Am I crazy? REPE, Development?
Development Associate at a major developer/REPE. I want to get into Acquisitions, or better yet a REPE fund (?). I started my career in general contracting so I’m more Development than Investments/Acquisitions… which leads me to believe that maybe it’s worth an MBA? Real Estate is a lot about reps though… But how will I get reps if I don’t get a background in underwriting, capital markets?
Been reading a lot of people say the best money is in development…? I get that with Promote/Carry… I just wonder if sometimes I’d like to hear less about what color the furniture is going to be and more about why this is an awesome investment? Should I just take what I have and be patient…?
You get paid a lot in both, so pursue whichever one you will be best at. As for getting to the acquisitions side, I would make the argument that the finance/investment/acquisitions side is a lot easier than the construction side. At the core of it, the algorithm for acquisitions/investment is Revenue - Cost = Profit. Finance guys just add a bunch of other shit to convolute it. Anyone can look at rental/sales comps to calculate revenue, but knowing your cost in development is much more uncertain and therefore risky. Coming from the construction side of the business, you have a much better idea of what it will cost to develop a property and what issues can arise, which allows you to manage your risk better.
Furthermore, construction/design experience helps you assess investment/development opportunities. For example, let's say that I am looking at an oversized triplex that I want to convert to 6 units. From an acquisitions/finance perspective, I just assume that we split each unit into 2 and then plug that into my model and voila 6 units, but that would be a mistake. The first question to ask is is it even physically possible? Where are the bearing walls located? How will the new utilities be run? Where will the new set of stairs go to access all the units? If i just plug into my model that have 6 units, but in reality it is physically impossible or incredibly costly, then my model is meaningless. This is where construction/design experience comes in and to be honest, is much more important than acquisitions/finance.
That being said, I do think it would behoove you to learn the finance side of the business because this will make you very deadly. An employee who knows both design/construction and finance is a developer's wet dream because it is rare to have both. I have a friend who started as an architect and then got her MSRE in finance. She is now the VP of development at an REPE shop and they pay her a fuck ton.
If you want to pursue an MBA, it certainly won't hurt you (especially if you go to an M7), but if you want to save on the tuition, my suggestion is to self study first. Buy one of those real estate financial modeling courses and learn the finance concepts and practice financial modeling, then try applying what you've learned to your job. Maybe on the next financial modeling exercise, you can ask to take a stab at it. If you are able to master both sides of the business, you will be very valuable to developers
This is true. I know the finance side pretty well but now am trying to catch up on design/construction.
Sometimes I feel like I should just go the REPE route and get paid now instead of trying to play catchup on construction knowledge with the carry hope note...
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