If I want to make $1m a year is REPE or Development better?
Title says it all. I work in development and love real estate, so no I’m not going to try to break into IB. And for what it’s worth I’d love to start my own shop one day. That being said if one’s goal was to make $1m a year would it be easier done in REPE or Development?
Both have the capability to make you more than $1m annually.
I know this will come off negatively, and I don’t mean it to, but if you have to ask this question, I don’t think development will be the path for you. If you work in this industry, you know that you can make a fuck ton of money in both, but development is going to be higher risk and higher reward. Asking the question to me, gives off a sense that you want a secure path to that bag. So, I just advise you truly understand what it is you’re looking for in terms of risk, payout, and WLB.
I think you know that REPE can get you there, but you’ll have to sell your soul and grind it out for a long haul before you get there. You’ll definitely have to work hard, and put in the hours to have that success in development, but it’s a lot more self driven, and uncertain. Can you network your ass off, build relations, and take risks to build your resume and your own portfolio while you’re young? The founder of my dev shop started his business at 23, he’s in his forties and made a wild amount of money. But, there was a lot of risk. And it can be entirely out of your hands - look at todays market. You could have done everything right, and if you took on recourse loans, like you probably will have to at the start of your personal dev career, market turns, you’re fucked, and that’s going to stick with you for a while. It’s just like a startup, but more competitive.
Now, if you’re talking about working for an existing dev shop, there’s less risk, and that may be more on par with what you’d see at a REPE shop, in the sense that your big pay days are tied to capital events and actually delivering project results. But, in REPE you’re going to have much higher salary, and more consistent bonuses up until you reach a level in your company where you get paid significant carry, not just a project agnostic bonus. The trade off there is going to be WLB.
It isn't about where you make more. It's about the risk you're willing to take to do it.
REPE is a long and crowded ladder to the top, and often looks pretty soulless to me (though I'm biased, since I'm mostly a developer). But the checks are good, and come in when they're supposed to, and there is a way to grind to the top without taking any real risk. My guess is the median person in REPE is making better money than the median person in development.
Development entails a ton of risk, and if you don't have the stomach for that, you are likely capped at a certain compensation level, because the people who do take all the risk literally cannot afford to give out so much carry that they aren't being compensated for the real risk that they're taking. Where development has major, major upside over REPE is that it is far far easier to go out and hang your own shingle and own everything (including the risk, of course). Even a couple small deals that you self-perform, or mostly self-perform, will earn you way more than working for someone else in either REPE or at a big developer.
But not everyone has the stomach to personally guarantee a construction loan, or to pour hundreds of thousands of dollars of their life savings into a pit in the ground for predevelopment expenses that may never get returned. Which isn't a personal failing, at all. But there are far more exceptionally wealthy developers than there are fund managers, and that's a direct reflection of the fact that after a certain point, development entails risk and private equity doesn't, and real estate is one of the few industries which still has some kind of sane relationship between risk and pay.
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