Leveraged Breakdowns

Back in June we discussed the number one skill that will help you become your fund’s favorite analyst . This month we want to talk about the number one character trait that will make you into the most trusted analyst in your real estate private equity firm . This character trait will also establish the trajectory of your real estate equity career path . What is this trait? Integrity . Can I Trust The Model? One of the greatest temptations you will face as an analyst is to force a model to create the results you really want (or the results your boss really wants). There are all sorts of ways to manipulate a model. Trim one of the expense line items a little more than is really achievable. Assume lease-up occurs faster than what the leasing team expects. Cut the capital expenditures beyond what is prudent. The list is endless, because the variables that go into the model are endless. Resist the temptation. Let the results speak for themselves. Be disciplined in understanding the ...

The key to landing your first job in real estate private equity is to crush the interview. As an outsider to the industry, though, you run the risk of looking like an outsider if you don’t know the terminology forward and backward. No one wants to see that look on the interviewer’s face when you just said something that proves that you don’t know what you’re talking about. At Leveraged Breakdowns , we are committed to helping you become fluent in the language of real estate private equity and common interview questions. We also give you hands-on training with our real estate investment analysis online courses . Why isn’t it Just A Prepayment Penalty? Lenders love to throw in penalties in the event a loan pays off early. The early payoff could be due to the borrower refinancing or it could be due to sale of the property. The lender doesn’t really care. When lenders deploy capital, they do not want to see it come back early. They are managing cash flows and earning the spread be...

One of the questions we often get is whether there is a real estate private equity certification that will help applicants stand out from the crowd. There are a few certifications available, but they validate the experience a person already has. Put another way, most certifications require documented relevant experience in order to receive certification. If you already had experience, you would already stand out in the real estate private equity interview process ! Don’t let that deter you, however. Continuing education and certification can be a benefit to you long term, both in terms of skill development and in growing your professional network. There are a few options to consider. Certified Commercial Investment Manager (CCIM) The CCIM Institute is a global leader in real estate education, and is sometimes referred to as “the PhD of real estate.” There are over 10,000 CCIMs worldwide in more than 35 countries. Coursework includes financial analysis, investment analysis, us...

There are five primary real estate tax incentives that can boost returns in your real estate equity investment . Analysts should understand the mechanics of each so they can build effective real estate LBO models . Tax Increment Finance (TIF) Tax Increment Finance is a form of property tax rebate (refund) or an abatement (don’t have to pay) to the owner or developer in exchange for creating additional property tax value. The key term is “increment,” as these incentives are based on the increased property tax value created rather than the total value. TIFs are usually local, meaning a city approves and administers the incentive. But, the incentive may include contribution from the county or special taxing districts. TIFs target particular locations within a city, and the owner must demonstrate a need for the incentive. Depending on the state, the municipality may be able to issue bonds that are backed by the new property tax generated (revenue bonds rather than general obligatio...

Breaking through into a career with a real estate private equity firms requires a great deal of preparation . To stand out from the crowd of applicants you must demonstrate that you know more and will work harder than anyone else. Understanding what makes a firm tick means understanding their investment strategy. What is an investment strategy? An investment strategy is most concretely understood through what types of properties, in which markets, and at what risk level it chooses to invest. The strategy may be specific to one particular fund, or it may be an overarching theme that defines all of the deals the firm pursues. These strategies universally apply to real estate private equity in London , Singapore, and all points in between. There are four investment strategies: Core, Core Plus, Value-Add, and Opportunistic. Core Core real estate investments are command lowest risk and thus the lowest return. Core assets are fully occupied, achieve market rents, attract high-credit...

Real estate as an asset class is divided into three major types: Residential, commercial, and industrial. NAREIT (National Association of Real Estate Investment Trusts) tracks twelve main property types in investment real estate and provides data on the returns realized in those property types (and several sub-types). Most real estate private equity funds , however, focus on one of the five main property types or “food groups”: multifamily, industrial, retail, office, and healthcare. Multifamily Multifamily is defined as any residential property consisting of more than 4 separate dwelling units. Many federal agencies and most lenders classify residential real estate as 1-4 family or multifamily, based on the number of dwelling units. In many instances, multifamily may also include senior housing, particularly free standing independent living or age-restricted living (55+). Multifamily properties generally include some type of on-site management to handle repairs and maintenanc...