Is Brokerage Ever The Better Option?
As the title states, is brokerage ever the better option at the institutional level? I’m currently in acquisitions and work closely with many of the top investment sales teams (JLL, CBRE, etc.). A lot of these guys seem to be crushing it, and they appear to have a good amount of autonomy too.
I bring this up because it feels like people often criticize brokerage and glamorize the buy side. But is being an investment sales broker on a top team really that bad? It seems like many of them earn more than the average acquisitions professional. Maybe I’m looking at this the wrong way, but some clarity would be greatly appreciated. Since I’m early into the industry should I keep chugging down the buy side path or consider investment sales if I can get on a great team.
It's the better option if you're confident in your ability to source deals, build deep relationships, communicate, and save funds for a rainy day.
Yes, but with a huge if. You have to be wired that way, and you need to set your personal life up around it. The good ones do a breakfast and lunch 3-4 days a week, and dinner 2-3 nights a week. Layer in travel to go see clients in major markets a few times a year and closing dinners/boondoggles, and you start spending a lot of time away from home. You need a partner that TRULY understands that this is your day-to-day for the next 15+ years. It will impact your ability to coach kids sports teams and other shit, and if you aren't thoughtful about how you set up your life you could wind up with some pretty tough outcomes in your personal life (seen a bunch of divorces, drinking problems, kid issues, etc.).
Lots of people see the money, and not what all goes into being truly elite at that job. There is also a ton of survivorship bias in brokerage too. Need to be comfortable eating what you kill.
It is a great career path for certain types of people with the right set up, but it ain't for everyone. The ones who figure out obviously crush it.
is brokerage pretty much just a sales role? what about the other roles on capital markets/selling teams can u break down the options there
Have seen it go two ways - a great underwriter/pitch deck preparer type can go Analyst -> Associate -> VP but then max out there and that's totally fine they won't make the $1M but definitely could get to $200-$300K with less granular, rinse and repeat type analysis. Seems like you can do this at CB, CW, Nmrk depending on the team. Have also seen at the Institutional level an Analyst that is fighting for deals from Day 1, sources a few and gets bumped up to Director quickly, this can be favored vs the elite execution type Associate depending on the office/team.
Other teams it's pretty much up or out and the second you hit Director, there is going to be immense pressure to source, with a check in likely around Yr 2 of being on the sourcing side and if you are not cutting it, have seen people get let go, even MDs. Some teams will have fixed spits for Director, such as 15% of the net fees, others won't.
My advice is base it a lot more about how that recently promoted Director was treated, there could be a super team where they just churn and burn through Analyst - Associate and if you can't do the VP thing on a top heavy team, you missed the opportunity cost and skill development of being on the buy side.
The institutional side of brokerage is less cold calling but still a sales rale.
on the contrary, switching from acquisitions to brokerage is what allowed me to get involved in coaching kids sports! I have way more autonomy now to block out personal/family time that would never have been possible on the principal side. Although to be fair I think you're moreseo talking about the top grinders in highly competitive T1 markets, which is not me.
Kind of getting sick of this stigma. I see where you’re coming from but I’ve seen way more autonomy on the sell side than buy side. I’ve been in the institutional and private capital side of brokerage. No other part of this industry gives you the freedom I’ve seen. (Besides being an entrepreneur or something of the like). The whole drinking and divorce this is a minor part of any high achieving business ie: law, high finance, Dr’s, everything in between.
I mean, sure. A top earning broker earns more than an average acquisitions person. I'm not entirely sure why that is meaningful.
There is always more money in play when you take risk.
Being a broker is a great job if you have good people skills, are willing to hustle, and are very risk-averse.
It is impossible to give cogent advice without knowing anything about what you want to do, or who you are. If you enjoy the creative aspects of real estate, or the managerial parts of running a building and adding value, you will hate brokerage.
Do you mean "aren't very risk-averse"?
I don't think so?
Brokers take no risk. They are middlemen, leeching a few points off every deal or transaction and adding friction. They aren't fiduciaries, to anyone, they tend to lie readily and without remorse, and if something goes wrong, they don't bear the burden of it.
That makes them risk-averse, unless my language skills have momentarily deserted me
I’ll add that I don’t agree with brokerage being a “sales” job. It really isn’t. BD is a huge part of the job, but your actual job begins after the “sale”. Once you get hired by a tenant/landlord/buyer/seller, now your job begins and you’ve been hired to be their advisor.
fyi - in larger teams and down the line for a succesful broker, the "after" of listing agreement ie the actual sale or securing the lease etc is usually done by someone more junior.
Haha for sure - I’m a broker. Totally get it. At senior levels things shift to relationship maintenance and the middle and junior members do the day to day dealmaking. Not always the case though. Plenty of senior top dogs who are absolutely in the trenches on deals. They’re just bigger deals and what makes their team dominant is that they have lots of big, medium, and small deals going on.
But once you've won the assignment, you've done the only work that actually differentiates you from anyone else.
Every broker says and does exactly the same thing and gets exactly the same result. The days when your rolodex mattered are long gone; brokers do nothing a two decade old MLS system can't do.
The entire job is convincing people you can do a better job than the competition.
It seems like you’re referring exclusively to investment sales brokers with the MLS comment. That could be true. I’ve done some sales but I’m predominantly leasing. Hard disagree that the real work is winning the business. We’re repping a manufacturer on finding/building out a new 100k sf production facility, a non-profit on a large new office HQ and all the space planning that comes with it, among other requirements. What we do isn’t rocket science, but tons of tenant rep requirements are very challenging to solve for and you’re going to get gassed by your client if you don’t know shit.
I’ve seen some serious outlier bids on huge deals. How much of that was the brokerage team vs. how much of that was an institutional caliber buyer making outrageously flawed assumptions? I don’t know but something tells me Marcus and Millichap wouldn’t have found this buyer and this broker working over the buyer from their opening offer to a very quick closing was masterful every step of the way.
Agreed. We sell newly constructed fully leased apartments, the same group of 15-20 buyers will be making the same bid regardless of we pick to list the property. The brokers spend the years leading up to winning the listing building the relationship are trying to provide as much valuable info as possible.
A shop that did not have a presence in debt brokerage approached me for a lead/senior role (but still effective being a broker). I ran numbers up and down, very attractive economics.
But I cannot wrap my head around comes new year, you start with a blank page. You also need to staff/pay junior to some degree even when there is no business and that is more pressure every year. In the best year, I think I can make 5x what I make now but I will have to work for it. In a normal year, I probably make double so it is still great on paper. That said, no one owes you anything on the brokerage side so you will have to work for it. That compares to being a senior investment person at a debt fund, you can dial back a lot more. Unless you really fuck up and not doing your job, it is on autopilot. And you end up making more than most doctors/dentists make just by knowing how to open some excel/argus files and forwarding some emails, pretty good set up if you ask me (half joking, but have gotta admit, our skillsets and network are just so niche and limited that they are probably not that useful outside of our little world).
You described what many business owners go through.
Been on both sides, currently back in brokerage. There are significant pros/cons to each, namely stable W2 income vs. autonomy, but I'm much happier with the autonomy especially with WFH and wanting to spend more time with family.
What ultimately drove me back to brokerage was seeing how much acquisitions was essentially the same job, you're going to be an excel monkey as a junior and on the phones as a senior regardless of what side you're on. I think WSO makes acquisitions out to be some highly sophisticated quantitative role creatively piecing together capital structures in 100 tab models, but in reality your just building relationships and selling yourself/your firm as a buyer, as somebody brokers and owners should reach out to, or as somebody investors should partner with or give money to. Ultimately success in CRE = sales whichever side you're on.
How is the autonomy different if both roles at the top are still heavily sales oriented? Shouldn't both sides have associates/VPs to handle the heavy lifting while you're out chasing business?
The difference is that brokers are 1099 and in my experience are pretty free to do whatever they want as long as they are generating revenue and not being a huge asshole that embarrasses the company, they essentially operate as disparate entrepreneurs under a company umbrella who can team up and work together as much or as little as they want. On the principal side you're more likely to be a cog in a team with uniform rules. As an example I used to work for a broker (pre-COVID when WFH wasn't a really a thing) that hated rush hour traffic and would adjust his schedule so he was arriving at the office before 8am or after 10am and then leaving by 4pm or after 6pm, nobody had a problem with it at all since he had full control of setting in-person meetings and office facetime, and nobody was really relying on him for any collaboration so they wouldn't be delayed or annoyed with him on that days he showed up late. I worked with another broker there that, if he was having a good year, would take the entire month of August off to live at his vacation home and only work a few hours per week replying to urgent emails/calls (again this was pre-COVID when remote work wasn't really a thing yet in CRE). In my experience this type of thing wouldn't fly on the principal side where there are more set guidelines for in-office facetime and roles are generally far more reliant on each other for collaboration/approvals/etc to get shit done.
Are there any business careers where success doesn't = sales?
I look around real estate and everything is sales.
You sell as a broker. If you work in acquisition or origination, you sell your pitch to your team/IC/broker. You sell as analyst: assumptions for underwriting, getting more responsibilities, and eventually promotion. If you do CRE law, past associate level, you have to start doing business development. You sell to investors to raise funds. As a developer, you sell your ideas to the city, investors, gc, etc. Earlier in your career, it is probably less of sales but as you progress to mid-level, I would say a third or half of what you do is sales.
That said, the type of sales and the target that you sell to are very different. I am really good at debt origination (sourcing and structuring and pitching deals to broker/borrower/IC) and raise funds, but I do not have the same skillsets to work in investment sales or to sell my development plan to the city planners.
If you want to stay in real estate and progress, I think you just have to figure out in which settings you are most comfortable to sell.
No, not really. Sales is critical in getting an idea, product, service or investment off the ground. Otherwise if you're not able to actually sell to someone, you're not going to succeed. I mean networking is basically sales, your doing it to get a job or to create a business relationship, build rapport with another party.
And honestly when you've been good at it, people come back to you. You establish a relationship that could be worth your weight in gold. At my old job, the owner was so good at selling that he could sell ice but he could not for the life of him properly run our company. We were always a complete mess. In risk of the lights going out but somehow for the life of him, his sales skills, and the relationships he built were the only thing that would save us from going belly up. He'd easily lure in new investors or new capital into the company or projects so that we could keep going.
For someone like myself who is currently 1 year into being an acquisitions analyst, if I ever want to make the switch is it better to go analyst on buy side to analyst on sell and work up to production? Or should I get enough experience on the buy side to then go right into production if that’s what I want to do?
I ask because it seems like the analyst/associate level in brokerage seems like there’s many hoops you need to jump through to eventually be given the opportunity to produce. A lot of my friends that are/were analysts at brokerages don’t see the light or always wanted to switch to buy side from the beginning. Also - what is the ideal brokerage team setup? One with few producers and few support staff or a juggernaut team?
I think the biggest hurdle to becoming a competent producer is simply the knowledge, credibility, and connections gained through experience. It doesn't need to necessarily be gained on the sell side or principal side, just somewhere relevant within CRE. If you look at the bios of top brokers you'll see a mix of lifelong brokers and people that have spent the bulk of their careers in other areas.
For junior roles within brokerage, you absolutely want to get on a quality team at one of the bigger shops where there will be structure and learning opportunities for junior staff. Smaller groups like M&M have a reputation of just throwing junior staff into the fire making cold calls and then taking over warm leads without giving any real training or growth trajectory.
Brokerage is easier for the avg person than being an investor. Being the BEST at either is the same proposition: you need to sharp and dedicated.
Brokerage is less meritocratic because the actual horsepower to do the job is less. It is a grinding mans game. Similar to any service job. Investing is harder with a longer time horizon and more risk.
Now, if we are talking who is wealthier after a 25 year career, more often than not you will find it is the investor, but that's not because they made more money, its because they were forced to save more. The broker will have earned multiples over the investor, but the broker was subject to a less efficient tax structure and lifestyle creep (which is exactly what would have have happened to the investor had they actually had the cash available to them).
There is no off ramp for the broker, you are only as good as your last deal. The wealthiest brokers I know made all of their WEALTH off of investments or selling a brokerage team that they built. It is just too hard not to buy the big house/golf club membership/new wife/etc.
I know a lot of brokers that can set up their personal corps to shield the tax but the point stands.
Many of my friends in debt brokerage, same age group mid 30s to late 39s, are killers. They generate low to mid 7 figures in revenue annually but they certainly spend like they will continue to make more next year than last for forever. The scary part is that even the late 30s did not really see the impact of the financial crisis as they were too junior at the time to appreciate that their revenue could go from millions to just enough to keep the lights on over night and would stay there for a while.
Your last point was too true! I have seen personal net worth of a few brokers that were involved in deals that I work on. You could never have guessed that based on their casual appearance and no name/place/toy dropping in conversations that they are deep into 8 to even 9 figure net-worth. Bonkers when I see it.
I've definitely seen that as well. I did see a trend though, where they were coming from a family already integrated in real estate whether it was generational or they have a sibling who they partner and have really just built an empire.
Honestly, though it 's a good combination pairing the variable income flow of brokerage with steady dividends from other investments. It certainly beats trying to climb up the food chain on the buyside to get good comp, but there is also the waiting game for deals to be fully executed and realized which is not pairing well with how the economy has been the last few years.
I've gone from institutional analyst -> brokerage analyst -> associate broker on big team -> acquisitions for developer -> back to brokerage (with a mix of trying to syndicate small deals).
Coming from a poor immigrant family, I was wired to be super risk averse, but now after being on both sides I'll never go back to the buy side personally. While there is the stress in income fluctuation, I can't put a price on the autonomy I have while being broker. In brokerage at the end of the day, you're only accountable to yourself. I couldn't stand dealing with team bullshit and make-work projects on the buyside trying to justify my salary. At least when it's slow in brokerage, I can take my dog for a walk in the afternoon. I agree with the above poster that the top brokers don't have a work-life balance, but not everyone is crushing $2.5M/yr; there are a ton of guys making $500K-1M per year with incredible work-life balance. Walk into a brokerage shop on a nice sunny summer day and see how busy it is for yourself.
If you can save up a decent nest egg (+/- 18 months of expenses), then I would recommend taking a stab at brokerage. That said, there are acquisition shops out there that are super entrepreneurial and pay you big bonuses tied to your deals, but at the end of the day someone else is making the decision.
Quibusdam cum exercitationem expedita explicabo ipsam facilis. Vel est beatae fugiat ab sint in suscipit.
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...
Maiores asperiores incidunt nihil ea maiores fugiat. Dignissimos facere quia qui sit. Adipisci eius aliquam ipsam dolorem et ut odit. Enim harum architecto sit culpa ut. Consequatur unde quia nihil sapiente molestiae aut. Occaecati consectetur natus dolorum enim dolor quae fuga.
Impedit doloribus itaque corrupti officia repellat. Sunt rem necessitatibus non itaque qui sint. Ut incidunt error architecto iure.
Officiis temporibus aliquid similique quia et incidunt. Praesentium ut facilis laborum ad non cumque quis ut. Facilis est aut cupiditate officiis et animi. Assumenda enim unde qui quasi delectus dicta voluptatem.