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What do Acquisitions Analysts do

What’s the most important thing when you are searching for jobs? Know what you are getting yourself into.

When I was right out of college, I had no idea what each job title entails. As a result, I don’t know what I want to do, then the people I network with don’t know how to help me. In the end, I ended up with a job I have absolutely no interest in.

Looking back, I would ask the 20-year-old me one question constantly: “do you really know the job you are applying for?” 

(Okay. He may not listen to me at all..since the 20-year-old me would think he knows everything. )

But if I can go back time and send him this post, it would definitely help him.

So what do Acquisitions Analysts do exactly?

Of course, the lifestyle of acquisitions analyst may vary wildly from companies. I’m speaking from the perspective of an analyst working for a regional residential developer.

Real estate development companies do 3 things. Buy properties, work on it, sell it. Simple.

Acquisition analysts help with the “Buy properties” part. Analysts will build the model, crunch numbers, and find out what’s the reasonable purchase price. The model (Pro-Forma) is basically a cash flow statement for whatever the lifespan of the project. The technical skills involved in creating the model is not the most challenging part to me. I enjoy creating Excel models, to me, it’s like playing Lego. The tricky part is how to come up with numbers to put in the model. What’s the selling price after we deliver the building? What’s the construction costs?

Everyone has different opinions. My job as an analyst is to collect all the information I can, talking to right people, and generate my own thoughts. For example, why the selling price is 450k a unit, not 350k a unit? Answer: Well, here are the comparables, A has better locations, B has better finishes and amenity, this project is nearby, so somewhat in between. However, not each data point is backed up by solid theory. There are many wild guesses. (That’s why the dog face in the picture). Although they are all “educated guess”, still lots of uncertainties. My goal is to have as many as reasons to back up each number as possible.

A typical day for me looks like this:

8:30 am: Get a cup of coffee and read major real estate news for 15 minutes so that I don’t sound stupid in meetings.

8:45 am: Check my emails to decide: which deals to work on today, whom to follow-up with, schedule lunch appointment, follow up with people for information, which site I need to visit, etc.

9:00 am: Busy day begins. Update the models based on managers’ comments, build new models to determine target land price, constantly get new information from the deals I work on, then update the models again

1:00 pm: Meet with my manager to tighten the assumptions for deals we have high chances of getting, discuss the strategy to get those deals

2:00 pm: Emails and phone follow up with sellers/brokers/subcontracts; maybe a site visit and look at the land/building and talk to sellers; Do a lot of research to back up the numbers in the model; Marketing efforts to be the go-to person when certain property owners want to sell their properties.

4:00 pm: Draft Letter of Intent to buy the land/building, send to the manager for approval. Meanwhile still create more models, looking at more new deals’ marketing packages, due diligence materials, etc.

5:00 pm: Organize deals in the pipeline, and go over the to-do list and check off things. I may work on things like a report my manager needs to make decisions, last-minute changes for Letter of Intent.

Work until whenever the jobs get done.

What makes you a great analyst?

I would say if you are good at Microsoft Excel or any modeling skills, and the models spit out accurate results, you are good. The things that would make you great are your experience and connections in the industry. Experience will make you very confident with all the assumptions in the financial model. This process also involves a tremendous amount of research. The results the model is as good as the assumptions you put in. When there are millions of dollar on the line, it is worth the effort. With good connections in the industry, you would know who to ask to get the most accurate assumptions for your model. In addition,  everyone wants to buy things at a cheap price, why you should get the deal, not others? Relationship with the seller (or the middleman between you and the seller) is definitely the key.

However, it takes several years to build up your network. What analysts can do in the meantime is to use modeling skills and analytical skills to build the model that reflect different scenarios. To be more specific, when the purchase price has been negotiated but the profit is still not high enough to take the deal, you manager may negotiate the terms (more study period/ pay the price in installment/ pay the price with final profit). As an analyst, you need to reflect these arrangements in the model. Another example, you can build a model to reflect the projected profit under different scenarios such as financial downturns, slower sales pace, construction costs out of control.  Then you need to present the findings to the management in a way that they can understand the risk of the project.

Next step in the career?

Find your own deals. When you are the go-to person for the sellers and brokers, you are probably no longer an analyst. Instead, you are the manager or are even ready for your own real estate development business. You can hire acquisitions analysts to work for you at that stage. However, if you work for a conglomerate that acquires and manages properties on a larger scale, you can climb up the corporate ladder, from analysts to managers, to directors, to top management role of the company, or start your own business.

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Want to know what other analysts do? What kind of analyst? Give me suggestions: Marketing Analysts, Financial Analyst(corporate finance), Investment Banker, Data Analyst, Business Analyst? I will do all the interviews for you.

 

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