Moving from Appraisals to REPE Acquisitions?

Pokemaster92's picture
Rank: Chimp | 12

Hey guys,

Long time lurker, first time poster. I'm in a bit of a pickle. I have been working in appraisals for two years at small shop doing institutional (Class A/B+) work. I had no internships or clubs or related activities in college, so this was my first real work experience. Obviously, I know I'm behind others competing for these REPE spots. I am debating what the best strategy would be. I'm pretty fresh into my career, so I obviously don't mind starting at the bottom. It seems fairly difficult to network as an appraiser simply because brokers, etc. don't really enjoy talking to appraisers, and we don't do enough client facing work (back office-type spot) to network with clients. I really want to get into the action of CRE (that's why I joined the industry) and I'd love to chat with any former appraisers who've made the switch. I am not opposed to an in-between step, of course, such as starting out again as an analyst at a brokerage, etc. but I want to make sure it's a good in-between step. Feel free to comment here with your thoughts or shoot me a PM! Thanks everyone

Comments (5)

Most Helpful
Sep 25, 2018

I actually completed exactly the transition you described moving straight from a regional appraiser (after 3ish years of valuation experience) to private equity real estate acquisitions/underwriting at a family office (approximately $1BB in asset value).

Several questions and pieces of advice for you, posting here so that all can (hopefully) benefit:

What type of valuation/property type do you specialize in at your firm?

Appraisal is a great opportunity to learn a little bit about a lot. Each property type has its quirks as well as personalities associated with it. This is generalizing but for example, you will find that office attracts conservative personalities while retail the opposite. Additionally, knowing the distinction between how the different property types work is really valuable. For example, location is important for hotel properties but in reality it is an operating business and has its whole own terminology to learn (REVPar, Occupancy, ADR, etc.) but most importantly it will teach you which type works for you.

**Take advantage of your data advantage** - once you have established and feel like you've identified your niche become the "go to" guy in your office for those valuations. Appraisal is a lot of heavy data lifting and generation but this is a huge advantage because assuming you consciously pay attention as you log and generate this information in your head then you can develop what can be an encyclopedic knowledge of certain property types. Terminal cap rates, sale prices per square foot/unit, NOI per square foot/unit - this is all valuable data which will help you as you step towards an acquisitions role and if you stay long enough in valuations you develop a "sense" for certain properties and how much they are worth.

**Take advantage of your networking advantage** - as part of generating all this data (and assuming you are doing this right) you will/should develop good relationships with a lot of brokers in an area just by how many times you call them. Do your best to get on really good terms with them because there are usually 3-4 brokers max who control a market and if you want to step into an investor role you are at a major advantage since they already are comfortable with you and hopefully they think of you first when they have that great deal come across their desk.

**Develop your "investor" mindset** - the industry in general underestimates how close appraisal versus private equity financial underwriting can be (assuming you are at the right shop), the only difference with private equity is that instead of solving for valuation, you are solving for return. Appraisal is great because it gives you a lot of "inside" looks to deals (since you are underwriting this for the bank) so constantly harbor and develop your "investor" mindset. Once you have gotten through the initial valuation exercise, ask yourself - would you do this deal? Why or why not? What has this investor/developer missed or gotten right? Waht would you change? Always be approaching it from this lens and you will learn to think like an owner.

**Learn equity basics on the side via supplemental reading and networking** - the biggest components you miss out on by working for an appraisal firm are all the principles and basics specific to the private equity field. Do your best in your free time to supplement your knowledge via sites like this, textbooks, novels, podcasts, etc. or better yet with some good old fashioned networking if you know of individuals in the industry. Big themes to hit on and understand really well include equity versus debt, waterfall structures, preferred return versus regular equity, sources and uses, debt constraints (LTV, LTC, DSCR), IRRs, return on costs and many others. These are all technical knowledge though and can be learned in your free time so you can prove to that fund/employer you understand their business on a basic level.

Again these are only a few pieces of advice for you, the reality is getting into private equity and/or acquisitions is a lot of hard work combined with a fair amount of luck but appraisal is underrated with how much data and learning it can expose you to at a young age. Any questions you have please let me know and I'll be happy to help out.

    • 13
Sep 25, 2018

This was a lot of information to take in, I appreciate it!

Oct 13, 2018

This guy nailed it.

Mar 14, 2020

great content

Sep 25, 2018
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