What is Real Estate Investment Banking?
In simple terms, real estate investment banking is the act of connecting capital seekers with capital providers. The investment banker analyses the capital stock such as preferred equity and JV equity and identifies potential capital sources in terms of investment possibilities, risk profiles, types of assets and other factors.
In this guide, FinanceWalk introduces you to Real Estate Investment Banking (REIB) and its myriad opportunities.
Real Estate Investment Banking Analyst
Being a real estate investment banking analyst or associate is the commonest of offered positions. As an associate/analyst, you get a unique opportunity to work in an entrepreneurial environment and apply analytical skills. You are required to actively participate in cross-border negotiations and be a proactive and motivated team player, displaying discipline and total commitment.
The responsibilities of a real estate investment banking analyst/associate include:
- perform real estate portfolio analysis and valuations such as Debt Yield analysis and DSCR
- prepare financial models applicable to various operational scenarios
- prepare market reports, presentations and research
- identify valuable real estate prospects for acquisition or reselling
- manage individual interactions actively
- be actively involved in dialogues between clients and other senior team members, and take note of advisory board, securitization needs, transaction counterparties and client management
- review and order third party elements such as engineering, appraisal, title, legal deeds and others
- completely manage the due diligence process which includes information flow coordination, company analysis, virtual data room preparation, tracking information flow, monitor market information and review sponsors
To work as a real estate investment banking analyst / associate, you need certain skills, experience (optional) and educational qualifications.
Educationally, you should have a Bachelors or Masters in Economics, Finance, Business, Law and other related subjects. It’s good if you specialize in “real estate” but it’s tough to come across universities that offer a specific course.
In skills and experience, past experience of having worked in the investment banking or the real estate industry is obviously an added advantage. Firm knowledge of the real estate IB industry and working basics of financial valuation and modeling is recommended. You should have credible judgment integrity and working ethics, plus discipline and commitment. You should be able to work in a fast-paced environment and be self-motivated. Also, you are required to interact with clients in a professional manner. You must have strong work ethics, be proactive, be organized, have the desire to learn, show intellectual curiosity, conduct independent research works, and excellent communication skills, both written and verbal.
Real Estate Investment Banking Salary
According to the Bureau of Labor Statistics, the IB industry will grow 15 percent between 2010 and 2020 and obviously, the growth will reflect on the salary packages of the involved executives.
Since real estate is a segment of the IB industry, we couldn’t find any specific salary scale but reviewing various real estate investment banking companies and popular trends, we found some comparable data to become your information source.
- As a Capital Raising Associate
According to 2015 Indeed.com data, a real estate capital raising associate earns $63,000+ annually. The package depends on location, industry, company, experience and benefits.
- An Analyst in New York, USA
The location impacts salary package. Here’s a salary graph of a real estate investment banking analyst from 2012 to 2014. Latest data shows that a New York-based analyst earns about $140,000 annually.
- A Senior Associate in New York, USA
Compared to nationwide postings, a real estate investment banking senior associate in New York earns 36% higher. Here’s a graph between 2012 and 2014. The average salary of a senior associate is $122,000.
Compare it with the national average below.
- As Working in ‘Real Estate’ Industry, USA
You not only work as an associate or an analyst but there are other positions too like financial analyst and asset manager. Here are their salary scales.
- As a Real Estate Investment Manager, USA & India
Here is a graph depicting various investment manager positions and their average pay.
Thus, we see that the salary offerings in the real estate investment banking sector is varied and based on various reasons. If you wish to see similar data of your country, search on the country-specific career tools like we did with Indeed.com, PayScale.com and Glassdoor.com.
20 Real Estate Investment Bank Firms
The real estate investment banking firms listed below aren't numbered based on any kind of ranking. They are simply our handpicked list and neither is it a comprehensive list. Feel free to do your own search.
Our list includes:
- The Carlton Group [Current Openings]
- Hinduja Group [Current Openings]
- Goldman Sachs [Current Openings]
- CBRE Capital Advisors [Current Openings]
- ABN AMRO [Current Openings]
- Raymond James [Current Openings]
- Citi Group [Current Openings]
- Morgan Stanley [Current Openings]
- JP Morgan [Current Openings]
- Cushman & Wakefield [Current Openings]
- Key Bank [Current Openings]
- Moss Adams Capital [Current Openings]
- HSBC Private [Current Openings]
- Jones Lang LaSalle [Current Openings]
- Cowen Group [Current Openings]
- Carval Investors [Current Openings]
- Scotia Bank [Current Openings]
- Westwood Capital [Current Openings]
- Bank of America [Current Openings]
- Aries Capital [Current Openings]
Check out the linked section on current openings to apply or, you can search job networks like Indeed.com and CareerBuilder.com for more openings.
Real Estate Investment Banking Jobs
There is a lot of scope in the real estate IB industry. In this section, we will look into real estate IB jobs and career path.
The real estate IB industry is a ‘niche’ zone. Jobs are available but one has to be really on the lookout for the best of opportunities. You can search for jobs on job search engines like Monster.com but before initiating a search; understand how you want to be placed in the industry. The real estate IB has segments, as explained below.
- Real Estate Investment Trusts (REITs)
REITs are equity firms involved in the improvement, operational, buying and selling of properties. REIT’s can function globally or segment their business according to nature of buildings (residential or commercial), property types and location. Some of the REITs are listed publicly while others function as associations and corporations. Working in REITs will involve activities related to capital raising and cash flow maintenance. Most of the incomes are paid as dividends and there is always a need for constant cash flow.
- IB in Residential Sector (Internal Divisions)
Sometimes, companies involved in the residential sector such as home building companies remain limited within a specific geographic region, and such companies have internal financing divisions which often hire real estate analysts and associates to understand the market better and look into real estate financing.
- Commercial & Large Individual Properties
Real estate investment banking isn’t limited to residential and core commercial properties, it also extends to lodging and gaming buildings like hotels and casinos that require high-scale investments. Returns on these buildings are highly seasonal and is based on amenity investments. Usually, companies hire real estate IB people to analyse the merit of investing in such buildings.
Real estate investment banks approach properties from a financing point of view rather than the perspective of a developer. As a real estate investment associate or analyst, you are entrusted with the task to reveal the viability of investing in a property, on both long-term and short-term basis – that’s the moot agenda.
Here’s an interesting graph presented by PayScale.com which shows how your real estate investment banking career can shape up or just investment banking, for that matter.
Majority of the people working in this field have 4 – 15 years of experience. National trends show that 53% of people in this industry have 1-4 years of experience while 30% have about 4-9 years of experience.
Statistically, the real estate IB industry sees more male workers than females.
Breaking into real estate investment banking can be accomplished in a variety of ways. You can opt for direct recruiting or convert internships into full-time jobs. Look out for opportunities while you are still studying and try to imbibe the skills necessary for this career. Starting with an internship is the best option.
Networking will hold you in good stead. Use sites like LinkedIn and Quora to network with known personalities in the field. You can build relationships with current employees of a company you are planning to apply to or you can talk to school alumnus for contacts and introductions.
Moving on, to better prepare for the real estate IB industry, follow the questions list below.
31 Real Estate Investment Banking Interview Questions
Some real estate investment banking interview questions you should prepare are listed below.
- Why do you want to join [company name]?
- Predict how the stock market will perform in the next one hour.
- What is the value of shoe industry in India?
- What are your investment banking skills and how are they applicable?
- Talk about any IB deal you have handled in the past.
- Comment on any IB deal you’ve read about in the last few weeks or days.
- Discuss your quantitative skills.
- Run me through your resume in detail.
- How will you analyse real estate space requirements?
- What are the salient features of writing a real estate IB report?
- Why do you want to switch to real estate IB?
- Have you ever failed to honor a commitment?
- Why does your interest lie in capital markets?
- What is our company’s weakness? Explain.
- Who are our competitors and how can we beat them?
- What is your career goal?
- Discuss the feedback your previous employers gave?
- In 3 sentences, tell me why we should hire you?
- Have you ever faced ethical challenges during work? How did you handle them?
- Are you a leader or a follower?
- How does real estate IB function? Explain.
- Talk about our products and services.
- If we were to give you $20 million, how will you invest it?
- How can real estate IB and technology function together?
- Pitch me the stock of any company.
- How will real estate IB survive in slower economy?
- How will depreciation reflect on a property value?
- Explain some basic financial concepts.
- What is the value of real estate goodwill?
- What valuation methods are used in real estate IB?
- Explain some valuation methods.
Also, check out our BIWS review of investment banking interview guide.
Real Estate Investment Banking Exit Opportunities
Since real estate investment banking is a ‘limited’ field, professionals do worry about its exit opportunities. What career opportunities are available if you decide to exit from real estate?
Usually, the most common transition from Real Estate Investment Banking is to Real Estate Private Equity but the transition is not always smooth. Problems with skills might arise such as valuation issues but it mainly depends on the bank you are working with and your role. You can also think of moving into long-only REIT Asset Management, real estate hedge funds, real estate operating company (REOC) and other real estate companies.
Lastly, you can also transition to generalist Private Equity (PE) but it will be tough to integrate yourself with the workings of a PE fund. However, if you demonstrate a lot of interest and knowledge, skills, and industry relevant experience, getting into PE will not be difficult. Check out our series on PE.
- How to become a private equity analyst?
- How to get private equity job?
- Private equity interview questions
- Private equity vs. venture capital
Avoid moving into real estate development because its more “brick and mortar” business and your IB skills won’t be a beneficial match.
Suggested: Read more about investment banking courses
Even though a niche segment, real estate investment banking offers good career opportunities. If you are passionate about real estate and have interests in investments, real estate investment banking should be your choice.
Do share your feedback and comments below.