To Go or Not to Go... MSRED

I didn't want to hijack the thread in the B-school forum about the guy making 360k and I felt this could lead to a relevant discussion on career progression in real estate.

I'm currently an investment sales broker in a tertiary market at a boutique firm. Late 20's, made 400+ last year and on pace to do 350+ this year (conservatively). I own an apartment building in a good demo area that I repositioned w/ partners. Applied to 2 MSRED programs: rejected at dream school and accepted at backup (still one of the top programs in a major metro).

The goal is to start my own entrepreneurial development shop and grow it over the course of my career into a reputable firm doing $100MM+ deals. I'd be going to school to get the education, network, and credibility for raising capital - not to network into a shop making 120k/year as an associate doing grunt work. I don't think that makes sense as I can make that in a year flipping houses and napping half the day.

At first I just wanted out no matter what. I hate cold calling every day and am more interested in the managerial aspects of running a business and developing properties. What I do now is not mentally stimulating at all and I can't do it for the rest of my career. I have to build something that matters.

Now that the day of reckoning is almost upon me - and seeing how much money I'm going to leave on the table - I'm considering sticking it out for another year while the market is in the 8th or 9th inning. Business has been flowing in like crazy over the past two weeks.

The options are to go to school now and hope to get paid on as much of the business I've already brought in for the year as possible or to reapply next year with a much improved resume and a few hundred grand in investment capital in my pocket. Sticking out Investment Sales for any longer than that is not an option. I hate the market I'm in and I'm bored to tears.

I'm concerned that if I reject the school that I got into and reapply next year I'll be auto-rejected. Then if I don't get into my dream school I'm screwed.. Or do I just go to school, start my own business and grind it out? Either way, when I leave brokerage to start an entrepreneurial company I'm going to have to take a haircut it's just do I do it now or later. Unfortunately I'm not getting any younger and there are a lot of variables here.

TLDR:

Making a lot of money in IS
Want to start my own development shop
MSRED now or reapply later with more money

 

Mentors have suggested the MBA route to me as it has more "cache" and a stronger network.

1) I went through each class one by one to compare MBA vs MSRED and the MSRED classes are more focused/granular. 2) I'm getting old (will be 29 later this year) and 2 years in school seems like forever, especially after hustling for so many years 3) As I learned from my rejection, schools prefer candidates from brand name institutions that they can quantify. I'm just some guy from a boutique RE brokerage. Successful and from a good undergrad, yes, but I can't compete on paper with a GS or MsKinsey guy or gal. I'm competitive and won't settle for a program that isn't top of the line so I'm worried I won't get in even with a strong GMAT and application. 4) It's even more expensive

Open to being proven wrong though.

 

if the MSRED programs are part time, do it. You can continue making bank while getting the degree, which for you is primarily a credibility value. A full-time MBA is going to take you two years anyway (same if not more than MRED part time), so the opportunity cost of staying in your existing job is really a wash from perspective of time expended, but going to school part time is potentially up to $800k more valuable to you in total dollars. Why spend two years not working and making money, especially when you are netting $300k/yr?

Some will probably disagree, but if you want to raise money in competitive development these days the degree (either) will go a long way. You can probably just leverage your broker balance sheet into development, but I think without the degree it will be tough if you want to raise serious money (institutional capital).

 

Which schools rejected you? Cornell? MIT? Haaahvard? Also, understanding what market you're currently in will help because it'll show what your options are.

Anyhow, getting to the heart of the matter, have you tried applying for development (or whatnot) positions with large firms? With your experience and success you wouldn't be coming in anywhere near grunt level and by working at a big firm for a bit you'd also open up your network and find future co-founders/investors like you would in business school.

I was a former broker too (albeit leasing) and hated every second of it. To me, that was way more important than the money or any potential money down the road. I would caution you against just any old MRED program, however. You aren't going to find dumb people in your class or anything like that, but at a lot of programs you will be in a room with people who have had maybe an internship or two under their belt and don't know what a cap rate is.

Obviously an MIT or Cornell student would be dealing with these issues less, but I would imagine such a situation would be frustrating for someone with your success and experience. It has been frustrating for me, and while our backgrounds are similar, you'd be coming in with more success and experience than I did even.

Commercial Real Estate Developer
 

Thanks for the reply, CRE. Seems like we have some things in common.

MIT rejected me. After looking at the class profiles from last year I'm not surprised. Very few students, if any, had never worked for a major corporation with some cache behind the name. Regardless, there are a number of other things I'd do differently if I were to go through the process again and I know my application would be killer. I'd pull a Vinod Khosla if they rejected me again.

I'd rather not post exactly where I am but let's just say I'm not all that far from either Boston or NYC. PM me if you really need to know the nitty gritty.

I'm not sure what the profile will look like at Columbia so I'm going to the accepted student open house this week to find out. I had visited MIT and heard the pitch on the program from them and an alum whom I know. That's what sold me on it. I haven't given Columbia that same opportunity yet. I am concerned about student quality as they are increasing the class size at Columbia.

I have not applied to any large development shops. I'm relatively optimistic that I could secure a position at a MM to large REPE shop or developer just through my personal connections I've built in IS. What the position, salary, or day to day of that job would look like I have no idea. The concern is taking a huge haircut to have a very limited role in the process. Maybe it's worth feeling out. Unfortunately, I'm under the gun.

Another concern is that if I'm ever to go to graduate school then it's either this year or the next or I'm just going to be too old and entrenched to make that jump.

 
Non-PC Broker:

Thanks for the reply, CRE. Seems like we have some things in common.

MIT rejected me. After looking at the class profiles from last year I'm not surprised. Very few students, if any, had never worked for a major corporation with some cache behind the name. Regardless, there are a number of other things I'd do differently if I were to go through the process again and I know my application would be killer. I'd pull a Vinod Khosla if they rejected me again.

I wouldn't discount the "reapply" option entirely, especially if by not going to school for just one more year you gain an additional $350k.

Non-PC Broker:

I'd rather not post exactly where I am but let's just say I'm not all that far from either Boston or NYC. PM me if you really need to know the nitty gritty.

Oh god so you're in THAT shithole. ;)

Non-PC Broker:

I'm not sure what the profile will look like at Columbia so I'm going to the accepted student open house this week to find out. I had visited MIT and heard the pitch on the program from them and an alum whom I know. That's what sold me on it. I haven't given Columbia that same opportunity yet. I am concerned about student quality as they are increasing the class size at Columbia.

I'm not as familiar with Columbia either, as I ruled out NYC early on in my hunt. "The public" views it as a top program though, for what it's worth. As I said before, you're not going to run into dumb people, but you MIGHT run into inexperience. That's my main complaint (and perhaps my only complaint) with my program. My classmates are great, and will be great resources down the road, but I came to grad school to get to that next level. The entire first year of the program has been getting everyone to the level I was already at. It's frustrating at times.

Non-PC Broker:

I have not applied to any large development shops. I'm relatively optimistic that I could secure a position at a MM to large REPE shop or developer just through my personal connections I've built in IS. What the position, salary, or day to day of that job would look like I have no idea. The concern is taking a huge haircut to have a very limited role in the process. Maybe it's worth feeling out. Unfortunately, I'm under the gun.

Yeah I was more or less just looking for another route for you to escape brokerage. It just depends on your goals. If you want to be a developer, you have experience and capital already, so as you said, you need the network and the credibility. I'd argue that working for a major company will get you both and arguably more credibility for investors than a MRED degree would.

Non-PC Broker:

Another concern is that if I'm ever to go to graduate school then it's either this year or the next or I'm just going to be too old and entrenched to make that jump.

This is why I originally asked about your location. I'm a huge MRED proponent and you might be the first person on here who I've tried to play devil's advocate with about the decision, but there are other options out there (executive MBAs, online MBAs, evening MBAs, etc.) that wouldn't involve you losing a third of a million dollars in opportunity cost for going back to school.

Before making the jump, I would definitely look into what kind of position you could get right now. I would be surprised, in your specific situation, if it would be substantially different from the kind of position you would get post graduation.

Commercial Real Estate Developer
 

You'd be absolutely crazy to spend $100,000 on Columbia tuition and to leave $400,000 (ok, $250,000 after tax) on the table to do an MS in real estate for the network. If you're doing $400,000/year in net income as a broker, my guess is that you have the personality to network without spending money on the network.

You can do your own entrepreneurial ventures without any type of degree. All you have to do is to get people to trust you. Also, you'll find that most investors look at the bottom line projected return of a project and don't hyper focus on the details. Your Harvard MBA is worthless to an investor who isn't interested in a 6% return on cost. All you need to be successful--ok, all you need to MAKE money--is investors willing to invest in your projects. Most don't give a darn about your education credentials. Eventually, all they will care about is your reputation and track record.

EDIT: my position is from that of a Georgetown part-time candidate. So I'm in an MS program, but I'm not foregoing any compensation, let alone $400,000.

Array
 

I've definitely become adept at networking which is part of the reason I think I would kill it if I spent a year in NYC hammering doors and parlaying my current connections into much more significant ones. The classes themselves do look valuable. I'd learn a lot about the intricacies of the development process and ultimately be better suited to run my own organization at a younger age.

With that being said, I do understand your position and the career path you're proposing. I can find ways today to raise capital once I have a good deal. I could type out an example of partners I've tapped already but it's probably not necessary.

One additional concern is about what it's going to take to break into the "club" of institutional capital without a higher education. I came from, what I guess you would call, a "semi target" (a handful of kids from my class went to GS and are still there) but not from an elite ivy. Maybe it's an inferiority complex that's driving me to search for the prestige of a degree. I'm sure you're catching the drift - I think big, maybe too big. I do also spend a disproportionate amount of my free time self-educating and constantly learning is a passion of mine.

What I still can't seem to find a way to address is getting out of my current area to an active urban environment that's showing growth. It all brings me back to the fact that at some point I'm going to get whacked on income because I chose the wrong starting point for the end result that I'm looking for. It just comes down to what I'm comfortable with in my pocket before I make that jump and what that jump is going to entail. That's for me to decide and right now it's something different every day I wake up.

 
Best Response

I think you're thinking "too big". My company owns somewhere in the neighborhood of $1.5 billion of real estate, but some of the partners just invested with a guy needing just a few million in equity capital for self-storage deals. I underwrote the deals for my team and I can't tell you where the guy went to college (or if he even has a college degree)--I can tell you, however, all about his track record the last 10 years. With us this guy is doing 4 new construction self-storage deals, making a $1 million developer fee per deal (5% of total cost of, say, $20 million), and getting a very nice equity kicker at the end--he's becoming a very rich man in the process.

Point is, you don't need to build Manhattan skyscrapers and you don't need Goldman Sachs' money to be successful in this game. I don't see how Columbia could do anything but set you back net $350,000.

Array
 

My advice would be to work extremely hard utilizing your developer contacts and lateral to a position in an active, well known and respected firm. Spend (arbitrary number) 2 years learning everything you can and meeting as many people as possible and THEN consider if you want to do a Masters in RE(D) or as I point out below an MBA.

If you can lateral to a Dev shop then you are ahead of 99% of the MSRED students who are likely using that degree to get where you can presumably go now.

After two years+, you could consider an MBA (with RE focus or Finance or Entrep Finance focus) that can be done part-time (columbia exec mba would serve you better reputation wise and network than its MSRED although it is more expensive) given that you want to own and run a business in the future and that would provide those broader skills.

In RE, experience means much more than any golden ticket degree.

 

he gets a 5% developer fee? I need to get into self storage!

my previous comment was deleted, maybe because cursed- gist was: Makes no sense to go to school to go work for someone else and make less money. You should put together your own deals, money finds good deals - capital providers don't care if you have a masters degree.

 
Non-PC Broker:

Thanks to all for the feedback and helping talk me through this. VTech - your post brought me back to reality.

My mind is all but decided however I'll still go to the open house tomorrow and have my meeting on Friday before solidifying anything.

I was admitted to Columbia, but decided on Cornell. Let me know your thoughts on the open house, as I'm curious to hear about the new Director's vision.

My situation is much different than yours however, which is why I'm going. I'm located in that same s@!#hole though.

 

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