by Luis Miguel Ochoa Comments (72)

Real Estate Investment Banking 101: Salaries, Jobs & Exit Opportunities

real estate investment banking cover

You’ve heard those words plenty of times when it comes to real estate – whether you’re just casually interested or you fully intend to become the next real estate guru.

And if you overlook the occasional housing crisis or three, you can see why the real estate market is so essential to all sorts of different industries:

  • Utilities: Need to deliver electricity somewhere…
  • Consumer Retail: Need to fit those Brooks Brothers suits somewhere…
  • Industrials: Need to park your private jet somewhere…

But there’s surprisingly little information out there about what you actually do in a real estate investment banking group – even though lots of people are interested in the field.

We’re going to fix that with an interview from an analyst who networked his way into real estate IB, coming from a non-target state school.

Today’s interviewee has covered lodging, gaming, and home building, and he can tell you all about properties and REITs as well – so let’s get started and learn how the sector is divided, how valuation works, and what you need to know when interview season begins.  This interview features valuation and financial analysis commentary provided separately by Suleman Iddrissu.

Laying Down the Foundation

Q: Okay, let’s get started with your story and how you broke in. Were you more interested in investment banking, or in real estate?

A: Sure. I went to a state school and networked quite a bit with alumni to find my role.

It’s incredibly vital to find someone who can sponsor (similar to mentoring, but more like one step above) your entry into an investment banking team, and from there help to look after your progress in terms of assignments.

And in turn, you, as the mentee, need to perform well to ensure that your superior looks great.

When I found myself on a real estate-related team, I thought about getting a real estate license but that sort of background is not necessary from an entry-level standpoint.

So I was definitely more interested in investment banking from the start, and just happened to network my way into a real estate group.

Q: I know we’re not focused on networking here, but any tips on how to stand out?

A: To do well, you just need i) the right attitude, ii) attention to detail, and iii) a real sense of teamwork.

  • Attitude: If I give you an assignment at 3AM, will you have a smile on your face the following morning? Or at least not be drooling on your desk?
  • Attention to Detail: Are you able to check your own work?  If I don’t have time to do all of my own assignments, then I definitely don’t have time to do your assignments.
  • Teamwork: Can you anticipate the needs of your teammates? If someone is working on sector pages, and you happen to come across a useful article, will you be able to create a quick 3-point summary so your team doesn’t waste time?

Q: And what other tips do you have on getting in if you can’t use on-campus recruiting? Anything specific to real estate?

A: Here’s how I think about the different recruiting channels, if opportunity were a house and you were looking to “break in”:

  • Front Door: On-campus recruiting, applying online, diversity programs, etc…
  • Side Door: Networking through alumni and internal referrals.
  • Back Door: Taking another role and then transferring internally.
  • Window: Volunteering to work for free and then creating a position for yourself.
  • Chimney: Help an analyst out on his / her own assignments, so you effectively create an externship. Maybe chip in to do acquisition idea profiles, etc…
  • Through the Wall: Get in during a Superday by fostering the right relationships way in advance.

The recruiting process is kind of like dating – it requires getting to know your partner, being accommodating, and not going in with a canned agenda.

I don’t think too much of what I’m saying here is specific to real estate – networking in any area of investment banking is the same.

Here, you just need to be certain that you show passion for the sector to maximize your chances of being placed in our group.

Real Estate 101

Q: That’s good to hear… so let’s jump into what you actually do in a real estate group at a bank. How is it divided?

A: Real estate is one of the broader coverage areas in investment banking, and each sector is quite a bit different:

Real Estate Investment Trusts (REITs): These firms are sort of like private equity firms, but for properties rather than companies. They buy and sell properties, operate and improve them, and sometimes even develop new properties.

REITs might be diversified, or they might focus on a specific sector like commercial, residential, retail, industrial (ex: warehouses), healthcare, and so on; some firms might have a geographic concentration as well.

REITs are required to issue 90% of their taxable income as dividends to avoid corporate-level income tax – and that requirement combined with their constant acquisition and development of new properties results in minimal cash on-hand most of the time.

So they have huge financing needs and need to issue debt and equity constantly just to continue operating.

Home Builders: These firms construct and sell homes, often for particular geographies. A company such as KB Home (NYSE: KBH) might have a particularly strong presence in the Southwestern and Southeastern US.

The properties here may range from single-family to townhomes to condominiums (NB: home builders might be classified under industrials).

Sometimes these firms also offer financing services through a separate arm. You might expect to see similar offerings from construction equipment (Deere and Deere Finance) or even automotive (ex: GM) makers.

Demand for houses is the strongest indicator of where this sector is going – in a poor economy with high unemployment, home building is not a great place to be.

Certain bankers might also cover aggregates, which are related to the materials used in home building or even infrastructure development (NB: companies in this space include Martin Marietta Materials, or Vulcan Materials).

Gaming: They should just call this one “Casinos,” but I guess “Gaming” sounds better.

There are pockets of activity around the globe known for this segment – Las Vegas, Atlantic City, and Macau come to mind (see page 19 here).

The key driver here is how well casinos can keep gamblers inside the casino and spending money (hence all those free bottles when you gamble away your bonus in Vegas…).

Casino operations also include expensive restaurants with some of the best chefs in the world, and elaborate shows with the biggest names in the entertainment (ex: Cirque du Soleil). So then it’s not surprising that the sector often features…

Lodging: Mostlyhotels and resorts (cruise lines sometimes fall under transportation). Pricing, promotion (think or, and the occupancy rates for hotels influence this sector.

The hotels themselves also offer conference/convention/trade show services as another source of revenue (if they’re in a major gaming hub).

Length-of-stay is critical and can be boosted by amenity expansion and upscale hotel additions. Proximity to other major cities is a driver in the Asia market, as is transportation infrastructure (See here for an example of a lodging company’s overview).

Unlike residential or commercial buildings, which feature long-term leases, hotels have “lumpier” and more seasonal revenue – which presents both a challenge and an opportunity.

Q: You discussed REITs above, but how often do you work with individual properties in a real estate IB group?

For example, would you ever be involved with selling or financing the acquisition of a regular apartment building?

A: It depends on the group, but at most large banks the focus is on REITs, the other sectors above, and companies that own chains of hotels and resorts rather than individual properties.

Partially, that’s because individual properties (with some exceptions) are generally not worth enough for us to get deeply involved; also, property sales are more the domain of real estate brokers rather than investment bankers.

Post-financial crisis, I’ve also seen real estate investment banking teams adopt a more principal-oriented approach to the real estate sector. Of course, you should expect the deals to be pretty sizable or notable to get the attention of an investment bank.

And if you look at top REITs, like Vornado (NYSE: VNO), the top leadership is comprised of former financiers and accountants – no real estate brokers or real estate developers.

So while the two fields are arguably similar, they are actually quite different. I’m not saying it’s impossible to go from one to another, but you would be better positioned coming in from a general finance background as opposed to a realty background.

Valuation Station

Q: In the other sector interviews, we’ve seen the usual valuation suspects time and time again. How is real estate valuation any different?

A: That’s a really broad question, because valuation depends heavily on the sub-sector. You value a REIT differently from a home building company.

And you value individual properties differently from both of those.  For hotels in particular, see Hotel Valuation Techniques By Jan deRoos, Ph.D., and Stephen Rushmore, CHA, MAI.

In general, real estate valuation is different from “normal company” valuation due to the metrics you use, but it’s not quite as different as valuation for banks and insurance firms, for example.

Q: Can you walk us through some of the key metrics then?

A: Sure. For individual properties, Net Operating Income (NOI) is one of the key metrics and is similar to EBITDA for normal companies. NOI is equal to Revenue Minus Operating Expenses Minus Property Taxes, and excludes Depreciation, Amortization, and Corporate-Level Income Taxes.

The NOI divided by the Property Value equals the property’s Cap Rate (also called the Yield in the UK and other regions), which is typically anywhere from 5-10%.

It’s the inverse of valuation multiples: a 20x multiple corresponds to a 5% Cap Rate, and a 10x multiple corresponds to a 10% Cap Rate.

Then on the REIT side, you can sum up all the REIT’s individual properties to get a picture of what the entire firm looks like.

Q: But do you use the same metrics for REITs?

A: Technically, you can calculate NOI and Cap Rates for REITs, but the most important metric by far is Funds from Operations (FFO), which is defined as Net Income + Depreciation & Amortization – Gain / (Loss) on Sale of Real Estate.

The idea is to say, “On a normalized, recurring basis, how much in earnings are we generating?”

Gains and losses are non-recurring, so they’re subtracted; and D&A is extremely large but it’s non-cash and deceptive for real estate because most properties increase in value over time.

That is just the basic idea – you see all sorts of variations, such as Adjusted Funds from Operations (AFFO), where you subtract Maintenance CapEx to more closely approximate cash flow, and then metrics like AFFRO that make other adjustments depending on the industry (e.g. straight-lining of rent).

All REITs break out FFO in their filings, so that’s your best source for the actual numbers.

Dividend yields and dividend payout ratios are also important to analyze for REITs because of the requirement to issue 90% of taxable income as dividends to avoid corporate-level income taxes.

Q: OK, so let’s go through the different methodologies now.

A: Sure… I’ll start with the intrinsic side:

Dividend Analysis (AKA Dividend Discount Model): This approach considers a 5-year projection with discount rates as well as a terminal value calculated either by a multiple or a perpetuity growth approach.

Discounted Cash Flow: Stream of Funds Available for Distribution = FFO – normalized recurring capital expenditures. As you know, this requires determining cost of capital, and discounting streams into present value.

With REITs, DCFs and Dividend Discount Models can often give you similar values because FFO – Recurring CapEx tends to be close to the actual dividends issued.

Net Asset Value: This one is specific to real estate, and it’s different from what you see for oil & gas companies and other types of NAV models.

The idea is that you take the REIT’s projected NOI and divide it by the appropriate Cap Rate (you can go granular and divide this into different regions or property types) to figure out the value of their gross real estate assets.

Then you add in other assets, exclude Accumulated Depreciation, and subtract Liabilities to determine the NAV. You can also calculate NAV Per Share and look at the premium or discount to the company’s current stock price.

Q: That’s a lot of information, but it sounds like NAV is the key methodology that’s a lot different from what you see in other industries.

What about relative valuation and multiples?

Q: Sure. Just like other industries, you can still use comparable company analysis and precedent transactions, and sometimes you even see EV / EBITDA multiples used there.

But more common are FFO and AFFO multiples, both of which are Equity Value-based (since you start with net income).

Occasionally, you also see Earnings Before Depreciation and Deferred Taxes (EBDDT).

And then you have the other analyses that pop up when looking at M&A deals: Contribution Analysis (the % of the combined entity that each company in a merger would receive based on their FFO contribution), accretion / dilution analysis, trading analysis (comparing a target stock to a composite index), and even looking at research analyst price targets.

Some firms also use Prospective Buyer Analysis to see if other buyers could execute the transaction without having EPS decline immediately afterward; you’ll see it referred to as Affordability Analysis as well.

Q: Once again, lots of information there – but it sounds like the different multiples are the main point to keep in mind?

A: Pretty much. Again, sometimes you will still see EV / EBITDA used, especially outside of REITs for industries such as home building.

I would also take a look at these Fairness Opinions to see good examples of how banks value real estate firms in real life:

Note how the Gaming valuation uses very standard multiples and methodologies: EV/EBITDA, P/E, and a DCF based on Unlevered Free Cash Flow.  Here’s an example of a confidential information memorandum:

If you were to buy a portfolio of real estate properties, you might have to value each property on its own (using Cap Rates and perhaps a type of DCF analysis).

See: more on real estate and REIT modeling and valuation.

Life in Real Estate

Q: That’s a very helpful explanation of real estate valuation.

What about the popular deal types in the sector? Will you be doing lots of M&A deals, or are financings more common?

A: Capital raisings are far more common, at least for REITs – as mentioned above, they constantly need to raise debt and equity to continue acquiring, developing, and renovating properties. Financings are more common in the other sectors as well.

M&A is not quite as common because there aren’t too many REITs to begin with – it’s not like other industries where there were hundreds or thousands of potential targets, so most acquisitions are of assets (individual properties) instead.

Firms also tend to lack cash and the ability to raise debt (since they’re already heavily leveraged), so 100% stock deals are the most viable option, but those present risk to both parties.

When M&A does happen, geographic presence tends to be a key driver: one firm is strong in the Northeastern US but wants to expand to the Midwest or Southwest, for example.

Deal flow also runs in patterns: if one real estate firm raises capital, a competitive firm will likely do the same. In fact, I had one week where all the biggest REITs raised equity right after one another.

This is not to say that you’ll never get exposed to M&A, but financings are definitely more common here.

Q:  So if you like real estate, where would you go work? Are any banks particularly strong in the sector?

A: Real estate, like the financial sector, requires drawing on a large balance sheet because of the high percentage of financing deals.

Expect Bank of America Merrill Lynch and Deutsche Bank to be near the top of the league tables.

Any day of the week, you can use Bloomberg’s <LEAG> command, and click ‘Financial Advisors.’ Click any of the names, and you can see a list of deals done by the firm. Easy!

Q: Finally, some people claim that going into real estate makes your skill set much more specific and limits you to ONLY real estate-related opportunities.

What’s your take on that? Are there good exit opportunities?

A: I think there’s some truth to those claims, but it happens with most industry groups: you tend to get pigeonholed into doing the same thing on the buy-side, regardless of whether you start out in TMT, industrials, or any other group.

So yes, recruiters are more likely to get you interviews with real estate-related groups.

If you want to move elsewhere, you need to demonstrate interest in other areas by researching them, reading sector pages, and reading the articles on this site about other groups, areas, and regions.

In terms of exit opportunities within real estate, REITs are a common destination for analysts; some people also move onto real estate private equity firms or hedge funds.

It’s not quite as common to move into plain vanilla private equity, but sometimes it happens.

Moving into real estate development is rare because the skill sets are totally different and development is much more “brick and mortar” than working with REITs, home building firms, and so on.

Q: Awesome! Thanks for your time. Really enjoyed the chat.

A: No problem – hope it was helpful.

M&I - Luis

About the Author

Luis Miguel Ochoa has facilitated a variety of strategic initiatives from corporate acquisitions to new market development. He earned his B.A. in economics from Stanford University where he was a member of the varsity fencing team.

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  1. Hi there,

    Are there any books about real estate that you would recommend to someone who is just getting started in the sector?

    Thanks in advance!

  2. Hi Brian,

    I work in a BB M&A group and am contemplating moving to the RE IB team at another BB. I have prior investing experience at a BB’s public markets investing group. Just wondering if there’re any downsides to this move if I’m certain about my interest in RE. I allude to exit and growth opportunities. It appears that increasingly on the private side, M&A experience is considered good but it also helps to have coverage experience and relationships. How true is that, and with an eventual REPE or RE investing role in mind, does this seem like a good opportunity?

    1. If you want to stay in RE-related roles for the long term, there aren’t really any downsides to joining this RE IB team. The only real downside is that you won’t be able to join generalist PE firms/banks/other funds as easily in the future, especially if you stay in RE for several years. But pretty much any RE exit opportunity is possible.

  3. Avatar

    Thanks always for great interviews, including this one. Quick question about exit opportunity of working at a small~mid-sized REIT? I would be in working in the firm’s corporate finance/capital markets team. Would I have an opportunity to break into RE IB after 1-2 years?

  4. Since he said real estate development is a completely different skill set than reits and the like would it be unrealistic to take a financial analyst job with a real estate developer as a stepping stone to get into real estate investment banking?

    1. Real estate development is not ideal for IB. Working at a REIT, RE PE firm, or even a brokerage would be better options.

      1. Would the primary reason for that be that you wouldn’t get to work on deals in that role? I know some real estate development companies have land acquisition analyst roles and I have seen some people with these roles transition into real estate IB.

        It seems like working on deals is the most important aspect that IB’s look for in prospective employees rather than just having some basic modeling and forecasting experience.

        1. If you’ve already seen people in those roles transition into real estate IB, why are you asking this question? If you’ve seen it, you know it is realistic.

          Yes, it’s possible, but, as I said, it’s not ideal because real estate development deals are different from M&A and capital raising deals that most banks work on.

          1. Just trying to get more insight. Thanks for the help.

  5. There is a small commissioned based regional boutique investment bank in the southeast. The company is 14 years old and appears to be doing well. Most of their deals involve securing financing for multi-family deals. How realistic is it to generate a significant six figure income at this type of firm?

    1. Depends on how big it is… before commissions, it’s not realistic, but with a generous enough commission it’s possible if you’re more senior.

  6. i still don’t understand the difference between REPE & REIT…

    1. They are similar. The main difference is that REITs are publicly traded companies (for the most part) with special tax treatment, whereas most REPE funds are private and only have LPs to report to instead of a large set of institutional public markets investors. Also, REPE funds tend to acquire/sell fewer properties and may focus more on turnarounds and other improvements since they’re not managing an entire portfolio of hundreds/thousands of properties.

      1. Just to add on to that Brian – how do you know if a REIT is overvalued or undervalued?

        1. You have to value it using the methodologies described above and see how your estimates compare to its current share price.

  7. Hi! Great article.
    I’m currently in a BB on the technology side. I honestly got into my current dept randomly and realized that 1) the team is not a fit for me, and 2) learning a lot about myself after working ~1.5yrs full-time that I’m really interested in Real Estate (long story). My long-term goal is to buy RE myself and build equity in whatever I can afford (Single/multi family homes to start). How would you recommend I use my current position to leverage myself into the best position to use the resources available? (e.g. find an RE IB mentor, REIT, small developer). The conflict I’m having is that going into a large firm I won’t get the knowledge necessary to do small personal deals, but would give a higher salary and connections if I wanted to start my own fund later on.

    1. As I said in response to your other comment:

      “Learn real estate finance on your own, do some case studies (search our site), research properties or REITs so you can speak intelligently about the sector, and network directly with people in the RE group at the bank. Joining industry organizations in real estate might also help.”

      The path of least resistance is to make a move over to real estate directly at your current firm if you can do so.

  8. Hi,

    Great interview, thank you! It was very helpful. I have a superday coming up with a RE group , would you happen to know any good websites that talk about the industry trend and m&a/capital raise activity on Gaming, Lodging and Leisure companies?

    1. Avatar
      M&I - Nicole

      I am not 100% sure but you may want to refer to Dealogic for recent deals in the sector. Valueline may also be of some use to you:

  9. Thanks for the great article! I was wondering how competitive I would be for a role within a real estate coverage group coming from a Big 4 Real Estate Advisory background. It looks like your real estate modeling course would be a major competitive advantage as well. Thanks again.

    1. You would have a good chance, but it depends on how much you network and what your deal experience looks like as well. Yes, the RE Modeling course would be helpful although it is currently more geared toward real estate development / private equity.

      1. Thanks for the info!

  10. Hi,

    I have been a long time reader and I am extremely interested in real estate. I am currently struggling because I graduated with degree in engineering from a well known school. I have spent the last two years working for a construction management firm. I have worked and gained a very strong understanding of the construction of a property, the costs and the risks associated with a real estate project. Is it possible to move into a banking role with this background? I have been networking but I am not sure if my effort will pay off.

    Thank you for your help!

    1. Avatar
      M&I - Nicole

      I’d say going back to get your Masters at a target school can improve your chances quite significantly.

  11. Just out of curiosity, what are some of the most well known and most successful REIBs? I understand firms like Goldman or JPM have great IBs in general and maybe weaker RE coverage groups. Would BAML or HFF be near the top of that list?

    1. Goldman actually has a good RE coverage group from what I know, but probably does fewer financings than the traditional commercial banks (BoAML, Citi, the European banks, etc.). Any bank with a large balance sheet is generally good for RE, so BAML – yes, HFF – think they work more on property-level deals.

  12. Hi,

    Less technical, more career-related question. I became highly interested in real estate as an undergraduate, where I had a business degree (finance and real estate concentrations) from a top-10 program. I decided to pursue a law degree and a masters degree in real estate (the joint degree is called a JD/MSRE), because I thought it would offer a comprehensive real estate education and make me very competitive moving forward, opening up doors in every sector of the real estate industry. I just finished my first year of the 3-year program. Long term I would like to work my way to the top of a large REIT or development company, or perhaps even manage a REPE fund.

    My question is what should I do in the short term?

    I plan on going for my MBA maybe 4 or 5 years after I graduate, but I’m just not sure what the best option for me is in that 4/5-year period. Do you think REIB would be best? Or practice law at a big firm RE department that works on big deals? Some other opportunity with a REIT, REPE group, or development company? Just not sure which option I would learn the most, get the most deal exposure, get the biggest resume boost, etc.

    Looking to focus my networking efforts. Thanks for the guidance. Great article.

    1. Avatar
      M&I - Nicole

      I’d stay in real estate. REIB, or opportunities with REIT, REPE group, or development company may be best, depending on which offers you end up with

  13. How do the hours and pay compare?

  14. Yes this helps a lot. I have 3 weeks before I start training for my IB job. So I will first go through the Excel & Fundamentals course. Afterwards, if I want to spend the extra money/time I will purchase the Excel & Fundamentals course. There is a package offered if I only wanted to purchase those two courses? And can I work on the courses whenever I have time? Thanks!

    1. Avatar
      M&I - Nicole

      Did you mean the industry specific courses in your second sentence?

      Yes, there is a great package for Excel & Fundamentals –

      Of course, you have lifetime access to the courses and can access them whenever you have time and wherever you are

  15. Brian,
    Thanks for all the good stuff. Going into Real Estate IB and was wondering what the best thing I could do to get practice on 1) real estate valuation and 2) practice on excel (learning shortcuts, etc). Do not want to be overwhelmed first week on the job. I noticed a REIT modeling training program on your website for $247 – how long would that take to complete and is that the best thing to do at this point?

    1. Avatar
      M&I - Nicole

      Tim, thanks for your interest in the courses. We move very quickly in the real estate course and assume that you are already proficient with Excel and that you already know the fundamentals of accounting, valuation, and financial modeling. If you haven’t gone through the Excel & Fundamentals course, we’d recommend that first.

      In terms of time to complete the course, you go through every single lesson and complete all the Excel file exercises, we estimate a completion time of 35-40 hours. However, if you just need to refresh your basics, you can focus on the “Overview” lessons and learn the most important material in 10-15 hours.

      So in your case, if you only have a few days before starting your job and just want to brush up on your Excel skills, you may want to go through the Excel part of our Excel & Fundamentals course if you haven’t already done so, and then jump to the overview lessons of the Real Estate course. We’d still recommend you to complete the Excel & Fundamentals course first if you have the time though.

      Otherwise, I think just the Excel & Fundamentals course will do if you just want to brush up on basic financial modeling skills.

      I hope this helped. Please let us know if you have other questions regarding the course!

  16. Question from someone working at a CBRE/JLL/Colliers/Cushman in the in-house M&A strategy group. The group I currently at is focused on acquiring other RE brokers to expand the firm’s services. If I am interested in working at a REPE firm, what type of firm (local small fund, middle market, megafund?) will this background qualify for? Should I consider adding IB or REIT in between or is that non value add? Note that the current position does not deal in acquiring any RE assets, its is only to grow the firm through acquisition of brokers. The position does however deal with modeling out deals and financing scenarios. Thanks!

    1. Avatar
      M&I - Nicole

      I’d say middle market, and IB experience can be useful.

      1. Do you mean I would qualify as a strong candidate for a middle market fund or getting IB experience to switch over vs a middle market IB? I suppose another route would be a M7 MBA, do RE PE shops recruit for associates based on my background if I was able to get into a program? I know that you can break in if you work hard but was just wondering if its typical to be recruited.

        1. Avatar
          M&I - Nicole

          I meant getting IB experience at switching over, though you can also speak with a middle market fund to establish your contact first. Yes a target MBA can potentially increase your chances.

  17. Great article. Thx a lot.
    I have worked as a mortgage loan processor for like 6 years and as a loan officer and loan consultant (loan modifications, hard money deals) for about 5 years. I also have Masters in Sciences (MS) in Investment/Financial management. What exactly would be a good step upwards (in investment banking etc)? You can tell me about more than one position that I should aim for. Thx a million

    1. It would be tough to get into IB directly with your background – maybe think about moving to CRE or CRE investing first, and then transitioning into REPE from there.

  18. Hi,

    I have the opportunity to intern over the summer between my junior and senior year (I’m from a target school) in the valuation & advisory department (performing appraisals of commercial real estate properties) of a reputable firm (like C&W or CBRE). Networking aside, how can I best spin the experience in order to earn a full time offer with a BB REIB group or a top REPE firm like BX? Is it common for people to move over to REIB/REPE from a background in commercial real estate valuation from a top brokerage house?

    Thanks again

    1. Play up the valuation / modeling side as much as possible and point out how there are similarities in the deal types between CRE and REPE/REIB. Yes, it’s definitely possible to move from CRE to one of those (more so for REPE) – an upcoming interview will cover this.

      1. Is this interview yet available? I’m interested in transitions from brokerages to REPE as well.

  19. Would a strong background in residential real estate help a person who wants to do real estate investment banking, regardless of whether they apply as an analyst or a managing director? I have worked at a leading RE brokerage (think of RE/MAX, Coldwell Banker or Century 21) as an intern.

    1. Avatar
      M&I - Nicole

      This can potentially help though having relevant IB and valuation experience matter most

  20. Hi there,

    Thanks for the comprehensive article!

    You mentioned that “Real Estate Investment Trusts (REITs): These firms are sort of like private equity firms, but for properties rather than companies.” In that case, then what is the difference between a REIT and a Private Equity Real Estate firm (PERE) e.g. Lasalle Investment Management, Tishman Speyer, Blackstone Group etc.?

    Thank you.

    1. Avatar
      M&I - Nicole

      Real Estate Investment Trust – REIT – A security that sells like a stock on the major exchanges and invests in real estate directly, either through properties or mortgages.

      Private equity real estate fund is a collective investment scheme, which pools capital from investors. These funds typically have ten year life span consisting of a 2-3 year investment period during which properties are acquired and a holding period during which active asset management will be carried out and the properties will be sold.

      The difference is that REIT is publicly listed.

      1. Thanks for the reply. But how is working in an PE (RE) firm different from working in a REIT?

        1. Avatar
          M&I - Nicole

          I am not 100% sure but I think the nature of the work will be somewhat similar

  21. With a huge emphasis on capital raising, is it fair enough to say that there is not a lot of “strategic” thinking involved in REIB?

    Also, how often are sponsors involved in the space? And I am assuming people in the group will not be doing LBO as well?

    People tend to look down on capital raising experience. I am placed into a RELL group at a BB as a SA, and I don’t particularly find this industry interesting. If I have the chance to choose the types of deals / companies to cover, which types should I pick in order to give me a more general and transferable experience?

    1. That is somewhat true, yes, but it varies by sector and how much REIT work you do vs. work with other sub-sectors. Financial sponsors are quite involved and firms like Blackstone / KKR have actually been buying up individual properties lately. LBOs do happen, but they’re not as common since REITs are already heavily leveraged.

      I would pick anything outside of pure REITs to work with since they are the most specialized. Something else in that “Gaming, Lodging, and Real Estate” space would help with more generalist roles… for example, casinos are a bit closer to normal companies.

  22. Mr. DeChesare,

    Thanks for the great article. Quick question: As a freshman looking to break into ibanking from a non-target school, how would you perceive an internship at a small real estate investment LLC? They foucs on small single family homes and the responsibilities included deal and property analysis, but also a lot of marketing. Would this be of value for a freshman interested in ibanking?

    1. Avatar
      M&I - Nicole

      Yes this would be useful – you’re already ahead a lot of people because most freshman wouldn’t have such opportunity

  23. Hello, I’m a rising senior at a non-target school, double-majoring in subjects unrelated to finance. But one of them pertains to Real Estate, and I have been getting myself involved in RE internships as much as possible (did three up to this summer).
    This summer I landed on an internship at one of the top brokerage firms (CBRE, HFF, JLL), and am preparing for the CFA level 1 to take it in December.
    I ultimately want to land on a job at REIB upon graduation – BB or not, it doesn’t matter – and was wondering if I am doing the right thing by pursuing the CFA. It certainly takes a lot of time out of me so I think next semester all I’ll be doing is studying for school (18 credits) and for the CFA, but do you think it might be better for me to just network and search for more jobs rather than putting all of my time into the CFA? I’m doing this to prove that I can actually be a quantitative person as my majors are very qualitative, but do you think it’s worth it? (and there’s no guarantee that I’ll pass so that’s another problem as well…)
    I am also planning on taking classes outside of school on ARGUS and financial modeling that involves DCF+@ to be set for the job prior to entering, but then again, I don’t really know if I’m doing the “right” thing.
    I really need your advice. Thank you so much.

    1. Sorry that I asked a question about the CFA. Should’ve been more attentive. Please disregard that part of the question.

      1. Avatar
        M&I - Nicole

        No worries. No need to apologize

    2. Avatar
      M&I - Nicole

      Yes the CFA can help if you’ve only been majoring in qualitative subjects. Taking Finance/Accounting classes can also help.

      However, I would focus most of your time on networking, attending info session & looking for roles that fit you. I’d say networking, knowing how to pitch your story & knowing your strength/weaknesses are more important than taking courses. Taking 1-2 solid courses that increase your financial skills & show recruiters that you have solid finance knowledge is sufficient; the rest depends on your performance in interviews (key is to land one first). Interviewers will probably not go into details re your financial knowledge given your qualitative background.

  24. Currently a non-target junior and am offered an internship in the investment sales Team in one of the top brokerage firm (CBRE, JLL, HFF) and a small REIT (non S&P 500). Which one opens more door when it comes to FT recruiting? How poor are these 2 internships compared to my BB SA friends. I am looking to go to BB (RE group preferably) / top REIT.

    1. Hey, sorry, not sure how we missed this question.

      That’s a tough call but I’d say the top brokerage firm is better for the brand-name recognition. Obviously a BB summer internship is better but the brokerages are the next best option.

  25. I’ve been working for a well known commercial real estate company as a real estate market researcher. My long term goal is to work for a middle market investment banking firm in my Southwestern city. The firms recruit MBAs heavily from two local top 40 programs.

    What should my next career step be? Do I continue working as a researcher and use the MBA to change careers or find a job in finance or on the sales side of commercial real estate before applying to an MBA program? Do I apply at 28 or do I apply as soon as possible? Would a dual MBA/Masters in finance be helpful in my particular situation?

    I’m 24, non business major, licensed real estate salesperson, 3.8 undergrad gpa, bi-lingual. My work experience before real estate was in marketing working for a start-up.

    1. I would try to do something finance-related and transition into the RE IB groups from there. If that doesn’t work, think about the MBA program if you’ve been working > 3 years or Master’s if it’s less than that. Applying sooner generally makes it easier to break in. Dual degree would not help much.

  26. Quick off topic question –
    i’m a sophomore currently working at a small investment advisory firm and I got an offer to do a full time 6 month finance co-op june-december at a well known F500. Will working full-time junior fall semester be a death sentence in terms of finding the time to network for an banking SA position next summer?

    1. Not necessarily, as long as you can spend an hour or two a day on networking and as long as you can take a few days off here and there for weekend trips.

  27. I saw something similar in a comment on the other RE articles but it wasn’t responded to. Where do analysts from non-BB ‘REIBs’ go – such as Jones Lang, Eastdil, Carton, HFF, etc? Currently at one of the firms mentioned

    I read REITs pay worse although they like people with REIB experience which doesn’t make sense to me. Developers would pay even worse yet unless you are a senior guy. REPE at a normal MM/megafund PE shop would be very hard as they mostly look at people who were in the REIB groups at BBs. So what are the different avenues available? Maybe move to buy-side at a small RE investment (although you can do this from UG) firm in AM or acquisitions and try to climb up the ladder? Although I suspect comp would still be lower here as well. I guess I’m just looking for advice/guidance here. Thanks

    1. Avatar
      M&I - Nicole

      I think moving to the buy-side at a small RE firm would be a better bet

    2. As Nicole said, most likely buy-side at some type of smaller RE investment firm. Maybe an asset management firm focused on REITs, or maybe even a RE PE firm that focuses on smaller properties instead (not sure how many of those small ones there are, though). Going to a larger bank’s RE group would also be an option, though it’s heavily dependent on the economy and the hiring climate.

      1. Thanks (although not surprising). Are any of the series # tests needed to move to the buy-side to firms like those?
        And by BB RE group you mean REIB? I know some have like Global real assets which is much different (and pays much less) and probably some groups in between

        1. Not certain about that one but I don’t think the buy-side cares much about those tests. Yes, I meant REIB. Global real estate assets is very different – if it’s not advising companies or institutions on deals it’s not really IB.

  28. Hello M&I, Great article! It covered all the questions I had on this group. Just wonderful.

    I hated when people do this on your thread, and I hate myself right now for doing this, but I have a off-topic question.

    I work in Europe and I’ve recently been laid off. I worked in equity research, so I can’t really say I saw it coming. But any-hoo, what’s a girl gotta do?

    I went back to the job hunt and there really wasn’t much available. I ended up finding two openings. One is an associate position for Asset Management at a BB. The other is a fund accountant position. Problem is, they’re both the same firm.

    Do you think it’s a bad idea to apply for both the AM Assc. position and the fund acct. position? (It gives me a headache to think of an appropriate reply for the “Are you applying for any other positions?”, which I will almost certainly get.
    I can’t say “Oh, and I’m also applying for your firm’s back office job since the markets so bad.” can I?)

    1. Thanks! I would probably just apply for the AM associate position. If you were an entry-level recent grad applying to multiple roles would be less of an issue, but they may notice that if you’re applying as a lateral hire.

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