Interview prep · Real Estate & REITs
Real Estate & REITs interview questions
Real estate interviews run on two levels at once: the property and the company that owns it. The category tests whether you can underwrite a building's cash flows and also value the REIT wrapped around a portfolio of them — and whether you understand why net income, the metric everything else runs on, misleads here.
The entry question is almost always the cap rate: net operating income over value, its role as the sector's pricing shorthand, and the intuition that it moves inversely to price like an inverted multiple. From there interviewers escalate to REIT metrics — why depreciation on assets that often hold or gain value makes net income unrepresentative, and how FFO and AFFO adjust for it — plus NAV as the asset-value lens. Advanced rounds go property-level: what drives NOI, how underwriting differs for a stabilized asset versus a development, and how you would think through a specific acquisition.
Strong candidates move fluidly between the two levels, using cap rates and NOI at the asset and FFO multiples and NAV at the entity, and can say which lens fits a given question. That translation skill is the real test.
Real Estate & REITs: what candidates ask
Do real estate interviews replace the standard technical questions?+
No — the sector layer comes in addition to the fundamentals. Real estate teams commonly still test accounting, general valuation, and sometimes basic LBO concepts, then add cap rates, FFO and AFFO, NAV, and property underwriting on top. Candidates who prepare only the REIT metrics get caught by an ordinary depreciation walkthrough.
Do I need ARGUS or real estate modeling experience before interviewing?+
For analyst and intern seats, typically not — tool proficiency is taught on the job. Interviews test the concepts underneath: what drives net operating income, how a cap rate translates income into value, and why REIT investors look past net income. If you have modeling or ARGUS exposure, it strengthens your story, but it is rarely the gate.
What real estate question should I expect first?+
Some form of the cap rate question is the closest thing to a guarantee in this category: define it, invert it, compare two assets trading at different cap rates and explain why. It is the sector's version of the depreciation walkthrough — a fast screen for whether the fundamentals are automatic — so drill it until the answer needs no thought.
Every Real Estate & REITs question in the bank
All 84 published questions from Real Estate & REITs — each links to its own page. Free ones show the full model answer.
6
- What is net operating income (NOI), and what does it exclude?
- What is a cap rate, and how do you use it to value a property?
- Why does a LOWER cap rate mean a HIGHER property value?
- Why is net income a misleading profitability measure for REITs?
- What is RevPAR, and how is it calculated? Quick example.
- Why real estate investment banking (or REIT coverage) specifically?
36
- What drives cap rates up or down?
- How should you think about the spread between cap rates and interest rates?
- What is the difference between a going-in cap rate and an exit cap rate, and why do underwriters usually assume the exit cap is higher?
- Walk me through the real estate risk spectrum: core, core-plus, value-add, and opportunistic.
- Explain the main commercial lease structures - gross, modified gross, and triple-net - and who bears the operating expenses under each.
- Why are long-term triple-net leased assets often described as trading like bonds?
- What is WALT, and why do investors and lenders care about it?
- What is same-store NOI, and why do REIT analysts focus on it?
- Define FFO per the NAREIT definition and walk through a quick example.
- What is AFFO, and how do you get from FFO to AFFO? Give an example.
- Why is P/FFO used as the REIT analog of P/E, and how do you use it?
- Why is AFFO a better measure of a REIT's dividend capacity than FFO?
- What are the key tax rules a company must satisfy to qualify as a REIT, and what is the payoff?
- What is the difference between an equity REIT and a mortgage REIT?
- Internally managed versus externally managed REITs - what is the difference and why do investors care?
- How do investors use dividend yield to value REITs, and what is the key trap? Include the payout math.
- What is the difference between levered and unlevered IRR, and why does leverage amplify returns in real estate?
- What is cash-on-cash return? Walk through an example.
- What is DSCR, how is it calculated, and what do lenders typically require?
- What is LTV in real estate lending, and how does it interact with the rest of the capital stack?
- What is debt yield, and why do lenders like it better than DSCR or LTV?
- How does construction financing differ from permanent financing?
- Walk me through a cash-out refinance and why sponsors use it.
- How has hybrid work changed the office sector's investment profile, and why is office such a capital-hungry property type?
- In retail real estate, what is the difference between anchor and inline tenants, and what is percentage rent?
- Why did industrial/logistics become one of the most sought-after property sectors?
- Why is multifamily considered an inflation hedge, and what is the flip side of that feature?
- Why are hotels described as operating businesses rather than real estate, and what does that imply for analysis?
- What is the investment appeal of self-storage?
- What is straight-line rent, and how does it distort GAAP revenue? Walk through an example.
- How does capitalized interest work during development, and how does it affect reported earnings?
- What are the standard depreciation conventions for real estate, and what is NOT depreciated?
- Walk me through a property-level pro forma from top line to cash flow.
- How does working in a real estate coverage group differ from a generalist industry group?
- What kinds of deals does a real estate investment banking group actually work on?
- Why do public and private real estate valuations diverge, and how does the gap resolve?
42
- A property generates $5M of NOI and is worth $100M at a 5% cap rate. If cap rates expand 100 bps with NOI flat, what happens to value - and how much NOI growth would fully offset the move?
- Two buildings across the street from each other produce identical NOI. Why might they trade at very different cap rates?
- Conceptually, how does a cap rate relate to a discount rate and growth - and why is a cap rate NOT the same as an expected return?
- Walk me through a REIT NAV per share calculation with numbers.
- What does it signal when a REIT trades at a premium or a discount to NAV, and how does it affect behavior?
- Why do REITs issue equity so frequently compared to regular corporations?
- What is a REIT's implied cap rate, and how do you calculate it? Walk through the math.
- NAV and P/FFO can point to different conclusions on the same REIT. Why, and which do you trust?
- Two REITs own identical portfolios but one runs 30% leverage and the other 60%. How does that distort a P/FFO comparison?
- What should you watch out for when a REIT reports 'Core FFO' or 'Normalized FFO' instead of NAREIT FFO?
- How would you value a REIT? Name the main methodologies and when each matters.
- Why does the NAREIT FFO definition EXCLUDE gains on property sales - isn't selling buildings at a profit part of the business?
- You buy a property with $100 of NOI at a 5% going-in cap rate, grow NOI 20% to $120, and exit at a 6% cap rate. What did you make, and what is the lesson?
- Walk me through the math of a value-add deal: buy at $80M on $5.0M of NOI, spend $10M on renovation, grow NOI to $6.3M, and exit at a 6.0% cap.
- What is yield on cost, and how does the development spread generate profit? Use numbers.
- Why do developers demand a spread between yield on cost and market cap rates, and what happens to development activity when the spread compresses?
- What is a ground lease, and how does it affect the value and financeability of the building on top of it?
- Show with a simple one-year example why levered IRR exceeds unlevered IRR when the deal works.
- Sponsors always quote both IRR and equity multiple. Why isn't IRR alone enough?
- How does hold period affect the relationship between IRR and equity multiple in a real estate deal?
- Lenders size loans on LTV, DSCR, AND debt yield. Why all three, and which one binds when?
- How does interest-only versus amortizing debt change a deal's cash-on-cash and DSCR? Use a $10M loan example.
- A deal shows a 3% going-in cash-on-cash but a projected 18% levered IRR. How is that possible, and what should it make you scrutinize?
- What makes data centers different from traditional real estate, and why is power the key constraint?
- What drives the senior housing investment thesis, and what distinguishes a RIDEA structure from a NNN lease to an operator?
- Which property sectors have historically traded at the lowest and highest cap rates, and what explains the ranking?
- A retail tenant pays $100K base rent with percentage rent of 5% over a natural breakpoint. Sales come in at $2.5M. What is total rent? Explain the mechanics.
- Two assets each produce $10M of NOI - one is a hotel, one an apartment complex. Why does the market pay materially less for the hotel?
- How is revenue recognized on real estate development - percentage-of-completion or at completion?
- How are tenant improvements (TIs) and leasing commissions (LCs) treated in the financials, and why do they matter so much for REIT analysis?
- What does 'stabilization' mean, and why does it matter for valuation and financing?
- How does company-level EBITDA relate to property-level NOI for a REIT, and what is EBITDAre?
- Walk me through a simple JV equity waterfall with an 8% pref and a 20% promote. Use numbers.
- What is a 1031 exchange, and why does it matter for real estate markets?
- In acquisition accounting for a property purchase, what are above- and below-market lease intangibles, and how do they distort reported revenue?
- What is a capex reserve in underwriting, and where do hotels treat it differently?
- In REIT M&A, a deal can be FFO-accretive but NAV-dilutive. Explain the tension and which test should govern.
- Walk me through the channels by which rising interest rates transmit to real estate values.
- What is negative leverage? Show it with numbers and explain when, if ever, it makes sense.
- A REIT trades at a 25% discount to NAV. Why can't management just sell the buildings and buy back stock until the gap closes?
- Is real estate a bond or a business? How would you frame the answer?
- Why do REIT take-privates cluster when REITs trade at discounts to NAV, and how can a buyer pay a premium to the share price yet still get a bargain?
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