Real Estate = complicated + underpaid
I just joined the industry a year ago but relative to my friends in other industry’s I feel like I’ve faced a massive learning curve that they have yet to face. I’m aware of how junior I am but just curious how this looks from a more senior perspective.
For context I work at a JLL/CBRE. Been interviewing on the principal side to see my options and these modeling tests, etc. make the barrier of entry appear to difficult to get into but the pay is not even great on the other side. Idk it’s not extremely exciting to see comp not progress as the role becomes more grainy and analytical so I was just hoping on some senior insight.
Thanks
Edit - depends where you work. Most places probably after VP, but you still need to know and understand all the “grainy” stuff from your younger years. Also sometimes junior resources are sparse and you may be running your own models and IC memos. Especially if you work at a small shop and someone junior leaves.
Real estate gets less grainy and technical as you become more senior and becomes more about experience, creativity, and decision making.
Have to agree here. I work for 20yr cap markets vet, EVP of capital formation at our firm, two man team he and I. All he does is hit top of waves on information, provides suggestions to our young CEO, CIO (which they always take), and makes big and directional decisions for executive team, even legal lol. Dude wants nothing to do with nuances, he knows what goes into it, but needs to see/touch none of it. Pretty cool.
Bump.
Seems like there’s better options that are less grainy & make more money. Tech Sales, Med Sales, etc..
…however I feel like the earning potential is high in the first few years and then hits a ceiling for those less grainy jobs … anyone have thoughts?
(vs. the grainy jobs help later, get you some equity, carried interest, etc?… idk … would like to hear thoughts)
Based on my (pretty limited) research, tech/med sales roles seem to cap out at like $300k. I’ve always considered that route, but doesn’t seem worth the trade off. Unless I’m wrong I feel like real estate has a much longer runway career wise.
That is untrue. $300k in tech sales is like your run of the mill salesperson. Every organization is different, but there are plenty where guys averaging $500k - $1m+ are not uncommon.
Yeah I left the industry this year. Pay is ass and it's an industry of C students at best.
certainly two ways to view this but I’m of the camp that if the competition is C students then market share is ripe for the taking
You would think so, but you can't actually MAKE any money in order to RISK that money to MAKE the REAL money. That's what they don't tell you. Associates at "top" re funds make like $120k in HCOL areas. Sure, BX and Carlyle dudes make PE money but that's because they are part of a corporate PE megafund.
You need to HAVE money before you can make real money in this industry, and it's a chicken before the egg type of situation. Trust me, I learned this the hard way.
Also, a smart person can't really differentiate themselves in this industry because the modeling is so dumb simple. Your boss is gonna promote the cool kids or his family members 9/10 times and that's really I think what ruins this entire industry when compared to IB/F500 or something.
100% on the brokerage side in terms of students, even on $1 billion+ teams some of the guys are smart but fratty even on the analyst level.
Really? Is this REPE or broker type gigs
Brokerage your point is made, but there is a surfeit of lawyers, top mba's, ~cfas, etc. doing very well in the RE industry from acquisitions to development (tongue-in-cheekiness aside).
ok bye felicia
Relax buddy i'm one less person you're competing with for that sweet $200k/year VP promotion.
More analytical doesn’t mean more pay. Pay ramps when your relationships and experience add value. The principal side should be more analytical. You are actually buying the deal.
The complicating part is not the modelling, haha. The complicated part is the risk, like the guy above me said - once you start participating in that, the real money starts.
The people that make real money in real estate are the ones who find/create ownership opportunities, wherever they may be. You might be collecting a W-2, investing in your friend's deals, advising somebody for a fee/promote piece, and own several properties on your own. Yes, your W-2 might be lower, but real estate allows for so many opportunities to make money that most industries do not. Compensation in real estate at the top will always be tied to ownership. That doesn't mean you run your own firm, but that you are at a firm that compensates you in part with promote/carry. And I think it's real telling that over the past couple of years as promote $'s have fallen apart, a lot of people start to look at the W-2 pay and have realized that it's low relative to other industries. It is, but I don't recall that being a complaint for many from 2016-2022.
Why should you be paid more? You don't take any risk. People on WSO confuse opportunity cost with risk all the time.
What you're really complaining about is the fact that risk/reward motives are so fucking broken in most finance jobs that it's completely distorted how our financial markets work. That isn't the case in real estate, where the people who take risk are the ones who make a lot of money and the people who don't take risk generally don't make as much. That's how it should be.
Your job may be complex, but there are 10x as many people capable of doing that work as there are spots to fill. Fundamentally, the fact that you show up to work every day and bang out underwriting pro formas just isn't as valuable as you think it is. What is valuable is knowledge, experience, relationships, and capital. Which, as a junior person, you have none of. Why in the world should you be paid more when your job is something that AI is about 18 months away from being able to do for a fraction of the cost?
A) Real estate is widely regarded as one of the least technically involved asset classes
B) Of the big REPE firms that are capitalizing $B portfolios of assets, the pay is great. If you're doing single asset acquisitions, writing $20M equity checks at a time, then yes the pay is going to be lower than that of IB / Corp PE.
Is it? According to who?
Anyone whose come from IB and done both that and RE, such as myself. It's one of the easiest / chillest product groups, even if you're doing corporates or portfolios. Any sector can get complex but outside of maybe senior lending type of stuff idk any finance investment/lending role that's going to be more straightforward than RE Acquisitions, generally speaking. Acquiring a company is always going to be more arduous than acquiring a property. Property is just one of many assets to diligence in a corporate M&A.
Widely regarded = non-nuanced and totally unsupportable statement
Cranking out property level IRR models is massively easier than a full corporate finance model. Out of all of the pros and cons of real estate I have literally never heard anyone call it overly complicated. What asset class could be easier and more accommodating to the less technically inclined? Why do you think the hours are better? I can turn around property models at mach speed with just a T12 operating statement, relative to a full operating company underwriting.
Relax you are only a year into your career. you joined the the workforce in an increasingly employers market, and you're at a brokerage shop. The fact of the matter is real estate pays you on results not hours put in. There will be boom times again, and you should expect to make a larger piece of that as your career grows and you start to add value.
Now is a great time to evaluate if you want to be in this industry or do something else. If you like it, and you are good (get results), you'll make good money in the long run. Likely not life changing money, but I'm not really sure there is a way to do that being a w-2 employee (without getting lucky with an insane RSU grant at a start up).
Ozymandia = a grown ass man that deserves a swirlie
Guys, stop deluding yourselves.
You can't justify getting shit pay because you have the future, not guaranteed, opportunity to do deals on your own and make a lot of money. Other industries have great pay and guess what! You also have the opportunity to go off on your own and make a lot of money.
Except for the cream of the crop positions on the private equity side, (operator side is shit, don't even try to argue its not), its historically under paid comparatively to the difficulty of the position, and other finance industries. Doesn't seem to be going up either.
I would bet there are a lot more real estate professionals who start their own firms than PE folks. How many new investment banks get started every year? How many new hedge funds make it? Of course you can do those things, it's just easier in real estate. It's especially the case outside major financial centers. Not a lot of huge financial institutions in St Louis or Milwaukee or Cleveland. But I can guarantee you there are numerous folks in real estate in those cities worth 9 figures without breaking a sweat
Oh you would bet? Hate to break it you but your opinion or conjecture here is just that. nothing more. Nobodies making career decisions or moves based on what Ozymandia would hypothetically bet on. Bring some facts to the table if you want to talk rather than your biased world view as a real estate professional.
This.
Of my analyst class in RE 9 of them including myself went on to found their own funds. That was 9 out of a class of 12. Out of my analysts on the PE side 3 of them have founded their own funds, we have had more than 100 PE analysts over the years.
Great post. In my acquisitions analyst bullpen, just in my office, majority either started their own companies or are now the face of their family company. The two associates, one runs a VC fund and the other is an MD at a major fund.
In my analyst class that was nationwide, I’d have to check, but many started their own thing as well: one is a cold storage investor, another co-investment fund, RE hedge fund. Not saying entrepreneurship is the only thing, but I’ve noticed a higher number try. Some went back and boomeranged back to the firm. All in all, folks doing alright, living good lives.
Double commenting here - but if people know that regional shops and small developers don’t pay well, why don’t you just work at the places that do pay well? There’s honestly endless names and you can very easily make 250-275k at a good shop and obviously 300k+ at a top tier one. These opportunities are not that few and far between. Target places that pay well and you’ll land one.
Save for the HF and medical (MD) threads - it seems like these types of "not worth it, do something else" threads pop up from time to time for almost every industry/career. With the end result of the thread (after getting to the 100+ count) landing somewhere in the realm that to stay or go -- is a balancing test of benefits and detriments that each person must specifically judge for themselves.
Come on now man, the modeling tests are pieces of cakes - its like all things in life, just takes practice. Once you get a few deals under your belt, you realize they're all structured the same way and you'll pick up the language/understanding people use to talk about these deals. RE is a simple business - you build a box, you keep people in the box and keep them happy - so no, it's not "complicated" as you mentioned.
As for underpaid - not sure what your standard is. Let's use doctors (who are generally admired by society) as standards of measure - their wage on avg is 250k-300k/year. You can clear that amount after 4-5 years into the industry as a junior/mid-level mgmt member of a good team, while working a normal 45-50hour week, can certainly play golf most Friday afternoons if you want. That doesn't scream below the standard deviation to me. That's not even big money in RE. You see those when you start bring deals/relationships to the table.
My 2 cents, get out there and invite successful RE folks in your market to coffee. You can then have more information and decide for yourself whether this industry is for you.
There have been a few posts made by myself and others over the years that talk about how the economics of how RE professionals are actually on average some of the highest compensated finance professionals over the course of their careers. Is it likely you will be paid as much as the top megafund PE partners? No, is the probability that you make more than the average IB professional does over their career higher? Yes.
Define, qualify who are exactly those RE professionals.
Who the people on the site that have talked about the career economics or who these people are in the real world that are being referred to?
Hate to break it to you but real estate is not complicated. There's a reason why every dirtbag who has dyslexia tries to get into the game. You think this is complex, try medicine, nuclear engineering, or build a SpaceX rocketship.
Have you ever developed a building?
The OP works at a JLL-type firm. They're not developing which, to be fair to your comment, is quite complex.
This thread is being energetically and well-trolled -- not sure why it is not obvious at this point.
When I interview you for the principal side, I will tell you the pay is low now but will increase a lot quickly. You'll get carry in a few years. You'll have the track record and knowledge to setup your own shop by 40 and be crafting deals from a boat in FL or Newport Beach while your grunts run due diligence. Don't listen to a single word I say and evaluate all non-real estate options. I, and others on the principal side, will squeeze everything we can out of you for non-ideal pay, make promises we know won't be true that you'll make serious life decisions on, and toss you aside the second it is convenient.
- Successful RE Professional and Investor
So you’re a lying scumbag in addition to being a self-proclaimed successful RE investor. Got it.
I hope you were not in the hypothetical interviewee's shoes and now having regrets as a VP in the industry. Sad!
What do you tell a potential analyst/associate you are interviewing, especially if they come from a target school with a real major and likely have options outside of RE (i.e. you want them to join within the month to support acquisitions principals who are overloaded with work back in 2021)? "Hey Johnny. You'll be bored here and your chances at owning 2-3 homes in HCOL areas while obtaining an eight-figure net worth are slim if you go down this path as opposed to your other offers." We owe interviewees nothing and if a 22-25 year old kid cannot figure this out, then they are not long for this industry anyway.
As to being a self-proclaimed successful RE investor, most grew up in families in the industry like I did. RE investing and developing is a rich man's game. OP is not going to get there as a W-2 employee. This has been discussed ad infinitum. If I did not grow up in the industry I would never have joined it outside of personal investments.
Sadly this is true.
I got a laugh reading this. It’s pretty true.
Thank you. Two posters above haven’t read the many threads on WSO from late 20s/30s RE professionals who were duped and are now furious about it.
I am currently working for an LP here in the UK, and I think I can confirm they do tend to take the piss if you are just starting out in terms of salary.
I actually came from a development and asset management background, and then made the decision to transition to investment. Essentially I accepted a shit pay to start with, and then made sure I was basically the go-to guy for their trophy and most loved assets. It turned out I did manage to get them by the balls, and so I requested a raise. Last month they gave out bonuses, and I have to say that, despite ZERO disposals, they did hand me a nice/decent bonus.
My 2 cents for all here on this forum would be to strategise, keep your options open for when you want to move on after 2/3 years and, lastly, take advantage of reading/studying those structuring papers, as well as AMAs, DMAs, SHAs, etc... as those things cost a FORTUNE to produce from lawyers.
What are AMA's, DMA's, SHA's?
Also, how did you deliver your request for a raise? Did you just hint how much you do for the firm or did you give an ultimatum?
"AMA" = Asset Management Agreement
"DMA" = Development Management Agreement
"SHA" = Shareholders' Agreement
AMAs, DMAs and the likes are all contracts that clearly define your responsibilities under each umbrella, and why you deserve to make fees out of deals - aka the dough. SHAs basically define the structure of the investment, who has control, how the money is contributed, call/put option, dissolution, winding the company up etc...
Regarding raises, never give an ultimatum. It never works. You have to somehow give slight subconscious hints to your seniors from time to time, and see how they react. This is an art, not a science, so I guess the law of 'fk around and find out' applies very well here.
Something to think about... where do you want your career to be in 10-15 years? Do you want to own real estate eventually?
I entered the industry to learn and create a network to eventually own CRE down the line.
I was 25 when I bought by first property. Now, 5 deals later, I've got GP stakes in about $10mm worth of deals and I'm not slowing down anytime soon. I'm <30 but imagine the AUM when I'm 40.
Long term thinking, not short term "salary" thinking. Just my $.02
Most of your peers don't have the discipline to save the money for that first deal at 25. Most don't have the guts to build out GP stakes like that. It is "okay" to have the mentality of a W-2 employee, but there are better fields to be a wagie in than RE.
True, traditional PE probably will pay more than REPE or working for a develop. All depends what OP wants.
When I was 22 and working, I knew I wanted to be financially free by 35-40
What contributed the most to you pulling the trigger on your first property, money or experience to understand a good deal when you saw it?
Just wanted to get a property under my name and figure out ownership and build my "real estate resume". I had the money and figured "why not"
Can you imagine? Jeez louise toot your own horn a bit more.
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