Transitioning From Real Estate Brokerage to Real Estate Private Equity

-
A student recently asked the following question:
Hello, I’m a residential real estate broker who wants a career in real estate private equity. I am a 34 year-old with a business management degree. I have a resume of small real estate investments, emergency services, and real estate brokering. Currently, I am pursuing a financial modeling certification and applying for a Full Time MBA, since it is a big career change. Do you have any suggestions on education or track to go down? Also, would like to know what skills to obtain over the next year -- I’d like to stop being in a commission job.

Below is my advice.

 

Full-Time MBA

 

Pursuing a full time MBA is a good idea. You could also get a masters in real estate; though you may prefer an MBA given its general appeal to other opportunities outside of real estate private equity jobs. You’ll likely appreciate this article, in which I interview an acquisitions analyst who broke in from a non-target state school. Though Chris was younger and straight out of college, there are plenty of great lessons in that read.

How to Discuss your Real Estate Investments during an Interview

 

For your real estate investments, only bring them up in interviews from a technical angle. Think of your investments as Fermi problems to explain to your interviewer. Basically, if you had invested in those buildings as part of your future career in real estate private equity, what would have been your key financial model inputs? What’s your investment time horizon, what are the primary value drivers? The interviewer will be curious to pick apart your thought process. Just saying “I bought these because they were strong assets in good locations” will harm your prospects. Instead, really drill into each angle of your analysis. If you need help understanding the basic framework for REPE investment discussion, check out the free practice resources I’ve linked to below.

Which REPE Job Opportunities to Target

 

Global firms like Blackstone and Brookfield typically hire investment banking analysts in their mid-20s. Given your age and background, such megafunds and name-brand REITs are likely out of the question. Instead, I would advise you to target smaller, local REPE shops and family offices. You may also wish to expand your scope of potential opportunities. For instance, have you also considered openings at development shops?

How to Skill Up over the Next Year

 

The best skill to develop over the next year is your real estate financial modeling. So, you’re already on the right track with that financial modeling certification. I’m a big believer in learning by doing. The best way to learn real estate modeling is to commit to it frequently. Your financial modeling cert will teach you the tools of modeling, but the biggest hurdle is decoding the thought process. I’ve put together some free quizzes and case studies on my website to help you test your mettle. Additionally, the Leveraged Breakdowns flagship course, Breaking Down REPE, will push you to underwrite a large multifamily acquisition with nothing but the same source materials that you would receive in a live direct investment opportunity while working a real estate private equity job.
Location: United States

Comments

Post a Comment

Popular posts from this blog

Real Estate PE Technical Interview Questions I Ask at My Megafund

-
This post includes technical questions that I ask when interviewing candidates at my real estate private equity megafund. These questions are softballs meant to test your basic grasp of easy concepts. If you struggle with these real estate PE interview questions to any degree, then you’re not yet up to par. If you need to brush up, I highly recommend you check out Leveraged Breakdowns , the premier resource for real estate private equity education. Practice Until These Technical Questions Feel Like Baby Math Your interviewer considers the following technical real estate private equity interview questions to be easy, baseline checks of your skill. Practice until you’re comfortable in a high-stress interview. Also, make sure your mental math skills are tight. If not, there’s plenty of basic apps and websites out there that will help you practice. What is NOI? Question: What is NOI? What are the most common items included in NOI? Answer: Net operating income (“NOI”) is the st...
Read more

Why Asset Underwriting Skills Are Necessary For Real Estate Private Equity Interviews?

-
Why are asset underwriting skills necessary for a real estate private equity career? Real estate private equity interviews demand serious preparation. Although no two funds are the same, each will expect a strong understanding of real estate underwriting. Traditionally, real estate underwriting has been hard to learn outside of a real estate private equity career. Thus, industry outsiders have struggled to acquire the basic investments skills necessary to underwrite even a simple single-asset acquisition. This post details why asset underwriting skills are beneficial and how Leveraged Breakdowns’ real estate private equity course will help you ace your next REPE interview . How asset underwriting helps you better understand real estate private equity funds? No two real estate private equity funds are the same, each varies across countless factors. Some of the most important factors to understand when searching for your real estate private equity career are: Size Sector Focus...
Read more

Cap Rates - Wicked Simple or Wicked Complicated?

-
Are cap rates wicked simple or wicked complicated? The snarky answer is “Yes.” What we mean is cap rates have an “everyday” application that is intuitive and simple. Its foundation, however, is much more complicated. As you move toward a career in a real estate private equity firm, you will need to learn to use cap rates in their simple form. But it never hurts to understand the origins of the concept.   What is a Cap Rate? To begin, the term “cap rate” is shorthand for “capitalization rate.” The term is well-defined in real estate appraisals, and is aimed at determining a market rate of return for the property being appraised (see more on appraisals here ). The appraisal breaks the cap rate down into three component parts: the risk free rate, the equity rate, and the debt rate. The sum of these three rates becomes the capitalization rate used to arrive at the property value based on the income approach (specifically, net operating income divided by the cap rate equals th...
Read more