Hi guys, I have two superdays next week: one for a large Real Estate Private Equity Firm and another for a Large REIT. In my previous interviews I've been fairly confident in my answers to technical questions aside from two:
Walk me through a DCF valuation on an asset.....How do you find an appropriate discount rate?
So I understand the basics of a DCF (forecasting CF's and applying a discount rate to get present value) but I may not be describing it efficiently enough and I am sort of lost on where we get a discount rate from in the world of real estate. How is the Discount Rate linked to the cap rate?
There are two identical (age, condition, etc.) assets across the street from each other, why might one be more valuable than the other?
I know that one of the main reasons is due to tenant grade quality and lease rollover schedule. But sometimes the interviewer asks, "What if both have identical tenants and lease rollover schedules?"
If some of you real estate pros could provide me with some guidance, it would be much appreciated. Thanks!