Leveraged Breakdowns

Real Estate Private Equity

Negative Leverage in Real Estate

Almost all real estate transactions are financed with debt, with debt levels dependent on the borrower’s investment strategy, risk tolerance, and capital markets availability. In doing so, investors are able to reduce their upfront capital outlay and increase their return on equity. By incorporating debt, investors can enhance their returns with leverage. But, this is …

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Cap Rates and their role in Commercial Real Estate

According to the latest report from the U.S. Bureau of Labor Statistics, the annual inflation rate in June 2022 was 9.1%, its highest level since 1981, as measured by the consumer price index. This persistently high inflation for several months has forced the Fed to rapidly increase benchmark interest rates. The Fed funds target rate …

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Underwriting a Construction Loan – Summary & Wrap Up

This is the sixth and final  post in our ongoing real estate private equity case study on how a construction loan is underwritten by potential lenders.  This installment will provide a deal summary and a wrap up that includes a cautionary tale about construction lending.  To read the previous posts in the series, click on …

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Sector Series: Self Storage

Executive Summary / “TLDR” The U.S. self storage industry got started in the 1960s in the state of Texas, where most homes lack basements (and thus extra storage space). Self storage units back then were simple boxes with garage-like doors that locked. The industry has evolved somewhat since then, with large, multilevel structures housing indoor …

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Sector Series: Multifamily (Part 2)

Note: If you have not already read Part 1 of the Multifamily Sector Series, you may want to start there. Part 1 provides a basic overview of multifamily real estate, including categories of multifamily, market characteristics, and historical performance. We cover the basics for those new to real estate private equity, but also dig into …

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Sector Series: Multifamily (Part 1)

Executive Summary / “TLDR” The multifamily or apartment sector is the “core-est” of the core real estate sectors and has attracted a wide range of real estate investors. Over the long-term, the sector has proved itself with strong performance, good liquidity, and a straightforward operating model. One differentiating factor versus other sectors is that the …

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Sector Series: Hotels (Part 2)

Note: If you have not already read Part 1 of the Hotel Sector Series, you may want to start there. Part 1 provides a basic overview of hotel real estate, including categories of hotels, important industry terms, and a discussion of hotel seasonality, EBITDA margins, and capex. We cover the basics for those new to …

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Sector Series: Office (Part 2)

Note: If you have not already read Part 1 of Office Sector Series, you may want to start there. Part 1 provides a basic overview of office real estate, including types of office buildings, factors that determine asset quality, and a discussion of office leasing and office capex. We cover the basics for those new …

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Using Real Estate Investment Case Studies To Sharpen Your Skills

What exactly is a real estate investment case study? It’s basically a story problem like you had in algebra class. But instead of a train leaving Chicago going west at 45 mph, we have a building that is leased to Walgreens for 45 years. A case study is a set of facts that are used …

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Five Entry Points To A Career In Real Estate Private Equity – Part II: Relevant Skills

Part one of this two-part series focused on the responsibilities of various real estate private equity jobs. In part two the focus will shift to specific real estate private equity skills associated with each of the five entry points. Investment Analyst As the name implies, an analyst must be good with numbers. Further, a quality …

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