Joining an investment sales team
I have a potential opportunity to join a retail investment sales team that focuses on middle market deals (2-15mm) with a major brokerage (JLL/CBRE/CW). Sometimes the team gets brought in on bigger institutional stuff but mostly smaller plazas owned by HNW people or families. The main broker is planning on winding down in the next few years and wants to find a Junior broker to train. I could be left with a lot of connections and a great book of business. It’s just him and one other analyst and I would be coming on as a producer not a salaried analyst or anything like that. 100% commission doesn’t scare me since that’s where I’m at now and I enjoy “eating what I kill”.
I’m currently selling residential and doing quite well (will sell 60-70 homes by end of the year) taking home 175-200k after all my marketing and business expenses are written off including car, gas, insurance, “entertainment expenses”, etc. (~330k Gross commission). I’m just kind of bored of the emotional aspect of dealing with Mom & Dad buying a house in the suburbs In the right school district. Not enough analytical brain stimulating work for someone with a Finance & Accounting background I guess? I’m basically just running a big marketing company at the end of the day.
What kinds of questions should I ask the broker to make sure I’m not leaving a good thing for a less lucrative gig as he starts to wind down? If you were in my position, would you switch or keep chugging along selling single family homes? Input is appreciated!
My 2 cents - it sounds like you have a very good thing going on right now and I would think long and hard about walking away from that. Have you thought about expanding your business and hiring brokers yourself? You’d be building on what you already have, and eventually you could just become a business owner and not have to deal with the nitty gritty of slinging homes.
At the end of the day I’m a true believer in doing what you want to do though, so if you don’t want your future to be in residential sales then fuck it, no time better than the now. My guess is you will be taking a step down in comp though.
You may find the headache of dealing with small/HNW retail investors far worse than the boredom of dealing with resi buyers.
Why do you say that the small/HNW investors are so bad? I currently deal with "Mom & Pop" who think their granite in their kitchen & bathrooms is SO much nicer than the neighbors that their home should sell for 20k more than all the comps. I would assume similar issues in CRE will still arise but, my expectation at least, is that commercial owners understand to a greater extent that this is an investment and that the numbers are what they are.
NOI is X, Cap rates are Y, your property is worth approximately Z. Maybe I'm naive obviously not having sold many investment properties in the past?
You would think, but NOI and cap rates will be endlessly debatable to them, and after you've spent countless hours explaining every cent of the NOI and every comparable cap rate they will either submit an offer 40% below guidance or misrepresent their ability to close and tie up the deal while scrambling to cobble together capital, needing multiple extensions, and freaking out and threatening to sue over every minor issue they "discover" during DD that either isn't an actual problem or was already disclosed in writing before they even submitted an offer.
I was a very successful resi guy from 1995 to around 2000 when I transitioned to commercial/multifamily. I personally could not be happier. I like the clients a lot more on this side. But others here do make a great point. Yes, you could possibly expand your existing brokerage. Others are obviously successful at this. I was not. I easily out produced the 4 other agents I had.
The transition is going to be pretty brutal considering you probably have to abandon your resi business 100%. I did not have to do that since it was my brokerage. Over the span of a few years I converted my business to 100% commercial.
Even if you're a stud investment sales guy day 1, deals take time. I'm working on stuff with clients that we talked about 18mo ago.
I have 1 person who works under me right now so of the 60-70 properties I mentioned, a handful are his (16 to be exact) so I'm in a similar situation. I am hopeful that if I do make this move, I can still manage the resi team at night (the guy is pretty well trained), although I'm not sure how time consuming, frustrating, or profitable the team will be if I'm not 100% invested in its success.
Another question I was going to ask is what do these IS teams get besides the brand name for working at a JLL/CBRE/CW that makes it worth it to give up 50-60% of their commission? I guess I could understand starting out how the name would mean a lot, but if you have an established book of business, why wouldn't you go open up John Smith's Investment Sales Shop or be a commercial division of a Resi brokerage and take home a much bigger split?
Regarding your 2nd paragraph/question, I'm on the principal side now so take with a grain of salt, but the biggest thing I can think of is the platform itself. If you go to the commercial side, you've now got to deal with a lot more 'data', because now you've got to know market trends, expenses, sale comps, lease comps, and the market as a whole. In addition, the marketing package that you need to prepare, generally, is a little more polished/sophisticated than resi, as in a lot of cases at the MM or institutional level you are dealing with savvy sellers/buyers that expect to be given a high quality/level of information. Additionally, they expect you to know everything about the market, like what development projects are in the pipeline, what tenants are in the market, what the pulse of the market is, tenant financials, demographics, etc. Usually the bigger firms can charge a bigger split % because they know that you don't have the scale to go hire the people that do this stuff for you on your own. Once you are more successful/bring in more gross $'s of business, then they start negotiating the splits downward in your favor. Example: 1 analyst is anywhere from ~75K to 125K depending on market/experience, etc. 1 graphic designer/client services person/admin is anywhere from 45-80K depending on exp, etc. So right there, you've got to add on an additional 100-200K on your gross fees to break even. To mitigate this, a lot of the bigger firms just hire these people in pools, then take the money from the splits and pay them from that, rather than have one broker foot the bill. Unless you're on a team with (or are yourself) a BSD, then those people can cherry-pick the better analysts/marketing staff and pay them direct.
Also, residential is basically a 7 day/week business when you're selling a lot. Most people can only meet after work or on weekends to see houses/meet about listing. Between that and Open Houses and things like that, it gets difficult to take time off without feeling like you're losing money. I don't mind working long hours and "pounding the pavement" at all, but work/life balance would be nice. The money isn't as great if you can't enjoy it when you want to.
Following up on this, had a great meeting and considering making the switch. We talked informally about what compensation looked like on the team and I was told I’d be given a % of all deals right away instead of salary (didn’t get specific yet). I’d be trained on the business and market trends to learn as much as I can. Obviously this isn’t an overnight process but long term. My job would be to go after the smaller fish the Sr broker is no longer actively chasing (people who own 1-3 properties) and establish relationships with them for future business. Any business I bring in will obviously have higher splits. The team already has a good Analyst so I don’t think I’d be doing much of the lease abstracting and that kind of work, but more real “brokering” and relationship building with people with which the team does not currently have good relationships.
What would you guys qualify as a “good” amount of deal flow for the team to be currently producing. Coming from resi, especially at the volume I’m doing, I need to get a baseline of how many deals a “good broker” does every year for comparison.
What would be a fair amount to expect/ask for in splits for deals I help with and deals I bring in? Thanks in advance!
It would probably be a team doing over $100mil in volume a year, if I had to guess.
Curious how they structure splits. I see guys on here getting 5% of deals, ouch.
Edit- on deals you bring in, just accept it day 1 that the house is taking 40-50%. If you kept more than 25% I'd be surprised.
Long term, and this is something to really think about, you do not have to be with a huge firm. The top MF broker in my market left M&M a few years ago, is fully independent like me and he closed $133mil this year. And he kept 100% of his paycheck!
I was kind of assuming I’d be giving up 50% of the commission to the Sr. Broker starting out on deals I bring in in exchange for training and all that he is providing. What do you think is fair to accept as far as deals he brings in while I learn? I was hoping minimum 10% but I may be overzealous and don’t want to sound rude when asking for “his money”.
As far as number of deals/year, what is “normal”? 10? 15? 20? Thank you for all your help!
You can prob get 10% on his deals, because while you're not new, you have experience and know who to close an escrow.
You might get one deal year one bro. It's really competitive right now. The work we put in during 2012, 2013, 2014 and 2015 are paying off today. You're going to have to bank on a down cycle to build up communication with owners and brokers when it's a bit slower. These owners right now want to make several millions in just a year, and they are. That's what's tough. So, this is a long term life changing career move for you. There will be struggles.
This market today makes 2007 (and I thought 2007 was bananas) look like childs play.
I really appreciate you taking the time to answer me. Out of curiosity, what type of property do you sell? Just MF? What do you think of retail going forward? I’m just trying to be careful and make sure this is the RIGHT career move given where we are in the market and where I am personally in my current career. I understand it’s a long-term play and not necessarily a get rich quick scheme.
Well located retail has a good future. I have a client that was a retail leasing broker. We talk about sites and spaces all the time. His a big believe in small units...under 2000sqft.
Is the investment sales position in NYC? I thought about doing middle market investment sales at a brokerage (e.g. SVN in LA, C&W just outside of NYC), but recently spoke with the owner of an independent, integrated capital markets (acquisitions, dispositions, financing, and capitalization for institutional investors, pension funds, PE firms, et al) firm that primarily works in the West which is more analytical than brokerage and may be more of what you're looking for given your background in finance/accounting RE: "analytical brain stimulating." There are firms like that in NYC that might be worth looking into, and for ref. my background is in pharmaceuticals which more or less means my skillset is in finding and analyzing deals, and then writing investment proposals.
Starting a Career in Investment Sales (Originally Posted: 11/17/2016)
I recently graduated college and I'm considering an offer to work under a top investment sales agent in a big market (salaried role with potential for commission). The only problem is this is for a regional firm that is not well known outside the market I am currently in.
I'm on the fence because of the company name and limited resources. Has anybody had a similar experience? Was your experience positive/negative? How will my exit-ops look?
Not in investment sales, but your exit ops in your region will probably be great. Do you have any other offers to even compare it to? If not, you'll probably want to take it. Also, real estate is pretty regional in general with some exceptions. Most positions require knowledge of the market so people hire from within that region.
No other offers for a salaried brokerage position but a strong chance at landing 100% commission or draw type structure with a well known firm (think Cushman, NGKB, or HFF). The salary role seems pretty safe. I'm considering leasing as well but with no salary just commish.
26 year old here who just got out of Leasing, IS arena to go into development. It will be tough sledding due to your age. Most of the heavy weights were guys more senior to me who built up crazy rolodexes. Expect 18 months+ to really start making real deal flow happen.
Spend very frugally even though you are on salary, because once you switch off to commission, the checks come in variably and sometimes, sparsely.
Another word of advice, try to get a mentor who is willing to coach you up and walk you through deals. If they offer to partner on buildings/projects, this is the best of both worlds.
Happy hunting.
Thanks for the advice. As an update, they did offer me a position. I'll have an in person meeting next week to discuss comp. Not sure what to expect but was hoping to negotiate $55k as a start. Probably wouldn't accept anything below 50 because I live in a major city and that's pretty much market rate.
Starting in Investment sales/capital markets (Originally Posted: 12/14/2015)
Hey WSO,
I'm new here to the community and loving it so far. I'm curious about the commercial brokerage field specifically investment sales. I'd like to know are there any other ways into the industry outside of networking your way into one of the bigger shops?
Briefly about me I'm 25 years old, and have worked abroad playing basketball professionally over the past 4 years( Poland, Turkey, Greece and Switzerland). I have been able to save about 10-12 months of expenses. I graduated undergrad from a private liberal-arts institution. I Majored in finance at a top 15 business school. I also played Division 1 basketball during my time there, making 2 NCAA Tournament appearances.
I've played professionally since graduation, but acquired my real estate license as well. I know modeling is key when breaking into the industry and I'm proficient in excel. I would like to increase my experience with Argus, and I was wondering if most shops would train me or if I should go about that on my own?
I'm looking in the Atlanta area. Would love any feedback to increase my chances at landing a gig!
Thanks
did you go to Michigan? sorry I am of no help to your question, just a curious basketball fan
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CBRE in Atlanta has a couple of ex-UGA athletes that work there, I can think of a few on the investment sales side of things. So does JLL.
As far as modeling/training, at an analyst level you might be expected to know the basics, and anything more complicated is a plus (i.e. ARGUS) and you can expect to learn by doing (they won't train you in the sense that you would be in some class, it's more learning by osmosis). Past an analyst level, you should have solid modeling skills, but this shouldn't be an issue for you due to the overall lack of CRE experience. Hope that helps some, probably a little vague now that I reread it.
Thanks for the input. It definitely helps. I've been through some office acquisition models that a buddy from a REPE firm shared with me. I understand the model, but would definitely need to see a real deal done to see how everything translates.
As far as starting as an analyst do they start you with a salary or are you scraping buy until you're able to do deals of your own?
Richmond?
+1
TinMan1 did you find a job in Atlanta?
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