IB analyst vs RE analyst (acquisitions)?
What is the better path? I am in the middle of these two options and want to get everyone’s opinion on these two career paths. Income? Quality of life? and my goal would be to eventually start my own fund.
The IB option is at a boutique.
any suggestions help!
I think that you, along with so many students on here, are making a classic misstep in your approach to choosing a career in asking about comp and workload. These are two similar, yet very different career paths. If you're willing to put in the work for either, then the question shouldn't be about compensation. You need to ask yourself what you're more interested in.
Do you want to have an intricate understanding of corporate finance, corporate-level strategy, and M&A transactions while learning the (undeniably more sophisticated) associated investment skillset? Go with IB.
Are you more interested in what makes cities tick, how they are planned, how to know what type of building is a good fit for an area and when/why to build it, what makes one building worth more than another seemingly identical building, and how you can make changes to improve your investment? Go with CRE.
All the money in the world won't make a difference if you find the work mind numbing. I love CRE because I love knowing I'm playing a part in shaping the world I live in and am fascinated by the way cities are planned and how opportunity is discovered in this industry, and being able to go walk through a building I/my fund owns was exciting to me. I loved the complexity of corporate finance, but ultimately I felt I'd get more satisfaction out of investing in real estate than in companies nobody has ever heard of in PE (from the perspective of starting my own fund, I was realistic in that I likely wouldn't be buying any Fortune 500 companies).
The finance side of it is admittedly much less complex than corporate finance, so if you're looking for a challenge in the numbers CRE may not be for you (unless you're at an REPE shop focused on entity-level investments).
TLDR - Go with what you're passionate about.
Really appreciate this post. I am much more passionate about CRE and my dream is to start my own REPE fund.
I am actually coming from the technology space and worked towards VC, but didn’t like that mentality of investment. I resonate more with RE because (like you said) it’s a tangible asset, you can see a history of financials, adjust value drivers and you can see your impact on the community. Unlike early stage VC where you are using a point system for valuations.
I know it’s a lot to ask, but would love to connect sometime and learn about what you did to be able to get your own fund going. Not sure if you’d be willing?
Sorry, I was speaking in hypotheticals - haven't started my own fund (yet)! I'm actually relatively new to the industry as I lateraled from another industry as well. Just wanted to share some advice from my own experience.
I've always had a passion for real estate but grew up in a city where it was entirely family-owned development shops, I had no idea what networking was, and went to a non-target school, so I made excuses like "I'll make just as much money doing working in X, Y or Z industry and can work 40 hour weeks, so it's fine if I don't go for what I truly want". That was one of the biggest mistakes I've ever made, and I hated my job for 2 years. I love what I do now.
Ultimately though, its okay to not be sure what you want to do either. The vast majority of people don't REALLY know what they want to do and don't figure it out until they're half way through their career (if they ever do). If you're not 100% on real estate, I'll be completely honest, IB is a safer option as it leaves a lot more doors open. Once you're in CRE I think it is tough to get out. It's a very specialized skillset.
So CREnadian said it pretty well above, Go with what you're passionate about.
Still, the fact that you are asking makes me think you may have some honest 'indifference', and that is okay. I am assuming you are either graduating soon or otherwise very early career, it is difficult to actually know what you are 'passionate' about when it comes to industries at this stage. (Not to offend the WSO community, but all those HS'ers who have their 'path' figured out kinda make me laugh, life and careers rarely work like that. But I wish them well!).
In general, comp in IB is higher by quality of life is lower when compared to CRE, that should not be news to you.
So here is my general observation (I work in NYC, so factor by base of people around me)...
People in CRE (regardless of firm/field/role) generally WANT to be there, and generally are not trying to leave CRE (get better jobs, firms, pay of course... but most want to stay, but this is not 100%). People in IB seem to ALWAYS want to leave, they get burnt out, bored, or otherwise hate the culture. IB is all about the 'exit ops', go figure.... but that is code for 'this sucks, hopefully tomorrow will be better, and I'll be richer'. The mercenary culture of IB is real, some do LOVE it, but a lot don't.
Does that mean you should do the RE-Acq analyst role over the IB analyst role? Not necessarily, IB analyst roles can teach you tons. Great training ground, and maybe you love it. I will say, its easier to go from IB analyst to CRE, than the other way around.
Good problem you have here! Good luck!
I'll take a stab at this given that I've done both so far. Started off my career in Real Estate IB at a MM, before transitioning to REPE on the GP side. Happy to answer one offs as well.
Summary version:
IB will make you technically sound and efficient in ways REPE will not (at least from a 2 year perspective) and will expose you to every property type and transaction under the sun (capital raise, recap, privatization, etc). You will also be well paid. If you transitioned to REPE after, you will be well positioned. This comes at the cost of: lifestyle, morale and for some, mental health. Your life is on temporary pause as it can be tough to keep up with family, college / HS buddies, make new friends and potentially date all at once. You have to pick and choose how to spend your limited and unpredictable free time.
RE Acquisitions - will make you a better RE guy but your finance understanding will take much longer to develop. You will likely be less technically sound compared to an IB guy, but can counter that with RE knowledge and soft skills (RE is very relationship driven). Life style is much better. Pay, I didn't take a huge cut but coming from banking helped. If I did not do banking first, unknown how this would've been affected.
Long Version
Banking
Pros: Modeling is top notch. My current REPE boss / firm thinks that I am a "quant" / freak given my excel skills learned from IB. This has translated over to him having confidence in my work and allowing me to take more responsibilities.
Quality of work: Sounds like a small thing, but quality of work coming out of banking is just different. Noticing every little thing / knowing how to create slides content wise, in a coherent order and relatively visually appealing just stands out on the REPE side.
Understanding capital structures: whether it is a bespoke common JV equity, pref equity or mezz, I saw it all in banking which has helped on the REPE side when understanding deal structures with an LP now and then how to model it.
Exposure - I saw every major and niche property type on the public and private market sides in IB. Quickly figured out which property types I enjoyed, which bored me and which I absolutely hated. This allowed me to tailor my recruiting over to the REPE side. I also saw the different RE roles out there and which would interest me post IB. Lastly, personalities. I worked with a ton of different bosses and clients in IB and quickly learned which types of people I enjoyed working under and which I despised. While this is possible in most jobs, banking amplifies this given the amount of hours you work compared to most.
Cons: Hours and Unpredictability. I never really knew if I was going to get torched on a weekday night or weekend. This made lifestyle pretty tough and impossible to plan events with college buddies in different cities. Banking burns some people out and some pretty badly. Be careful of this and make sure you fully address this while in IB and before you take your next job.
As a corollary, your time is less respected in IB because you're the client servicer not the client.
Additionally, you understand high level RE, but really you're a finance guy with a heavy RE flavor not a RE guy. This makes being on the GP Repe side a bit tougher because I'm learning more of the nuts and bolts of RE, construction and more. This is my weakness that I am trying to actively improve upon.
RE Acquisitions
Pros:
Lifestyle and Hours. I work anywhere from 45-60 hours a week with relative predictability when hours will spike. Only weekend work when there's a live deal with an LP ready to close soon. I can travel more for fun and work remotely (helps my boss is cool about that).
Pay: Base is relatively the same and bonus is more variable now. I'm guessing I will make less this year due to COVID19, but on a "busy year" I would come pretty close to or just below IB despite working significantly fewer hours.
I enjoy the work (sometimes can get stale) but am relatively refreshed each week and there is a clear path to promotion at my firm. This experience translates nicely over to if I ever wanted to start my own fund.
Cons:
The caliber of people you work with is much more variable in RE. Some brokers are idiots, Property Managers can be lazy or just not "get it" from a finance / ownership side. Same with some AM. Smart / driven people stand out.
Not sure if a con, but I focus primarily on acquisitions on one property type albeit different markets. In banking, you work on all property types ranging from privatizations, cap raises, recaps etc. Some variety is nice occasionally.
Summary
All in all, banking helped a ton and set me up for success. Like most, I was miserable occasionally and usually stressed but I was fairly compensated and learned a ton. Knowing my career path, would I do it again? Jury is still out but it's nice having IB people now I can ping for deals or advise. Maybe I would've started on the LP side first instead of IB or worked for a Pru or Metlife on the debt / equity side.
So I guess my question for you is.. if my end goal is REPE, should I go IB or RE? In Michigan, we have a lot of boutique IBs or from a RE perspective Bedrock is the most ideal place.
Here's how I would look at it man.
Is the boutique IB legit? My write up was based upon a MM bank that is known. It would likely hold true to an EB or BB as well. If the boutique really isn't well known or legit, you might be wasting your time, especially if you aren't getting paid like IB. There is huge variability in the boutique world.
Is the IB role REIB? If not and it's a no to the above question, that hurts.
The RE role, is it on the GP or LP side? If on the LP side, there could be a more formal process for promotion and learning and you'll see more property types out the gate.
The RE role, are you working with smart people with an impressive track record. If so, then maybe you can start directly here while learning a ton.
I think there are two outcomes I would consider without knowing specifics or family situations. However, also looking at large cities will help more (Philly, Boston, NYC etc.)
In a similar position, but considering going MBA to one of these two...Interested to hear anymore feedback, but the comments so far have been very thorough and insightful.
are you doing your undergrad? or is this a bit of a career transition?
my bad on the late reply, but it would be a career transition for me
This has been answered pretty well in other replies, but I'll offer one more data point you may benefit from. In general, you need to consider the opportunity cost when comparing IB vs any alternative. You get one shot at becoming an investment banking analyst and it has to happen coming out of undergrad (with very, very few exceptions). I can't speak to the CRE side, but my sense is it's much more likely to go from IB to CRE (acquisitions) than the other way around 2 years down the road. IB will credentialize you in a way that is hard to replicate elsewhere. Just my 2 cents.
Edit: I'm also speaking specifically to the IB analyst experience, where you'll develop the most technical skills. If you're talking about a post-MBA associate level role then that changes things.
This is true IF you work at a reputable shop. So in the context of OP, it really comes down to the deals the boutique he's got an offer at are doing. If they're just a no-name shop in a tertiary market then that's not going to mean anything to future employers.
Of course if we're talking BB/EB-tier, absolutely agreed - if there's any uncertainty on OPs part then the IB route is safer and much easier to transition from.
100% agree. I would say BB, EB and then also "elite" regionals like BlackArch are definitely in the category of reputable shops.
The scenario I am going through is a jump from a post MBA, Enterprise technology sales career to IB (boutique). Specific advice around that would be helpful!
This is a totally different scenario. You're basically comparing career banking at a regional shop vs CRE acquisitions. I would be strongly in favor of the latter for a couple of reasons. For one thing, the exit opportunities are much narrower for someone who only has post-MBA experience - best case scenario maybe become a CFO for a public company. Also, the economics of a career in banking at a bulge bracket in NYC are drastically different than working in, say, Little Rock, Arkansas. Your upside is diminished with marginally better quality of life - it's just not a great trade.
I don't work in CRE, but if you actually have the opportunity to build the acquisitions skillset this is going to provide better options down the road in my opinion. At the end of the day you're choosing between two very narrow paths, but given that we're not talking about Goldman or Morgan Stanley, I would go with something in CRE. High finance, and specifically IB and PE, is a space that is obsessed with pedigree and this extends to the brand name of the bank you work for. Unless this is some sort of elite-tier boutique I can almost guarantee you won't easily go from that to starting your own fund one day.
I agree for the long term, I didn’t realize the difference in pay for CRE acquisitions analyst / investment analyst vs investment banking analyst in pay. The CRE role was only paying 60k max
I've only become familiar with CRE very recently, but I've learned the starting pay is really not the best indicator of whether or not to pursue a career in acquisitions (or development). CRE entry level roles start at shockingly low comp but ramp up quickly to something north of $100k all in within 2-3 years from what I've heard. I wouldn't get caught up in year 1 comp.
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