I have had a number of different conversations with people in acquisitions roles lately, and in a recent conversation, I was told that many people opt to leave acquisitions for brokerage because brokerage is less stressful.
This seems backwards to me. I figure that brokerage would be more stressful because you never know when your next paycheck will come in. I've heard stories of people going for months and even years without making a buck in brokerage.
I do see how acquisitions could be stressful in that you will be held responsible for buying a property that ends up sucking wind, and maybe I am discounting that too much, but I still think brokerage has to be a tougher spot.
Anyone out there leave acquisitions for brokerage or know of anyone who has?
Yes. I know someone who left a very senior acquisitions gig with a multi-billion dollar institutional investor, to become a broker.
It's the same old question of entrepreneurship vs being an employee. Of course it might be harder, but some people are a lot happier working for themselves. I asked him about this and he insisted that it sucked working on the buyside and worrying about office politics, etc.
I've thought of leaving acquisitions for a brokerage or sales type role, especially if I can get a slice of the fee or have it all by doing it on my own.
The fee on a single $200 - 300 MM deal would be enough for many years of chilling out (Imagine having that kind of freedom in your youth!), or would give me enough to fund my own small Asset Management / brokerage shop for a couple of years. I have a fantasy about doing the former... making some independent movies, travelling properly, learning a couple of languages, spending time with my friends abroad, some charity projects, etc... One can dream...
Everyone makes a big deal about acquisitions and investment management, but its not that lucrative unless you get a slice of carry and the fund performs. Also, you have to make sure none of your colleagues sinks the fund (although its more likely that the real estate or business cycles will have the dominant effect on performance). Ultimately it's just a job. Unless everything goes right in acquisitions, being in sales / brokerage can be more attractive. It must be a nice feeling to hit it an quit it, deal wise instead of baby-sitting your employer's deals... A lot of the guys who have their own real estate businesses started out in brokerage.
Having said that, at the monkey / excel jockey / office slave / analyst level acquisitions is far superior.
You'd think jumping from acquisitions to brokerage would also give you a leg up on other brokers. Whether investment sales or capital markets, you've likely amassed a significant network of buyers, sellers and capital providers. You've worked with brokers, been their counterparty and understand their sales tactics. You've also garnered a higher level of sophistication than most other brokers and could offer some valuable insight to your client beyond what's standard.
I've def thought about how much less effort it takes brokers to earn a buck in the end, though positioning yourself to succeed in such a competitive and fragmented industry is def tough hence so many starving brokers. Key is finding your niche, being the best at it and making sure that niche isn't exclusively tied to a specific aspect of the industry where you're able to ride the cycles.
Brokerage can be rough. It will definitely be nice that you can give your clients some extra insight into the numbers of a property and guide them in that way, but that wont get you in front of clients nor will it get a deal closed. And honestly, the numbers part in brokerage is pretty basic RE 101 stuff. I think your biggest benefit would be hopefully having some contacts who own real estate, but I think if you go into brokerage thinking because of your acquisitions background you will have some kind of a leg up.. you will have a bad time.
For the majority of properties that you will have the chance to look at, clients wont need to see a full DCF model done or even a 10 year analysis done on the property. I have actually talked to some top brokers who shy away from doing any pro forma analysis outside of 1-3 years, as you set yourself up for a potential lawsuit if the numbers dont work out -- and people love to sue in RE. I know one broker specifically that got sued for his pro forma ( i think it was 5 years), though later thrown out, its still a fucking hassle. Its all about Cap Rate, GRM, Price / SF, Price / Unit, COCR.
In the end, brokerage is about getting listings and closing on them. If you make the jump to brokerage, have enough savings for 1.5 - 2 years (believe me on this, you dont want to have 3 or 4 listings and have to ditch them to go back to acquisitions because you only have a year of savings). Be ready to talk to a 1,000 people before someone agrees to meet with you.
Nobama88's response is pretty spot on. I'm a commercial investment broker myself and my focus is strictly apartment buildings. Buyers/sellers don't care for 10yr analysis; many don't even understand what Cap Rate and GRM means. Definitely need at least 1.5yrs of savings, ideally 3yrs. In the end, brokerage is a personal relationship business and trust plays a key role in winning listings.
I totally agree with both responses here. Deals are simplified on the brokerage side.
As a one man shop who has friends at all the big players I have to hire a graphics artist to create my marketing packages. I do the research and so on and they apply it. Part of giving up half your commission at M&M or CB is the fact that you get office space and staff to do all that for you and the offerings look fantastic.
Regarding savings, yes you always have to have cash. I tend to make all my money from March through September. So even when you have business going and are stable you still may go 6mo with nothing. That's part of why the big shops have teams and shared commissions. Having one assistant and a 1000sqft office is $10k month to support as well. So you know, make big checks, write big checks.
This is some great perspective. I have always viewed acquisitions as a more interesting role, and a bit more elusive in terms of securing a position, so the thought of leaving for brokerage seemed a bit foreign to me. At the end of the day, pedigree and experience are less important in to break into brokerage. That being said, breaking in does not guarantee success, and to succeed I could see how an acquisitions background might help.
I could see it making sense from someone that had lots of strong contacts in RE to leave acquisitions for brokerage, but for the most part, I think these brokers who are just killing it are by far the exception and not the rule. In each market there are a few guys that crush it, and everyone else is scrapping to get a listing. It just seems like there are not enough listings to go around.
The big guys are raking in tons of money. And there are a lot of starving guys out there
i'm a grunt in office leasing brokerage (top 5 brokerage company) and trying to make the switch to development/Asset Management, hoping to work for a REPE fund one day. Work quality and comp is garbage in this position as they groom you to move into sales; you do, however, get the sales experience & leasing experience which gives you a fantastic understanding of cashflows.
From the leasing experience to PERE is a long way to go.... Sales experience will give you understanding of leases, but making investment strategies is totally a different world. And think about all the work done with your surveys pitch books, sales people got all the supports from the analysts and admins, and don't really make a cash flow for property's net income themselves.
It's easy to switch from acquisition side to brokerage, but none I have ever seen from the opposite yet...
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You've never seen someone switch from brokerage to acquisition?
Aye i've seen it done both through additional education (MIT or Columbia MS RED for example) or perseverance. i've been in the business a year in a financial analyst capacity and have made some significant headway to making a transition into the investment side.
I would definitely consider exiting acquisitions for brokerage services in my later years, but only to one of the top institutional platforms (CBRE and ES). Brokers at that level are really just professional socializers, and the top guys make cheese. Shit, sign me up for that gig real fast.
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good stuff in here...
Never knew brokers did so well...
But I'm guessing that's how it goes in all of the sales jobs.
From a sales perspective, i know that a lot of finance people really dont have that sales moxy. They're more analytic, which is fine...
But people are much more fickle than numbers. You have to be able to make them feel like they're getting a great buy from a genuine broker
Being a broker is cold calling until your fingers bleed, getting thrown out of buildings, and other "not so glamorous" daily activities. I have no idea why someone would leave acquisitions to become a salesman
...ok...but that's like talking about the life of an MD or the CEO of Goldman to someone who is "looking to get into investment banking." It's cool and all, but it's not reflective of the life the original poster would lead for years, if not decades.
Maybe if your a first year broker. Years 5 - 30 shouldnt be like this unless your a complete dipshit.
I've been a commercial/multifamily broker in San Diego since 2000. It's funny, here I am working on my modeling to possibly work for an institution in acquisitions and so many institutional employees debate going to the other side. I can tell you this, commercial brokerage isn't a sales position per se. Is following up sales? Is doing what you say sales? I know terrible salespeople that are hugely successful as real estate and loan brokers.
I know you guys are looking at the math on deals with regard to commissions but to me it doesn't work exactly like that. As the deal gets bigger the commission % gets much smaller. Sure it's a nice pay day but not what many think the numbers are. I'm really good friends with some heavy hitters. I never know about their pocket deals and we drink together. When you discuss closing a $30mil deal, you have to be less than arms length to even have a shot. Meaning, by the time you know it's for sale it's sold. Deals only make it to market on CoStar and other sources cause the broker that has the deal hit up a lot of the players that can close on it or would close it.
Successful brokers across California close a lot more smaller deals in the $2mm to $7mm range than people realize. Those are your real pipeline. The bigger deals are the gravy you hope to close.
Lastly, it is and always will be about getting clients. I have no degree, don't know Excel for crap really, but I've done pretty well for a long time. Even in the resi days. The industry is not hard. Getting clients is hard. Keeping a deal together is hard. Finding financing in 2010 was very very hard :)
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