Brokerage Staying Power
To make a long story short, I’m growing tired of the pay at the entry level in brokerage. On an hourly basis it is barely above minimum wage, and I am making less than I did during summer jobs throughout school, despite working harder. If my end goal is to work for an investor/developer, is there any downside of moving to a real estate lending group at a bank? From talking to people I know, the pay is about double my current salary, and the hours are better.
Thanks in advance!
So, I think to answer this correctly, you should add some detail about what kind of brokerage you are doing.. like, what property type, leasing or sales, what type of firm, are on you a team or just on your own etc.
Some brokerage jobs are truly worthless, but some are really good (from a 'jump' to ownership perspective). I need more detail to figure out which you may have.
Lending for a bank may be better, but it has it's own traps and issues, but sure, the immediate compensation will be better. Prob better hours as well.
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I work in investment sales for one of the top firms in terms of brand name, and probably second best in my market in terms of deal flow. My direct team has two people in addition to myself, and we cover everything but multifamily, though I do assist the multifamily team with the underwriting of larger/more complex assets. That all sounds pretty good, but the main issue is I'm in a smaller market of about one million people, so deal size, volume, and investor pool are much smaller than a larger market. Typical deal size ranges from $5M - $100M, with $15M being average. If it affects your answer at all, I hope to move to a larger market when I jump to my next position.
I would say the experience is good in terms of developing skills, however I don't really get facetime with larger ownership groups as they are located elsewhere and I'm not "selling". Even if I was I suspect that I would just be viewed as "broker in ___ market" rather than someone that would come to mind when they want to fill a position. I haven't been given any bonuses in the past 6 months, though this is more due to market dynamics than my team not acknowledging my efforts. Demotivating nonetheless.
That helps a lot...
So, I think your question is really how to move to a bigger market in a more institutional role. If you can transfer or apply internally to another market, that may be the easiest means. I think you can apply freely in the big markets that interest you, but know that you will be trading one entry level role for another in all likelihood. On net, it doesn't sound like you have the kind of brokerage roles that will open the big doors naturally (unless you want to work for the local/regional owner/investor/developers in your space....).
I'm not sure if you are at or near the 2 year mark, it wouldn't hurt to cross it as this sounds like your first job and some longevity does look good for a resume going forward. That said, I wouldn't necessarily hold back on applying for new roles. Not sure how the job market will be going forward, but I think all brokers get a pass due to "COVID slowdowns" if you want to jump. The experience you have will probably be viewed more as an internship than brokerage, unless you can really speak to some serious deal volume in your time (but given income statement, I doubt that is your story).
Really, I would network, like use alumni directories (i.e. LinkedIn) and major affiliation organizations (like ULI or NAIOP) to find people in those target market. This is not the world's easiest jump, but not that hard either if you are flexible and interview well. I would def only jump to a job in new market, pointless to shift to lending or anything else if your desire is to leave.
Finally, you could go to another market to attend grad school (MBA/MSRE/D), as a means of getting 'in market', building network, getting educated, etc. This is clearly a more costly in both time and money proposition, but it is a killer strategy for people in your exact situation (I know many who 'broke in' via this short of shift).
Thanks for your thoughts!
You're right that I don't want to work for the local/regional firms (at least not in this city). Only issue with doing an internal transfer is that I'd be making the very mediocre wage in a higher COL city. Also not sure if it would benefit me much aside from improving my networking opportunities, and it'd look poorly to transfer for a short stint before landing something else. I don't mind trading for another entry level position as long as its on the ownership side with a decent firm.
This is my first job out of school, and I am close to reaching the 1 year mark. I don't think I have it in me to consciously choose to stay for 2 years, but it could happen depending on what the job market is looking like. I definitely need to work on my networking in other markets.
Agree that an MBA or MSRED would be a good option, but I've only been out of school for a year or so now and I'm hoping to not have to incur that expense of time/money. Main issue right now is lack of funds from the brokerage job and this route wouldn't solve it any time soon. I'm also not sure if I would benefit much from the program either because my modeling skills are pretty strong and I have passed 2 levels of the CFA. Hard to justify paying that much money simply for networking purposes.
Tldr; I'll take your advice on networking!
Brokerage and lending are very similar to one another in that they are both sell-side roles. On the brokerage side, the lower level employees typically earn less than they would be on the lending side unless they are working for a top team. However once transitioned to a higher level role, the floor in brokerage compensation is very low but the upside is virtually uncapped. On the lending side, the floor is higher but the upside is MUCH lower. Compensation for both ultimately depends on sales ability/volume.
In terms of transitioning to REPE or development from lending I would say that it really depends on the type of lending the institution does. If you are working for a group like OZK bank, you would be much better positioned for a development role. If you are working for Chase doing MF/Comm perm loans $25MM, not so much. If you are working for NYL doing all types of loans $50MM+, you would be ideally positioned for REPE and Development. Plus there are ample opportunities to hop over to their respected equity group at any time.
On the brokerage side, it is also group dependent. If you are out there working for a reputable leasing team, you might be a good fit for Asset Management roles. If you are working for a top IS team, you would be a good candidate for REPE.
I work on the lending side of a multifamily shop & would have to disagree that a lenders upside is anywhere lower than that of investment sales. That being said, working as a mortgage banker is very different than working as an associate/vp at a bank, but mortgage bankers typically can earn 1.5x - 2.0x the fees of an IS broker when you consider origination, servicing, & trading premiums.
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