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What are Real Estate Private Equity (“REPE”) interviews like? The REPE interview process is split into several different rounds which we will describe below.
First Round Interviews
The first round interview is structured to cut the wheat from the chaff. In other words, first round questions are designed to quickly tell whether you have a grasp on the requisite fundamentals. First round interviews are often face-to-face, on-site meetings with investors at various levels. Typically, you meet with the more junior people first. First round interviews generally start with five minutes of introductions, followed by about fifteen to twenty minutes of technical and behavioral questions, then finishing with five to ten minutes of a Q&A round (more on strategy for this final Q&A round in this post).
Technical Questions in First Round Interviews
First round interviews are naturally technical because REPE can’t be discussed effectively without technical language. Your interviewer’s baseline conversation will consist of constant references to details such as operating metrics, cap rates, and leverage assumptions.
Non-Technical Questions in First Round Interviews
Despite the inherent technical nature of the first round, your interviewers are also weighing whether you are a hard-working, motivated person with a passion for real estate. They will spend hundreds of hours each month next to you, so they need to be certain you’re the best fit for the job. After all, most REPE investors spend more time with their colleagues than their families, so fit is an important factor. A few common non-technical questions are listed below.
Common First Round Interview Questions
Common first round interview questions you should prepare for are listed below.
- Why are you passionate about RE?
- Consider two office buildings directly across from one another in Midtown Manhattan. Assume these buildings are physically identical and, given their proximity across the street, are in the exact same submarket. What elements would you consider to individually value each building? What factors could endow one building with a higher or lower valuation than the other?
- Name some of the primary RE valuation methodologies.
- Please order the major RE sectors in order of risk and explain why.
- Which asset would you rather own during an economic downturn? A hotel, an office building, or a residential building? Why?
- How does the tenancy of an office building vary from that of an apartment?
- What are the core differences between gateway and secondary markets?
- Would you expect more liquidity in a core or a secondary market?
- Walk me through the fundamentals of a single property real estate LBO model.
- If I purchase an asset for $1M at a 5 cap, achieve 0% NOI growth over my hold, and exit with no cap inflation after one year, what’s my IRR?
Extended First Round Interviews
Following your first round of interviews, you may be invited to a second round of similar interviews with slightly more senior investors. At this stage, your interviewers are beginning to take you more seriously and are likely vetting your candidacy one last time before they make you take the plunge into a case study.
Case Study Interview Round
After the second round, or the first round if no second round, you will be invited to perform an REPE case study. Typically, in the US, you will only be invited to perform a case study if the fund considers you a viable candidate, so this is a positive sign that you are progressing well. There are three general categories of REPE case studies, ranging from most to least intense.
Most Intense: The Take Home Case Study
Take home case studies are given to you on a Friday evening and are expected by Sunday at midnight. The REPE fund typically hands you an Offering Memorandum, T12 Financials, a Rent Roll, and perhaps some supplementary market data from a third party research agency such as Green Street or Axiometrics. These case studies are very demanding since you are expected to spend your entire weekend in front of a computer screen filtering the signal from the noise in the materials that the fund has shared with you. You will likely encounter numerous red herrings intended to throw off your trail and gauge your degree of sophistication. The ultimate goal of an REPE case study is to attack your understanding of Investment Underwriting from all angles to expose any and all weaknesses so they understand not only your knowledge of RE but the orderliness of your methodologies and your grasp on the underlying fundamental theory.
Medium Intensity: The Long Format On-Site Case Study
The second type of case study is a three-hour ordeal where the REPE fund invites you to sit at a desk in their office and underwrite an investment. This type of case study requires you to know exactly what you’re looking for and to focus on the cash flow details that matter. Three hours only allows you to establish the overall shape of an underwriting, so your key focus should be to not get lost in the details and establish educated, well-informed generalizations where relevant to maintain your momentum. After the three hours, you must present your case study for one hour to your interviewers. This is a very intense process where the REPE professionals seek to judge whether you truly understood the fundamentals of the investment, or if you just plugged in numbers like a run-of-the mill Excel Jockey.
Least Intensity: The Short Format On-Site Case Study
Finally, the one hour in-person case study can be quite simple and generally encompasses a set of assumptions that you need to weave together into a financial output. These cases are less designed to judge your investment underwriting skill so much as test your financial modeling ability. Perhaps the REPE fund chooses to probe your understanding of real estate in other ways, but if you are skilled in Excel and understand the basics of Real Estate, this is generally the easiest type of case study to underwrite.
Preparing for your Real Estate Private Equity Case Study
If you need to prepare for an REPE case study, Leveraged Breakdowns provides an exceptional course, Breaking Down Real Estate Private Equity, that shares our team’s insights from interviews with more than ten of the top funds in the business and synthesizes years of buy-side real estate experience to take you behind the scenes into the closely guarded world of Real Estate Private Equity. At the end of our course, you will develop the fundamental investor’s mindset that will set you miles apart from the competition that has otherwise focused on memorizing trite Excel tricks and career tips that crumble against a multi-faceted barrage from professional REPE investors.
Interviews with Senior Management
If you pass the case study, you may be the only candidate they have selected to proceed. Now is the time that your interviewers introduce you to their bosses, the top brass. At this stage, you will likely sit face to face with renowned investors who have made fortunes for themselves and their clients. Put simply, they can sniff out inadequacy from a mile away. If you don’t truly understand investment underwriting at this stage, you are in grave danger. If you do understand investment underwriting and are able to demonstrate your true passion for real estate, then this step should be a breeze.
Final Offer Timing
Once you cross this final bridge, you will likely receive an offer to join the fund within a day or so. This is when you celebrate, catch your breath, and prepare for a grueling learning curve as you’re suddenly the dumbest person in the room. It’s an exciting career, but you’ll quickly face a firehose of information that you need to quickly master.