How Do You Deal With FOMO Or Opportunity Cost In Choosing Your Career?
Hi guys, battling with this for a while now and would really appreciate someone sharing their insights into how they deal with the fear of missing out or opportunity cost of pursuing real estate versus other career paths.I'm currently in college at the moment and hold 2 interests: one being investment banking and the other being real estate. I have a stronger passion for the CRE acquisitions side because of its dynamics and because I've had experience in the field, but I can also see myself really enjoying being the "middleman" and help advise companies on M&A transactions/raising equity, etc. Naturally, I would gravitate towards the RE space but I wonder if that's because I've worked in the field and haven't yet tried out the IB side. To make it worse, I have a '23 summer offer for IB and now would have to decide if I should still spend time trying to recruit for a position on the RE side. For the past couple of days, my hair line has been receding back to WW2, I've grown more acne than a teenage boy who just hit puberty and I'm having a worse identity crisis than your average Billie Eilish emo fangirl. I've tried to come up with a list of values that I believe can help me decide (in which I will attach below) but still find myself deeply conflicted.Time. I came into college very set on doing real estate and up until now have mostly done real estate internships/programs. Although I did do 2 internships that are on the venture capital & consulting space, I feel like in terms of knowledge, I have more of a specialized understanding on real estate than I do in IB. If I decide to focus on CRE now, it would be time-efficient but if let's say I don't have any CRE offers to consider for next summer then it would be a complete a waste of time, assuming that I don't recruit full time for CRE afterwards. On the flip side, I could focus on recruiting for CRE only, betting on getting myself an offer and sacrifice the time I could've spent getting really good at financial modeling on the IB side. The same thing might apply when going full time. My friends have suggested going the IB route since the modeling will transfer to CRE if I decide that I want to be in RE after the initial 2 years, but I'd be significantly behind my peers in terms of CRE technical knowledge.Comp. If I'm not wrong, IB pay usually is around 50-70k on average above a good RE shop in the initial years. I know I shouldn't care about comp that much early on in my career, but my goal has always been to maximize my wealth and even though 50k-70k isn't much in early stages, with time value of money and compound interest, it can make a tremendous difference. And I always think about what if I invest in real estate while having IB as my day job, build my portfolio small and scale bigger as my pay increases. I know that work life balance will raise concerns in a tradeoff for comp, but I've found a niched groups of boutique/middle market banks that pay very well while their analysts will put in around 50-60 hours a week (I know it sounds impossible but I've talked with bankers at the firm and they all said the same exact thing). So now, with roughly the same hours, IB is paying more, and I can invest more, earlier. I guess the only thing that can make real estate more attractive is either comp is actually higher than I thought it is or salary might match IB when carry kicks in. If CRE pays around 200k for associates with 3 YOE on the acquisitions side and hours are a bit lighter, that definitely helps, but I keep seeing associate salary below that level (if I'm not wrong). I don't mind the hours, if I do have a lot of free time in the weekdays, I'll probably start a side hustle or something so it wouldn't make a big difference. I've also thought about doing REIB but the firms I'm aiming for do not have a RE group, and at any other firm I'll be pulling 80-90 hours a week, in which it's not that appealing anymore even with pay.Long-term career goals. I love the idea of starting my own shop, being an operator and find creative ways to add value to an asset. I'm very much a deals guy and love developing relationships (I know some may say you'll build more relationships earlier in CRE than IB as analysts/associates but these boutique/MM banks have great models in which as an associate, you can start working on business development and get a big cut if you bring a client in and the deal close). I think that starting a RE shop can be a bit easier than starting an investment bank, which is why I'm leaning to CRE on this end, but again, I haven't tried doing IB yet, and who knows maybe it's not as hard as I thought it would be. If I decided to go the corporate route, I think long term at a good RE shop, you earn as much as a MD in IB so it wouldn't really matter in this case.As you can see, I am perplexed, and maybe I'm so in my own head that I'm not seeing a clear answer in which you all can see. So if you've dealt with something like this before, how do you decide on one career path, and stick with it?TLDR version: I'm just confused af, what even is life?
I'd start in banking. If after two years you decide you don't like it, the worst case scenario is you have an extra $100k in your savings account and can take your pick at REPE jobs. In fact, a lot of the highest-paying REPE firms specifically recruit IB analysts instead of people with REPE analyst experience. On the flip side, if you started in REPE and then realize you'd rather be in banking, now you took a big pay cut for two years and have to go get your MBA just to get into banking.
I wouldn't worry about going into banking and being two years behind if you switch to RE. Most of what you learn the first couple years is mostly Excel and PowerPoint anyways which you'll be a lot better at than a REPE analyst. The actual dynamics of REPE aren't that difficult to figure out quickly if you've done banking. I've rarely met a REPE analyst with 1-2 years of experience that has done anything that meaningful or has impressive knowledge of real estate.
Thank you for your input, definitely helps a lot. Do you think your answer would change if the IB offer is for a MM bank that doesn't have a history of placing their analysts into RE (within the a certain geographical location)? Let's say if you're faced with a decision to do IB at bank acquired by Stifel versus going to PGIM as analyst, would you still take the IB route?
Thank you in advance!
It changes it a bit but I still think if you're uncertain, then you should go IB. I would not worry about missing out on a couple years of RE experience. You can even jump to REPE after only a year of banking if you realize quickly it's not for you. There are still a ton of great MM REPE firms that will hire out of MM banking.
As someone who faced the same kind of situation back when I was coming out of college, here's a little advice:
1. First year or 2 out of UG both REPE/Dev and IB will have you just learn excel, powerpoint, about the market. I personally went Dev and my friends that chose the IB route had rather similar experiences where we wouldn't make any significant decisions on deals and were doing grunt work early in our careers. There's no glory in either and you'll be the bottom of the totem pole no matter which route you go. If you went the IB route and read up on CRE/ took courses/ talked to others in the industry in your spare time then you wouldn't be lightyears behind everyone if you decided to make the switch, but still behind. However, that said you would definitely start at an Analyst again if you made the jump to REPE after IB even if you were a senior Associate because of how niche CRE is and it would take a while to get the nuances of RE deals down. Not saying you wouldn't have the technical skills, but as an associate in REPE or Dev you are taking on more responsibilities in deals and they wouldn't want to babysit you if you've never gone through a CRE deal before. You wouldn't stay at Analyst for as long as a recent UG would (probably), but considering your pay from IB to REPE analyst would be a severe drop off, you might feel less inclined to make that switch in the future.
2. The WLB at IB is always going to be worse than RE. IB will work you like 60-80 hours normally and that can skyrocket to 100 if you have an active deal. Meanwhile, in REPE or Dev you are more likely to do 60 on the high end and maybe 70 if you have an active deal in REPE. Weekends are not messed with much in RE except maybe the occasional email or 2 but generally weekends are respected, whereas in IB you might get a Sunday off if you're lucky. Everyone in college is convinced that they can do it and that the money is worth it, but take a look at any article or post on here about Analysts/Associates burning out and having existential crises about their family lives, love lives, friendships, physical health, and mental health all going to shit. Granted, not everyone is going to burnout and maybe you too could be a lucky one that gets the perfect team and able to make it, but there's a reason why IB hires so many analysts every year and it's not because IB is growing exponentially. It's because people don't want to be there. If you value WLB at all and having free time to enjoy life, then RE gets the nod here.
3. Comp is a funny thing. In RE you will have a lower salary than IB almost always at the junior level. No one goes into RE thinking "god I'm gonna be a millionaire by 30!". But, they all realize that by the time they are in their early 30's they will hopefully be a VP and by that point carry is on the table. Once carry and co-invest start to become part of the comp structure you are probably having $150k-$200k base salary, 30-50% bonus, and then some equity in the deal in the form of carry or co-invest. Those are ball park numbers and I've seen higher and lower across the spectrum, so don't take those numbers as gospel. The carry could be annualized out to hundreds of thousands or millions a year depending on fund performance and fund size. So, while you might only make 60-70k base and 15% bonus for the first year and 85k base with 20% bonus year 2 while IB is making a lot more, don't focus on the short term. Like investing in public markets, you aren't going to get rich over night and it's going to take a lot of discipline to reap the massive rewards at the end of the tunnel. In IB you are going to get very generous salaries and massive bonuses, but being the middleman limits your earning potential since you only make money on relatively small fees that the buy side are paying you (obviously you could do a ton of deals as a middle man and make a bunch but getting 0.5% fees on 10 deals worth $30MM is as much as a 3% carried interest in a deal/fund worth $50MM and $50MM is relatively small so take that for what it's worth). If you go IB you'll make a bunch of money quickly and assuming you don't have to move to a HCOL city you'll be able to invest that money well (ideally), whereas if you go REPE or Dev you're playing the long game and make less money immediately but you won't care as much when you're in your 40's taking home a massive amount and working a lot less hours. The longer you wait to get into CRE the longer you will have to wait to get seniority enough to ask for carry.
4. I know you didn't mention it but it inevitably comes up on WSO when taking about finance...prestige. In IB, people only get business because of the name on their business card so prestige actually matters. Reputation is what gives MS,JPM, GS, etc. any credibility over EB or MM firms since it's not overly hard to make a financial model once you've been doing it a while and most MM firms are started by ex-BB IB so they know what they're doing. Obviously you get bigger deals and more pay at a big name firm so every Investment Banker brags about prestige and how hard IB is to do and why their bank is better than everyone else. If you're someone who wants to walk into a bar (when you're not busy working) and boast to every girl who will listen that you're an investment banker for GS and you do "complex deals with super sophisticated financial modeling for global corporations" then IB is for you. You'll never get anyone to gawk over RE, at best you'll get a "oh cool building" out of someone lol. You'll see a lot of people don't care about prestige when it comes to RE since a trophy building mis-managed and with wrong market timing (like a massive office tower or major mall rn) can be more of a curse than a blessing than a smaller firm with a +25% IRR apartment building with only 125 units in Arizona currently. RE is more about performance than trophy hunting and IB is more about bagging the biggest name deal and most deal flow and less about performance of the company after you're done with your deal.
This was a very long winded way to say that RE and IB both have their benefits and downfalls and you'll have to weigh them against how you want to live your life. It's easy for an IB analyst on here to spew about how great IB is and why it's the single best career path and conversely it's easy for a REPE/Dev analyst to say that they are set up better in life for X,Y,Z reasons. You can always go from REPE/Dev to REIB and you can go from IB to REPE/Dev without too much trouble, you just have to think that you're starting over your proverbial career clock and taking steps back to do something you want more.
Thank you for your insights, they were super helpful!
I was just wondering, let's say if you're faced with a decision to do IB at bank acquired by Stifel versus going to PGIM as an analyst, would it be smarter in a sense to take the PGIM route or the IB route? What makes you eventually decide to go the RE route instead of IB? Is it possible for someone to get really good at CRE modeling and still jump to RE as an associate after 2 years of IB (would college experience doing CRE acquisition also count in this)? If the IB route you take is not M&A but more on private placement and capital fundraising, would this change anything? I don't mind about prestige at all, I just want to do something where I can learn a lot in the first 2 years with a decent comp and hopefully start my own shop at one point.
Thank you in advance man!
Lotta questions so let's break it down:
PGIM is a great place to start a RE career, especially if they want you on the acquisitions side of their business. You would be hard pressed to get to the point where you receive carry there and so you would probably have to lateral to a different firm (probably a regional or family office) to get to that point of earning. Getting high up in any BB IB or MF REPE is going to be very difficult based purely on the size of the place and how many analysts and associates vying for a handful of VP and above positions, and that's typically where you are going to get carry. Stifel is a reputable IB that is going to get your foot in the door at quite a few places you apply to in MM corporate PE, but not sure that name would carry too much weight if you decided to go to a more local developer after your stint in IB. In general, PGIM would be the easy choice for me IF you are leaning heavily towards RE. But, Stifel would be a good landing place if you wanted to exit to PE or a corporate finance job and leave your options open.
I think your second question was asking why I chose RE over IB so I'll answer that. I wanted to enjoy my 20's and 30's while I still had energy and youth so the WLB was much more important in my decision. I knew either way I was going to be well off in the short term and long term financially compared to the national average (some people want to be 1%-ers but there are more important things in life to me than just flaunting money around and owning the most stuff), so I wanted to be able to see friends after work and on the weekends, take vacations where I wasn't glued to my phone or laptop answering emails all day, and spend time dating and playing sports while I could before my body would inevitably break down on me like it does to everyone in their 40's and 50's. Making 100k all in with bonuses at 23/24 years old in a city like Cleveland or Indianapolis doing RE goes a long way compared to 130k all in at 23/24 in NYC/LA/Chicago in IB so to me it was a no brainer...best of both worlds.
Is it possible to get good at CRE modeling without being in RE? Sure, anything is possible. The same way a banker might get good at craftsman things in his spare time to flip houses or renovate his own, an IB analyst can get good at modeling CRE. It's all about practice, effort, and trial and error. It would be infinitely easier if your whole job all day everyday was to do CRE modeling and having your boss give you feedback to hone in on those skills, but you can always take classes and find practice scenarios to model in your free time. The reason I am skeptical about someone jumping from a different industry like IB or something like that to associate in REPE/Dev is because of the intricacies of CRE DD when it comes to acquisitions and at associate level you are expected to a lot more on your own when it comes to that sort of thing. Like in IB DD might include the 3 financial statements and a bunch of documents relating to their operations, whereas in REPE you need environmental surveys, structural engineer reports, CAD files and architectural drawings, proof of entitlements/permits, civil drawings, walking the building itself and noting any little detail "wrong" with it which you only really notice if you know what to look for, and more industry specific things like that. Not that it can't be done by an outsider, but a lot of firms would rather you spend a year or so learning all those things as an analyst under an associate and then once they feel you can handle those kinds of things then promote you.
So capital placement is an interesting part of IB because if you want to go into capital markets in RE then it's very translatable. But, if you want to do acquisitions then not as much so. I didn't personally do DCM or ECM in IB so I am by no means an authority on it, but I would have to assume you would do more modeling in M&A than in capital placement. This question about what is a better career path in IB between M&A and capital markets would be better suited on the IB page since they would be better equipped to tell you what skills you learn in depth and then come back and apply their feedback to the skills people outline needed on the RE forum.
I'm not sure where you are located/want to be located but comp will be fine no matter which route you choose. Grown 40+ year olds might only earn 60-70k in their field and in either path you choose out of the 2 will gross you at or above 100k in the first year or two. Obviously 100k doesn't stretch as far on the coasts as in the midwest, but by no means would you be suffering. IB is fast paced and you would learn a lot about finance in general, but not necessarily RE in particular. If you want to just learn a ton in general and make great money than IB is fantastic. If you want to make good money, not great, and learn a bunch about RE in particular than by all means jump into RE head first.
If you want to start your own shop do you mean Development shop or REPE shop? If you want to do development then I suggest you get into that as quickly as possible to learn all the legal side of things and the project management side because that takes a whole career to learn. We have people in our development team who have been doing this over 20 years and they are still learning new things and running into new issues everyday, so the sooner you start getting a handle on how that process works the better. However, if you want to run a REPE shop of your own, then no need to rush into a decision. In REPE there's still a ton of industry specific knowledge you'd need to learn, but at least the "hard" part would be modeling correct assumptions, raising a fund, and properly managing the asset. While you would still need to understand the more legal/government side of things with owning a property, its more secondary than Dev. Spending a couple years in IB won't kill your dream by any means and in the long run won't matter too much, but never hurts to start learning the ropes of the industry as early as possible.
Over the ~40-year career that you’re about to start, what you do during the first two years won’t really matter. That being said, starting in a more generalist role would give your career more flexibility. Plus you already have the offer.
Being two years behind is not as devastating as you may think. You and your peers will catch up to each other eventually. When you’re 40 and an SVP or even MD, will you really care if your fellow SVP/MD got there two years before you? What does it matter at that point?
FOMO is normal, but don’t let it overcome your rational thinking. Take a long term view and stay focused.
Thank you for your thoughts on this! Gonna try to keep FOMO out of my head as much as possible.
If you're this torn and you already have an IB offer, start in IB. It's easier to transition from IB to RE than vice versa.
I went straight into CRE because I knew I was more interested in it long term and had no interest in working IB/corporate PE hours.
Thank you man! I realized that my interest had always been on the real estate side more and just got an offer with a firm I really wanted so I think I'll stick to CRE for now, appreciate your inputs a lot!
Congrats and good luck!
Okay....... I gotta say... the title of the post instantly interested me! I'm nowhere near where you are with your career (im in late 30s), but the FOMO and opportunity cost thing is something I think about to be honest. Not anywhere like you seem to do..... but alas, I feel you, I get it.
So first, just gotta get this out of the way. It won't matter what you do, IB or whatever. Do the IB summer gig, if you like it, go consider FT. If you hate it... problem solved! If you do go work FT in IB and hate it.... great leave and go to CRE or whatever... problem solved! The reality is you will have a long career, and where you start is often one of the least interest parts of everyone's stories tbh.
On a deeper philosophical level..... FOMO/opportunity cost is legit. One thing about life is you basically can't exist in two places at the same time. Every choice has consequences including not making a choice and just keep doing what you are doing (clearly, when in college and needing a job... this isn't really a good option). BUT so long as you are making forward progress somewhere/somehow, you can always shift and hopefully be upwardly mobile in doing so! Unless you get crazy fixated on like working for Blackstone or something hyper competitive like that, you probably can navigate just fine from any path.
I would dare to say this isn't even a worry until maybe you turn 30, and even at 40 your options to shift and move are not zero (in fact, it seems like I know tons of older people who made big career shifts post-40 and are super successful). Ironically, if you are diligent in your work, learn tons, and otherwise figure out the key to adding/driving value (a subject not discussed nearrr enough on WSO), your optionality and value goes UP the older/more experienced you get.
For experienced people (yeah, I guess I'm referencing myself), the question how, when, or even if to like attempt big jumps or moves becomes more challenging (presuming you have a job/path you like). I did a big jump type move a few years ago, and have been very happy. But even still, the "what if" type questions enter my brain from time to time...... so this FOMO/opp cost concept never goes away. Personally, I just don't ever want to look back and regret shots I didn't take nor making foolish moves just because. So, I guess to sum..... if you are in UG.... your opportunity costs are literally at the lowest point they will EVER be!!! It only goes up once you start building experience in some domain and field. YET..... people can/do jump all the time (I've done it twice now I guess, all in CRE fields though).
Seriously... OP, just get some experience, worry about this shit later. Flip a fucking coin if you get stuck, it's just a good as any other logic at this moment.
Really appreciate it man! Reading your post made me so much less anxious - I ended up deciding doing the CRE route since I know deep down I love CRE more and just got an offer at a firm I really wanted so I'll probably go do that!
I have a quick question though, if you don't mind. Let's say after spending 2-3 years on the LP side of things, do you think it's wise to exit to an operator/developer for more specialized experience if your end goal is to start your own shop?
Very cool, and every time I've had the opportunity to go more "finance" I've always shied away, it just seem so boring relatively.
To your question about moving from "LP" to "operator/developer".... I first need to ask a clarifying question... To me an "LP" means the investor/clients of investment managers (this is how this term is used in the industry, especially at private equity funds, like if you hear of a PE firm hosting an LP conference it is a meeting of the investors into their funds). So that would be places like CalSTRS, Texas Teachers, all the SWFs, the Harvard endowment, etc. BUT, I think you are meaning "LP" = Investment Manager (i.e. Blackstone, Blackrock, PGIM, CBRE GI, etc.) and contrasting with operator/developer like Avalon Bay, SL Green, Silverstein, RXR, etc. (i.e firms with direct real estate ownership). This terminology debate happens on WSO, read along if you like, but I don't think you mean to be do that (just confirm, in case you are thinking something else).
So...... to answer the question... of Investment Manager to Owner/Operator.... with goal of "start your own shop"....... To be blunt.... I have no idea! What kind of "shop" do you even want to start? What business do you want to be in? Why do you want to be in that business? What business will you be best at starting? Do you see what I mean?? It's an amorphous goal and thus no advice will make much sense without making a ton of assumptions.
That said, if you want to "start your own shop" the biggest hurdle is almost always getting the funding (unless your parents are billionaires....). So roles that make you responsible for raising money, closing deals, and otherwise "running" the show will outpower just about everything else. Brokers have insane advantages for this reason. So.... If I were you, work 2-3 years where ever, then assess your career and personal interests at that time. I'd guess the next move will seem intuitive at that point. The best path for one person may not be the best path for someone else!
Whatever you decide, please don’t go into the literary or creative writing field.
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