

Aug 9, 2018

Thanks for the insight. Starting to get the idea that I shouldnt go for CFA.

Aug 9, 2018

When I had my summer internship at a small RE Private Equity firm, a few of the guys working there had their CFA but a majority didn't. Those that did either were in IB previously and then made the switch over to RE and/or their role at the firm focused more on researching investments to raise capital for their fund accounts.

Personally I have my BBA and MBA in finance and I used to think that getting my CFA was something I really wanted to do. When I decided to focus my career in real estate, I made the decision not to get my CFA and to get my MSRE instead. There are a lot of concepts I have learned thus far specific to real estate that aren't covered in the CFA and weren't covered in my two finance degrees. I think you'll find the same if you choose the REFM course and Argus certification. Also, the REFM courses and Argus certification are a lot less commitment and studying than obtaining your CFA. You can always complete the former two options and if you still want your CFA, you can start that. I feel like you would be kind of bummed out if you did it the opposite way and went through all of the hard work and studying for the CFA and then realized what you truly needed was a few RE specific courses.

Aug 9, 2018

Thanks for your insight. Before actually registering for the exam, I bought some of the CFA books from Amazon just to see if I can actually commit to it. I scanned through them and was very unsatisfied by the small to almost none amount of RE topics it covered. This made me think a lot.

With your advice and other people's comments, I think I will try going through some of the real estate finance books and get some capital market knowledge first. And then I will try out the REFM courses and Argus. Thanks again for your advice!

Aug 12, 2018

If you work for a large fund that is doing very large deals, the deals start to look more like, or are corporate transactions. I've found the CFA program and a broad knowledge base in accounting/finance very valuable in navigating larger and more complex transactions.

Aug 12, 2018
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Aug 12, 2018