Best RE Career to Prepare for Doing Own Deals
Currently in a REIB role at BB and seems like the skills in this job aren’t too useful for eventually going off on my own and doing deals.
I’ve heard going to a GP / “owner operator” is the best move. Is that true? And if so, how do I recruit for these names?
It genuinely depends on what you mean by "doing your own deals."
If you are doing development deals, development will be your best experience. If you are acquiring properties, acquisitions will be your best experience.
Makes sense. Structuring the acquisition/recap of a $500mm real estate portfolio is very different than acquiring a 20 unit building or developing a SFH.
Not necessarily. In my opinion, the best route, from a knowledge standpoint, is to work for a firm that will work on deals as similar to yours as possible in terms of size, property type, etc...If you want to invest/develop assets in the ~10 unit range, then work for an investor/developer that invests/develops sub-50 unit properties. If you want to invest in 500 unit+, then just follow the standard corporate path and work for a Greystar/REPE fund and climb the corporate ladder.
Since you are asking about doing your own deals, I assume you want to do your own deals as soon as possible as opposed to climbing the corporate ladder, so we can focus on option 1 from the above paragraph. The downside of working for a smaller firm, generally, is less pay, which means you have less money for a down payment and less income for a loan. This is a pretty big downside as real estate is a very capital intensive business. The upside is that hopefully you gain more relevant knowledge/experience and will have more time to pursue this side hustle. Having more time is a pretty big upside because if you are working 90hrs a week, you will have no time to pursue real estate on the side no matter how much money you have.
My advice would be to continue making as high of an income as you can for a couple more years, which means staying in BB and maybe recruiting for MF REPE. As I said, capital is the most important resource needed in this industry and the more capital/stronger financials you have the more you can invest. As for time, when the time is right for you, you can always move from a BB/MF to a smaller, less intensive shop, but once you've made that switch, it may be harder to move back to BB/MF to make more money.
Lastly, if you have time now, I would advise investing in RE on your own as soon as you feel comfortable. My recommendation would be to buy a duplex/triplex if you can afford one and rent out the other units while living in one yourself. I advise this for a couple reasons 1.) The best way to learn how to invest in real estate is to just do it (real estate isn't rocket science. The reasons you like a property will be the same reason other people like it as well i.e. safe area, good school system, good condition, generates income, etc..) 2.) You will learn how the offer, PSA, financing, closing process works 3.) You will learn how to manage property and tenants 4.) You may find that buying a duplex/triplex and renting out the other units will significantly reduce your cost of living 5.) With rates at ~6%, if you can find a deal that works financially, it is unlikely that you are overpaying and will probably make some money as rates decrease.
edit One more piece of a advice. The day that you decide to leave your high paying job for a smaller shop, make sure you buy property(s) before switching jobs, so that you can take advantage of your higher income/tax return in order to get a larger loan.
Wow, thank you for this thorough response. It’s really helpful. I take your point about making as much money as possible given the capital intensive nature of RE.
I should have mentioned an additional factor in this equation, which is that I really don’t enjoy the IB experience in general. And I’m not saying this because of the hours, which have actually been relatively reasonable for banking. Rather, I find much of the work extremely dull (endless useless PPTs, building overly complex models testing unrealistic scenarios without actually thinking about the inputs, admin work).
So, my main concern about sticking it out and going to a larger PE firm afterwards is that I’ll be working job(s) for the foreseeable future that do not inspire or motivate me. I’m sure I could do it, but it would definitely take a mental toll. Then again, part of the reason I’m asking for advice is I also take your point about downgrading in firm size - once you go down, it’s hard to go back… would much appreciate your thoughts, and thanks again for taking the time to
I can't really comment on your perception of your job because I don't know if this is a "I can do the job but it's mindnumbing and sucks" or "I'm fucking miserable everyday." If it's the latter, then prioritize finding better a job that you like or can at least tolerate and also maximize income. If it's the former, then I would honestly recommend sticking it out for a couple years because the income and brand names can really excel your career and make things easier in the future. But it's really your decision, no amount of money is worth severely damaging your physical or mental health.
I assume you are relatively junior (analyst/associate level). At the junior level, esp for larger companies, all jobs are boring and tedious. Whether you are at a BB, MF REPE, or large developer, as a junior 90% of your time will be spent in excel or ppt. The only way to get more interesting responsibilities is by working for a smaller shop, but as i said, that usually comes at the expense of income. Its up to you to decide if the mental toll of your job worth the money. If not, no shame in moving to a smaller shop where your responsibilities may be more fulfilling. Alternatively, if you are able to put up with your job and have some extra time, you can start thinking about investing in RE. Go study some markets you may want to invest in. Attend open houses. Figure out what your investment criteria are and maybe a big picture strategy. You can find fulfillment in your side hustle.
One thing about this business is that just one good deal could set you up for life and by "set you up for life," i dont mean never have to work any more. But if you are able to acquire a property in the right market at the right time, you could make enough in that one deal that'll allow you to quit your job and pursue your own real estate deals full-time. I've told this story a couple times before, but one of the fastest growing developers in my city worked in a back office job full time and did some real estate flips/BRRR on the side. He did 1 three unit condo conversion, made $600k, and quit his job to pursue real estate full time. Now ofc you're not going to find these deals everyday, but if you live in HCOL area where SFH are easily $1mm+, it's not as rare as you might think. Perhaps you buy a duplex/triplex for ~$1mm, do a cosmetic renovation or add a bedroom to boost the income, live in 1 unit while renting out the others. It's not crazy that in a couple years you sell it for $1.5mm. Now your income for that year between this sale and your job could be $500k+. Then not only do you have your savings and proceeds from the sale to reinvest/live off of, but your $500k+ tax return will allow you to get a larger loan from the bank to purchase your next property/project. For me, if i were still working for someone, my goal would be to get to this point as fast as possible, but you need capital to start. And now ofc i must add that this is a riskier path and lifestyle and its not for everyone.
Ipsum error saepe aliquam qui et. At dignissimos quis enim et et reiciendis. Fugiat veritatis ut praesentium quas dolorem.
Recusandae quia in perspiciatis nostrum similique corporis ut. Architecto rem rerum voluptate voluptas voluptatem quia voluptatem. Omnis et nostrum totam praesentium impedit ducimus ipsam. Voluptatem culpa voluptate corrupti occaecati consequatur occaecati. Sint accusantium molestiae aut voluptas.
See All Comments - 100% Free
WSO depends on everyone being able to pitch in when they know something. Unlock with your email and get bonus: 6 financial modeling lessons free ($199 value)
or Unlock with your social account...