Wall Street Prep real estate technicals
questions with actual answers.
What are the different types of real estate firms? ANS - REPE, REITs, RE development, RE investment
management, RE operating companies, RE brokerage
REPE ANS - raise capital from the funds LPs to invest in RE (buy, develop, manage, sell)
REITs ANS - own portfolio of income generating RE assets. 90% of taxable income must be paid in
dividends. Most are publicly traded
RE development ANS - construct properties from scratch. Lifecycle of property is longer than other
types of RE firms
REIM ANS - raise capital from LPs to acquire, develop, and manage to then sell them for a profit.
Different from REPE bc funds have no end date
RE operating companies ANS - Similar to REITs but have to reinvest earnings, not pay out dividends. If
they don't, they are subject to double taxation at firm and shareholder level
RE brokerage ANS - intermediaries that facilitate transaction on both sides (buy/sell/lease). Identify
opportunities to buy/sell on behalf of client or negotiate lease terms as a representative.
What are the different property classes in real estate investing? ANS - Class A, B, C, D
Class A ANS - premium modern properties in prime locations with top of the line amenities. Lowest risk
and lowest return
Class B ANS - slightly outdated but are built/renovated with high quality construction and maintained
well. Demand comes from higher end middle class. Higher yield with upside potential from investors.
, Class C ANS - Outdated (30+ years old) located in sub-optimal areas. Conditions range from fair-poor
and usually require urgent repair/renovations. Tenants=low income/low creditworthiness=higher
risk=higher upside for investors.
Class D ANS - Botton tier, distressed assets usually located in areas with collapsing market demand
(lowest rent, high crime). Require a lot of spending on renovation. Most investors avoid unless
destressed assets specific investor.
What are the four main real estate investment strategies? ANS - core, core-plus, value add,
opportunistic
Core ANS - most conservative with least risk=low return (class A). Appeal to investors who want
stable/consistent returns.
Core-plus ANS - low to moderate risk which aims to obtain income and growth. Requires capital for
improvements to increase cash flow and improve operating efficiency
Value-add ANS - growth oriented with moderate to high risk. requires considerable capital
improvements and located in sub-optimal areas. Aim to create more value resulting in growth-higher
rent prices and increased demand
Opportunistic ANS - most risky and are most complicated and time consuming projects. Initially
produce little/no cash flow but can potentially generate significant cash flow after fully developed
What is the real estate capital stack? ANS - "capitalization," describes the different sources of funding
used to finance a real estate project (common equity, preferred equity, mezzanine debt, senior debt).
Common equity ANS - riskiest in security bc claim comes last if default
Preferred equity ANS - blends debt and common equity=hybrid security. Returns=flexible bc they can
be fixed interest with option to participate in equity upside.
questions with actual answers.
What are the different types of real estate firms? ANS - REPE, REITs, RE development, RE investment
management, RE operating companies, RE brokerage
REPE ANS - raise capital from the funds LPs to invest in RE (buy, develop, manage, sell)
REITs ANS - own portfolio of income generating RE assets. 90% of taxable income must be paid in
dividends. Most are publicly traded
RE development ANS - construct properties from scratch. Lifecycle of property is longer than other
types of RE firms
REIM ANS - raise capital from LPs to acquire, develop, and manage to then sell them for a profit.
Different from REPE bc funds have no end date
RE operating companies ANS - Similar to REITs but have to reinvest earnings, not pay out dividends. If
they don't, they are subject to double taxation at firm and shareholder level
RE brokerage ANS - intermediaries that facilitate transaction on both sides (buy/sell/lease). Identify
opportunities to buy/sell on behalf of client or negotiate lease terms as a representative.
What are the different property classes in real estate investing? ANS - Class A, B, C, D
Class A ANS - premium modern properties in prime locations with top of the line amenities. Lowest risk
and lowest return
Class B ANS - slightly outdated but are built/renovated with high quality construction and maintained
well. Demand comes from higher end middle class. Higher yield with upside potential from investors.
, Class C ANS - Outdated (30+ years old) located in sub-optimal areas. Conditions range from fair-poor
and usually require urgent repair/renovations. Tenants=low income/low creditworthiness=higher
risk=higher upside for investors.
Class D ANS - Botton tier, distressed assets usually located in areas with collapsing market demand
(lowest rent, high crime). Require a lot of spending on renovation. Most investors avoid unless
destressed assets specific investor.
What are the four main real estate investment strategies? ANS - core, core-plus, value add,
opportunistic
Core ANS - most conservative with least risk=low return (class A). Appeal to investors who want
stable/consistent returns.
Core-plus ANS - low to moderate risk which aims to obtain income and growth. Requires capital for
improvements to increase cash flow and improve operating efficiency
Value-add ANS - growth oriented with moderate to high risk. requires considerable capital
improvements and located in sub-optimal areas. Aim to create more value resulting in growth-higher
rent prices and increased demand
Opportunistic ANS - most risky and are most complicated and time consuming projects. Initially
produce little/no cash flow but can potentially generate significant cash flow after fully developed
What is the real estate capital stack? ANS - "capitalization," describes the different sources of funding
used to finance a real estate project (common equity, preferred equity, mezzanine debt, senior debt).
Common equity ANS - riskiest in security bc claim comes last if default
Preferred equity ANS - blends debt and common equity=hybrid security. Returns=flexible bc they can
be fixed interest with option to participate in equity upside.
