What is it like being a real estate private equity Analyst?

Introduction

This post answers a series of frequently asked questions regarding the life of an analyst along the real estate private equity career path. Have more questions? Please, visit our forums where any question is encouraged. After all, our goal is to close the information gap keeping you from your dream real estate private equity career.

What is a real estate private equity analyst?

Most real estate private equity career paths begin at the analyst position. Regarding rank, you could equate the position of an REPE analyst as relative to their analyst peers in Investment Banking. Real estate private equity analysts are generally 24 through 26 years old, yet age may vary by fund. When hiring analysts, REPE investments teams have high expectations for analyst performance. Thus, analysts must be sharp with Excel, quick with mental math, attentive to detail, and willing to work all hours. More on skills below.

What is the responsibility of a real estate private equity analyst?

Real estate private equity analysts are responsible for the following tasks, ordered by most to least frequent:

  1. Desktop underwriting (e.g. spreading T12s, analyzing rent rolls, building LBO models)
  2. Miscellaneous task-based work (e.g. negotiating NDAs, touring properties, contacting JV partners)
  3. Preparing screening memos for informal discussion
  4. Preparing formal memos for investment committee

What are the most important real estate private equity analyst skills?

Analyst Skill #1: Financial Theory & Excel

First and foremost, each real estate private equity analyst needs to understand how to build and maintain a full-scale LBO model. If you need a reference, refer to the Verdant Apartments Acquisition LBO Model we build together in Breaking Down Real Estate Private Equity. In other words, successful analysts wield a holistic understanding of financial theory coupled with Excel acumen.

Analyst Skill #2: Real Estate Fundamentals

Analysts need to understand the bricks-and-sticks fundamentals of real estate. What is the difference between PTAC vs. central? Podium vs. wrap construction? Steel beam vs. wood frame? Garden style vs. mid/hi-rise? A one-time vs. recurring operating expense?

Analysts learn this information at different phases of the real estate private equity career path. Property management, asset management, development, and even investment sales experiences can bestow great knowledge of bricks and sticks fundamentals. If you do not have any direct real estate experience, research any unfamiliar jargon you encounter in top REPE news sources (Urban Land, NAREIT Portfolio News, MultiHousing Professional, etc.).

Analyst Skill #3: Mental Arithmetic

Every real estate estate private equity analyst should be absolutely up to snuff on their mental arithmetic. As a real estate private equity analyst, I was casually interrogated dozens of times each day to test my comfort with rapid mental arithmetic. Though a bit gimmicky, rapid mental arithmetic skills are beneficial because they help analysts quickly convey nuanced subjects to colleagues via simplified examples. Examples of scenarios where mutual skill with mental math comes in handy are: explaining ground rent resets, estimating nominal dollar impacts from insurance assessments, visually checking that an interest rate is calculated properly, etc.

A few more analyst skills:

  • Geographical Knowledge & Submarket Quirks
  • Independent Research
  • Mental Math
  • Local Tax Policy
  • Interpersonal Management
  • Friendliness
  • Curiosity

What news should an aspiring real estate private equity analyst read?

Real estate is a localized game, no matter how you play it. Thus, you will need to stay current with submarket trends. As an example, San Francisco and Washington, D.C. are dissimilar submarkets, one driven by tech and the other by government. Which would you consider more stable in a downturn? Which likely has more upside? What trends might impact that relationship? Ultimately, remaining current with industry news will always be important throughout your real estate private equity career path. Select Leaders has put together a shockingly good list of high-quality real estate news sources. Personally, I enjoy National Real Estate Investor with my morning coffee.

What are the hours like?

REPE fund cultures vary, but average hours range from ~70hrs per week during calm times to ~90 hours per week during busy times or at hardcore firms. Most REPE firms start work a bit earlier than banking but later than trading, around 8:30AM – 9:00AM. Analysts should expect to remain in the office until at least 9:00PM on weeknights, perhaps 7:00PM on Fridays. Regional or friendly firms could have better hours.

How do you break in?

Network your back off, learn LBO modeling like the back of your hand, study the top funds and their notable transactions, and develop relevant career experience at a number of relevant careers, including:

  • Property manager
  • Investment sales broker
  • REIT
  • Developer
  • Or any other real estate adjacent career that teaches you asset underwriting

Remember, the closer you are to the money being invested, the more you will learn about asset underwriting. That said, investors who have worked in buildings themselves (and perhaps not so closely managing the capital) have an instinctual advantage over pure armchair underwriters.

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