Is there enough $$ in RE?
Title says it all. I went to a pretty good school and got into a MF REPE firm out of school. I am very passionate about real estate and even invest a bit personally. It has been four years on the job and I have to say that sometimes it is disheartening to see friends in banking/PE that are raking in 1.25x-1.75x my salary. They definitely work more hours on average, but tbh I don't really mind grinding at this age.
I know this post reeks of first world problems, things could be way worse and I still do well. Maybe its a case of the grass looking greener on the other side, but curious about what other RE monkeys think. I know passion is important, but if the difference in salary is 1.25-1.75x now, I can only imagine that spread will increase overtime.
My end goal is to be an entrepreneur and create my own firm (this is part of what attracted me to the space in the first place). But, I feel like the risk of that not working out is compounded in RE since being a MD in RE does not seem to pay anywhere as much as a similar role in IB/PE. Curious on everyone's thoughts.
As you say, you go into RE to hang your own shingle. It's a lot easier than in IB. So yeah, as with everything in life, you sacrifice short term for long term. If you want to be handed half a million dollars a year for doing a job anyone on the street can do, grind it out in IB for 20 years and guarantee yourself MD. If you want to risk not making that kind of guaranteed salary, but have major upside, stay in CRE.
No one is going to say "hey, we'll hire you and pay you a million dollars a year as a 25 year old, and if you want to leave, no problem! your job will be waiting if you ever want it back. With a 20% raise for kicks!"
Weigh the costs and potential benefits and make a choice. But don't post about how "the money isn't there" when you're clearly acknowledging that the money is there, it just won't be handed to you on a silver platter
I know it requires work and yes, the money is there - especially long-term if you are an entrepreneur.
Just talking about the concept that I could work fairly similar hours in regular PE and potentially be making more. That is all. It is definitely a game of weighing risk reward like anything else.
That is true today. And maybe tomorrow. Ten, twenty years from now? Probably not.
How many people in PE go on to open their own shop? How many of them succeed? The whole point of being in real estate is that it is a business which even a junior level employee can think, with some reasonable justification, that they'll be a principal one day. Opportunity and entrepreneurship is just a lot more within reach.
So again, I'll repeat - if you want to make more money now, guaranteed, go work in banking or private equity. If you want the possibility of owning your own shop, stick it out. No one can make that judgement call for you, and some folks are more risk averse than others, and will choose accordingly. But you've already said twice at this point that you understand the trade-off. So what the hell is the question? Are you looking for someone to tell you that everything you know is wrong, and IB/PE will guarantee you $10mm a year in salary? I don't understand the point of the post.
OP got served damn
Just a word of advice, you should definitely follow whichever path interests you more. If you really don’t have an interest and don’t care about hours and just want the most money you should definitely just switch to IB it won’t be that hard. Money tends to follow (career wise) when you actually have somewhat of an interest. Also, keep in mind that 60% of kids in IB cannot wait to jump ship
Which MF REPE are you at if you don't mind? The top tier ones in real estate (BX, APO, KKR, BAM, Starwood, Carlyle, TPG, etc.) generally pay same as other IPs at the same level in other groups. If not, a slight haircut. It shouldn't be 1.75x less though, there's much discussion on this forum about it already. So maybe lateral for a year or two if it's about the comp, then do something on your own if you want to be an entrepreneur.
Btw, I'm talking about the investment seats typically labelled as "real estate private equity associate," not in development or AM. I don't know comp for those as much.
link to the other thread?
Don’t have time to find the exact ones I’ve read right now unfortunately. But if you search in the RE forum for megafund comp, some posts will show data. I also saw a 2022 comp thread where a 1st year Analyst was about to make 200 all in. If you see OP’s comments below, he made $300k all in with 4 YOE. Seems like banking pay to me, pre-covid that is. Obvs banks had crazy years recently and bonuses got high along with higher bases. PE comps are lower than IB atm at the junior level too.
Here is the reality, there is always somebody making more, somebody doing something cooler, somebody going faster/farther. Consider the posts form the IB/PE looking to get out of those fields and into CRE because they hate it. Tbh, nothing wrong with feeling like this, and if it really bugs you enough do what you gotta do to transfer over (clearly, far in the "easier said than done" category...).
Given that you actually haven't stated your total comp (or potential comp), beyond ability to gauge how real/fair your concern is. But, there are plenty of people that end their real estate careers with sizable wealth, and likely enjoyed a decent to high standard of living along the way. Now, what level of pay/comp you need to feel so fulfilled.... good lucking even telling that to yourself.
Here is an exercise I did (and redo every so often)... Open up a new spreadsheet, and do a long-run financial projection of your wealth income. Just go baseline, assume normal/reasonable bumps to salary/bonus and add some LT comp when appropriate. Then figure how much you are willing to contribute to your investments, retirement accounts.... and run it forward until retirement (you pick how old). Unless you spend it all or invest in bonds for the whole ride, you probably end pretty well off by any reasonable means of comparison. Could the IB/PE guys get richer?? Well... MAYBE... there is no guarantee that all associates will make VP or all VPs make MD, etc. There are often pretty brutal up or out conditions, not everyone makes its (clearly the vast majority don't... mostly via attrition as people just decide it sucks too much despite the pay). CRE has far more runway and options in all reality.
Now, clearly, you have some solid upside optionality from major job moves, entrepreneurial activities, etc. All of which may unfold but clearly with just 4 years in, too early to know when/how all that stuff could happen. You may go off and be part of a new venture, or be a solo starter, or find a firm that lets you grow upward at rapid pace (the sometimes termed... 'intrapreneurial' route is far more legit that people realize......), or you may be even really fight the "corp ladder" and get there winning the dog fights for top c-suite roles (I mean someone has to get them right??).
So, its long-game we all play, if you really are "very passionate about real estate" this industry can be super rewarding. Def not easy, but I think far more enjoyable than the IB/PE route. Just my opinion... but I now find that finance world to be super fucking boring (I used to be more allured by it when I was around your time in the biz too). I wouldn't go back and trade for anything. That's easy for me to say today, because I feel like I felt your way back then too!
Want to add on to this. In this industry, you will always feel the effect of other people making more whether you're making $250k, $1m or $5m, so try not to spend too much time on that.
The most important thing in the industry is continuing to move forward. If you would fall out of PE after being a senior associate versus in CRE you'll make MD, that's the only thing that matters. Yes, your MD counterparts in PE will be making more, but you'll be making much more than if you had gone to PE and never climbed the ranks. Also at a certain point performance becomes the most important metric when you get into carry. Maybe as an MD you're pulling $1.2m and your PE counterpart is pulling $1.8m, but if you're at a fund that performs and you get a $12m carry check in 6 years and your PE counterpart gets nothing then who cares. Similar vein as VC where you hit a unicorn, you blow everyone out of the water.
As others have said, if you ever want to hang your own shingle, doing so in real estate is much much easier than any other industry in finance.
My advice (and I have to take my own advice) is don't get too caught up in how everyone else is doing
@redever and @the comment above
Appreciate the advice here and it is good to know that folks that have been in the game for a while and enjoyed it felt the same way as me at some point.
I stated my comp below - I was close to hitting $300k all-in this year w almost 4-years experience. I don't think these numbers are bad at all, but I have good friends in IB/PE making $400-500k and sometimes it is hard to watch.
I will 100% try out that spreadsheet exercise. And you make a very a valid point that hating your job is not really a good way of living a fulfilling life. I too feel like straight finance is pretty boring tbh.
Good points above.
I'd also add from below, you need to look at it in terms of "living buckets", meaning, is $400K more than $300k, yes (basically a 33% raise). Same could be said for $60k vs $45k, or $24k vs $18k, but I wouldn't call anyone in those two groups "richer" than the other. Same way the other side, if you make $3B, what does $4B get you that you don't probably already have access too (maybe a sports team, what I'm saying is you don't really need that). I also get, $100k more is $100k more, thats a lot of money. However, $300k is also a lot of money if you spend it right. Don't look at $300k as a "bad" salary. It would be like if Jamie Dimon considered himself unsuccessful because Warren Buffet has more money than him.
Also, how much more do you have work to get that. For example, would you work 40 hours a week at $300k, or 100 hours a week always on call for $400k? Maybe you could develop a side hustle that would lead to something else.
Post comp or this is just whining into the void.
this
So almost $300k all-in 4-years out of school isn't good.
Man, you guys must be making it big.
You ain’t at that good of a shop if you’re making half of IB / PE
If your end goal is to become an entrepreneur and you are interested in CRE, check out development. If you were to make the jump now, you would take a cut in pay, but the opportunity for late career growth can be very lucrative.
We just built 1 building for $30m and have an offer for it when completed for $43m. If I were the local Principal I'd get a $1m check on this one deal. There is money in real estate.
What do you mean by Principal? Are you able to clarify?
Why would you the person get a $1M check?
Just someone whose overall comp has a promote structure of some kind/skin in the game. That's how you win at this RE game. You are invested in your deals, That's the dream. That's how all the senior level roles are at most private shops. These guys don't clock hours.
If you want to be a successful entrepreneur like you stated in your OP, then do whatever is most interesting and won't burn you out. It sounds like your passion sits in RE, so stay there and double down where possible. When you have your first major liquidity event, you'll feel odd and it won't be what you expected, at which point you'll realize why enjoying the day-to-day (or as much of it as possible) is so important. Listen to any founder interview and you'll hear them say it. The $ really doesn't matter after a certain threshold provided you aren't some psychopath with a crazy lifestyle.
Start thinking creatively too, no need to "wait" until you're qualified to get into the entrepreneurship end. It's much easier when you're young and can tolerate low budget living + risk. Even if things went horribly wrong and you had to BK...it's not a huge deal really. You have shitty credit for a few years and then you're basically good. Well worth the risk IMO. YMMV.
OP, you have zero shot ever making any money in RE if you only make $300k with 4 years of exp.
The way I see it there are three options from here:
1) Quit your job, sell all of your personal possessions, and join a monastery. This would be far more honorable than making $300k and slaving away. People would actually respect you for a change.
2) Quit your job, and find an older woman who will take care of you financially. This one will require a bit of time investment, so I suggest keeping your job until you find the right woman who will cover your rent / expenses in exchange for your time / sex. Similar to option #1, sleeping with an older woman for money is actually much more respectable than working in REPE for less than $300k.
3) Quit your job, get an MBA and pray you can get a job as an IB associate at Lazard/centerview. If you get an IB that’s a lower tier than those two, go back to option 1 and 2 because you’ll still be making less than $300k which is frankly embarrassing unless you live in Mobile, AL.
Best of luck man. I have a couple of friends who went the monastery route when their comp last year came out to $275k (so embarrassing lol 😂 ). So if you need any advice on that path feel free to DM me. And remember, suicide is never the answer, no matter how fucked your career is right now
I’m gonna throw this out there-there’s money in everything. Gobs of it. You just need to be the best at it to make it. You can than either charge for your services, convince your employer to pay you more. Or, get equity. Equity leads to wealth, not interim cash flow. The more zeros involved. The more money you can make.
A core real estate fund returning 5% per year can make more money than an opportunistic fund because of AUM fees and fund size. It’s not about return, in the money management business, it’s about how large is your AUM and what types of fees and promotes can you get.
If you’re actually at an MF / on the investment team you’re making PE money (maybe not IB now with all these raises etc)… and likely working less lol. Wtf is this
Woww. Maybe the takeaway is that I need a new job... Could be an issue of being underpaid. So is the $350 all-in excluding carry?
what mega fund pays 1.5-1.75x less than IB and corporate PE?? BX starting analysts clearing 200k… you must not be at a mega fund.. if so, please let us know which one ?
woow
As a service to the industry the salaries aren't as high as other industries, unless you are in sales, especially on the CRE side, and ultimately you just want to be an investor.
Comparison is the thief of joy and your future. You should be asking yourself if your income and lifestyle/workload is aligned with what you want/need.
I didn't even make "6-figures" last year but I feel pretty good about the work schedule and experiences I've had.
The most important thing you can build in real estate is relationships, not wealth. Wealth will always be accessible when you have the right relationships- and you can only build relationships with time and experience in the game. No principal is going to trust you with X asset or Y capital without
a) trusting you
b) liking you
c) needing to do business with you
And you don't get to the above without the experience and relationships that you build along the way- regardless of comp.
And by the way, the real money is in equity stakes, not comp.
If your end goal is to be an entrepreneur or start your own fund, then be a space you are passionate in. I want to create a fund/be a developer in the future, so money in my years as an analyst or associate isn't the most important thing.
Even if you are money-driven, though pay for analysts in REPE is still excellent. On top of this, after doing almost a hundred informational interviews with people in IB and CRE I've found the overall vibe of CRE to be soooo much better.
Bro, I know this dude he makes $10 million a year running a packing business at the age of 29. You should start working at UPS great exit opportunity working for a packing company, give it a few years, start your own business and you too could make $10M a year. Better yet, work for Estdil work 100 hour weeks for the next 15 years, and then become an MD. Then work 90 hours a week and make $3M. I think I would rather smoke some pot in the back of the UPS Truck.
Didn't read the whole thread, glanced at many replies. There is a lot of $ in RE...but RE means lots of different things. You could be a realtor and make a fortune (both residential and commercial). Before you laugh, being a commercial broker is essentially being a realtor, just working with commercial properties. Has more complexity to it than residential so that may sound cool to some. You could be a developer. You could be an investor. Lots of paths.
I own/operate my own non RE business. Did well. Got involved in some RE transactions as an investor (commercial). Did well. Then not so well. Some yrs my business fed the RE projects. Some yrs the RE projects fed my business (from a cash flow standpoint). Have owned commercial lots (raw land), a restaurant, a nursery, strip plaza, land with realized goal of building a strip plaza. In each case there is an investor, a realtor, a developer, etc. They all make money if it's a good investment. The time involved, carry cost, location, goals of the team, etc will vary and determine if it's successful for you.
So, there are lots of ways to make a ton of money in RE (or lose). One of my "partners" in this investor group really got into it and quit his day job, became managing member of our group, sourced deals for an extra piece, got a brokers license, works on lots of commercial projects and loves his day to day. Not a 9-5 job. Lot of networking, meeting with folks, due diligence, deal making. He has a blast. I just prefer making it a passive investment. Occasionally we sell a property and I have a nice pop to my yr.
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