Real Estate Private Equity (REPE) Study Guide

Income Statement

Shows a company's profitability over a period of time.

Balance Sheet

Shows what a company owns (assets), owes (liabilities), and the owners' equity at a specific point in time.

Cash Flow Statement

Shows how cash moves into and out of a business through operations, investing, and financing.

Revenue

Money earned from selling goods or services.

Operating Expenses (OpEx)

Costs required to run the business (excluding financing costs).

Net Income

The company's profit after all expenses, interest, and taxes.

Assets

Resources the company owns that have value.

Liabilities

Money or obligations the company owes.

Equity

The owners' claim on the company's assets after liabilities are paid.

Working Capital

Current Assets − Current Liabilities. Measures short-term financial health.

Accounts Receivable (AR)

Money customers owe the business.

Accounts Payable (AP)

Money the business owes suppliers.

Depreciation

The allocation of a tangible asset's cost over its useful life.

Amortization

The allocation of an intangible asset's cost over time.

Capital Expenditures (CapEx)

Money spent to buy or improve long-term assets.

Accrual Accounting

Records revenue and expenses when earned or incurred, not when cash changes hands.

Present Value (PV)

The value today of money that will be received in the future.

Future Value (FV)

The value of money after earning interest over time.

Time Value of Money

A dollar today is worth more than a dollar received in the future.

Discount Rate

The required rate of return used to convert future cash flows into present value.

Discounted Cash Flow (DCF)

A valuation method that estimates value by discounting future cash flows.

Net Present Value (NPV)

Present value of future cash flows minus the initial investment. A positive NPV generally indicates a worthwhile investment.

Internal Rate of Return (IRR)

The annualized return an investment is expected to generate.

Weighted Average Cost of Capital (WACC)

The average cost of financing from both debt and equity.

Enterprise Value (EV)

The total value of a business, including debt and equity, less cash.

Equity Value

The value belonging only to shareholders.

Mezzanine Debt

Higher-risk debt that ranks below senior debt but above equity.

Preferred Equity

Investment that receives priority over common equity but is below debt.

Common Equity

Ownership in a company with the highest risk but greatest upside.

Net Operating Income (NOI)

Rental income minus operating expenses before interest, taxes, depreciation, and amortization.

Cap Rate

NOI divided by property value; measures the property's expected yield.

Loan-to-Value (LTV)

Loan amount divided by property value; measures leverage.

Debt Service Coverage Ratio (DSCR)

NOI divided by annual debt payments; measures ability to repay debt.

Occupancy Rate

Percentage of units currently occupied.

Vacancy Rate

Percentage of units that are vacant.

Rent Growth

The annual increase in rental income.

Exit Cap Rate

The cap rate used to estimate a property's future selling price.

Cash-on-Cash Return

Annual cash flow divided by the cash invested.

Comparable Sales (Comps)

Recently sold similar properties used to estimate value.

Due Diligence

The investigation performed before acquiring an investment.

Asset Management

Managing a property after acquisition to maximize its value.

Acquisitions

Finding, analyzing, and purchasing investment properties.

Development

Building new properties or redeveloping existing ones.

Three-Statement Model

A model linking the income statement, balance sheet, and cash flow statement.

Acquisition Model

Projects returns from purchasing a property.

Development Model

Evaluates the costs and returns of a real estate development.

Debt Schedule

Tracks loan balances, repayments, and interest.

Waterfall Model

Shows how profits are distributed among investors.

Sensitivity Analysis

Tests how changing one variable affects investment returns.

Scenario Analysis

Compares different assumptions (best case, base case, worst case).

Mean

The average of a dataset.

Median

The middle value when data is ordered.

Mode

The most frequently occurring value.

Variance

Measures how spread out data is from the mean.

Standard Deviation

Measures the typical distance data points are from the mean.

Correlation

Measures the strength and direction of the relationship between two variables.

Regression

A statistical method used to predict one variable using another.

Probability

The likelihood that an event occurs.

Forecasting

Predicting future outcomes using historical data.

Time Series

Data collected over time to identify trends and patterns.

Confidence Interval

A range that likely contains the true value of a population parameter.

XLOOKUP

Finds a value in one table and returns a corresponding value from another column.

INDEX/MATCH

A flexible lookup combination used instead of VLOOKUP.

SUMIFS

Adds values that meet multiple criteria.

Pivot Table

Summarizes and analyzes large datasets.

Goal Seek

Finds the input needed to achieve a desired output.

Solver

Optimizes a model by finding the best solution under constraints.

ARGUS Enterprise

Industry-standard software for valuing and analyzing commercial real estate.

Bloomberg Terminal

Professional platform for financial markets, news, and company data.

Capital IQ

Database for financial statements, valuations, and company research.

CoStar

Commercial real estate database for market data and property information.

Power BI

Business intelligence software used for dashboards and data visualization.

Tableau

Software used to visualize and analyze large datasets.

Python

Programming language used for automation, data analysis, and financial modeling.

SQL

Language used to query and manage databases.

NOI (Net operating income)

Property income before financing and taxes.

Cap Rate

NOI ÷ Property Value; measures return.

DCF (discounted cash flow)

Values an investment using discounted future cash flows.

IRR (internal rate of return)

Annualized investment return.

NPV (net present value)

Value created after accounting for the cost of investment.

WACC (weighted average cost of capital)

Average cost of debt and equity financing.

loan-to-value

Measures loan leverage.

DSCR (debt service coverage ratio)

Measures ability to service debt.

Enterprise Value

Total value of a business.

Working Capital

Measures short-term liquidity.

Depreciation

Allocates an asset's cost over time.

CapEx

Spending on long-term assets.

Sensitivity Analysis

Tests the effect of changing one assumption.

Comparable Sales (Comps)

Similar transactions used for valuation.

Due Diligence

Investigation conducted before making an investment.

Senior debt

the safest loan with first priority for repayment

EBITDA (earnings before interest, taxes, depreciation, and amortization)

A measure of a company's overall financial performance, representing earnings before major non-operational expenses are subtracted.