Let's Talk About Broker Compensation
How much do brokers actually pull in?
I'm talking about your net of everything. So you pull in your commission and have a split with the company (anything from HFF/ CBRE to smaller boutique shops). Larger deals typically have multiple hands in the bucket (at least from what I've read- correct me if I'm wrong). So you split with your partner(s). Typically brokers have to source their own business- so after expenses of doing that (maybe it's client dinners, maybe software, etc.)
I am just curious. Comp has been talked about on other threads and I know it can go wildly all over the place. Some lazy broker in the middle of nowhere can make 0, Darcy can make it rain. I'm just curious.
This question applies to both Investment Sales, Leasing, and Debt/ Capital Markets/ Structured Finance.
** Also, where do you see the future of broker compensation? Is the space getting more or less crowded?
You more or less answered your own question - it’s all over the map. Some people make $0 while others make multiple 7 figures. It’s also highly dependant on market - a NYC tenant rep can do a 10,000 square foot deal at $65 per foot over and make a lot more than the Charlotte tenant rep doing a 10,000 square foot deal at $28.50 per foot. It really is a hard question to answer because it’s all over the map. What I can say is it looks like most brokers make a lot of money because it’s self selecting in a sense. If you are not a good sales person you just won’t last making $0 so people wash out. The sales people who have remained, remained because they do / did well.
I'm at my second major brokerage and knowing nothing about the deal besides its size, I would say probably 90-100 bps for a sale and 55-60 bps for the financing. So for example, if you work in IS, you're looking at a bit under $500k in fees and then half to the house. Brokers would take home roughly $250K on that, but if its a team (which it almost always is for that deal size), that is split up between the group (assume the top broker gets half of that?)
I personally think it is a much better time to be a debt broker in terms of comp.
No "retrades". Yes a lender can back out at the last minute, but assuming it is a good deal/numerous bids were made, a lot of the time it's just next man up.
Tons and tons of liquidity in the debt markets.
The best debt brokers know how to raise equity for the sponsor and generally have a great understanding of the capital stack as a whole.
A lot of deals are quite easy, truthfully, and thus the broker and his team can juggle a bunch at once. There is significantly less work for a $50 million refi of a stabilized asset than for a $50 million construction loan.
Just my $.02 but would love for others to chime in on whether they think its more lucrative (speaking very generally) to do debt/equity vs IS.
Yeah agree here. There's a little bit of 'fungability' for difficulty of the deal that comes into play as well. For example, a piece of land/development deal where the broker is going to have to help negotiate things like milestones, entitlements, etc., there will be more effort required than a single tenant net leased sale deal. A multi-tenant business park or portfolio, for example, where there's a lot of effort that needs to go into putting the financial/marketing packages together, would warrant a spread in fee as well. Generally speaking though, at least in my markets, you see something like (deal size on left; commission on right):
0-15 M; 2.5-3% 15-50 M; 1.5-2.5% 50-100; 0.75-1.5% 100M+; have seen as low as 30/35 bps on the massive stuff up to about 0.75 on the stuff closer to 100M. Some exceptions to the rule are not exceptionally rare (i.e., I've sometimes seen a point or more on 100M+ under certain circumstances).
Then obviously there's anywhere from 30-50% of that which the brokerage shop keeps. The rest gets divided among the brokerage team(s) depending on pre-negotiated split agreements.
Aside from the top 3-5 people in a given market/specialty, most brokers rarely exceed a net income average of 350k a year (pre tax). I would say most good brokers fall into the 100k-200k a year range. Sure, some brokers may be hot for a couple of years, but the good years must carry you through the bad years. A lot of "top" brokers live in fairly modest homes. Every year begins at zero.
You can count on one hand the brokers who fly private. For most, it's a decent way to make low six figures but not much more than that.
Disagree strongly on this. Are you talking about residential? If so then I agree. On the commercial side, there are a lot of people that make a lot of money on both the leasing and sales side.
Let me clarify here. Let's say you have a team of 5 people (a lot of the big investment sales teams will be bigger headcount). A senior broker (MD/VP, similar title), a junior broker (associate), an analyst, a client services person (who sort of works as an 'ops' manager), and a graphics designer/admin. Let's say that team brings in $2 M in fees, gross. So the splits will probably be a little bit more favorable than 50/50, but lets use 50/50 for this example. So obviously $1 M net to the team. Let's say the analyst, client services person and the graphics person are all salary/bonus, with the associate and the senior broker on straight commission (most of the big shops don't offer draws anymore just FYI... very few do this anymore). So the firm has made $1 M in fees from the splits - let's say the analyst makes $75K salary, the client services person makes 60K, and the graphics/admin makes 45K. So 180K in 'overhead'. That will often come out of the brokerage/firm's $1M, so they are left with 820K in revenue. Then, of the $1M in net commission to the team, let's say that $80K is put aside for bonuses between the three salaried people (maybe like 30-40K for the analyst, 20-30 for the client services, and ~10 ish for the designer/admin). So 920K left for the two producers, then let's say it's a 80/20 split between the senior and junior broker. So senior broker makes $736K and junior guy makes $184K.
Important to note though, brokerage firms constantly assess the profitability of the team. So they will probably float the boat for a little while in an unprofitable year, but they aren't going to cover the 180K into perpetuity, they need to see an ROI fairly quickly.
OK - I wasn't going to respond to your other post because I didn't want to come off dickish, but if you insist on putting out misinformation, 2 things here:
Unless you're in a very low COL market, if your senior broker was only clearing 1M, I got news for you, it's not a top team. Don't get me wrong, he's very successful and I'm sure you were as well, but there is a substantial subset of brokers making more than 2M/year.
Again, at ONE FIRM in southern CA, I can name 9 people just in the industrial leasing specialty who regularly clear 1M in fees, and I know, at the same firm, that 3-4 of them REGULARLY clear 2M in fees per year. Granted, industrial has been on fire, but again, that's at one firm.... and it's not even the top firm in the space. Again, I'm not saying there are 500 people running around in a specialty making stupid money, but there are far more than 'a handful', to which you keep alluding.
I'm not sure how you extrapolated from the above example I gave that there are 5 people in a market/specialty that do well.... That was a made-up team and I used a round $2M to make the math easier to follow.
Honestly see PacNumber 's post below..... Not just me saying it.
Debt and Equity Broker here. We'll do anywhere from $350MM to $1Billion/year (that was an amazing year) in deals, netting between $3.5MM to $10MM in commissions with a team of less than 10. There's no denying its far and few between of firms that can match that especially for our size, but what doesn't seem to be getting mentioned in this forum is repeat clients.
I can say with confidence that 90% of our deals come from the same 5-10 repeat clients. These are either smaller private-equity funds who are always needing acquisition financing, or family offices looking for refinances, investment firms with $50-$250MM in AUM, etc.
I know talking about networking is like beating a dead horse, but it really is the key to being a broker. Starting charity golf tournaments with clients and lenders. Taking clients out on vacation or to sports games with great seats, etc. You're not just building professional relationships, you're building friendships. Its your friends that will stick with you through all kinds of economic cycles, even when other firms try to discount their fee and win their business.
ALSO -- Reading and negotiating loan docs. I don't think enough can be said for that. Our job, no matter how high the fees may be, is a service job that can be ~80% handled by AI and automation in the future. However, the negotiation of loan docs with Borrower and Lender's counsel is where a D/E broker should really prove their worth. Being able to negotiate the terms and get into the weeds of the deal, regardless of what the coupon may be, can make or break the deal for your client. It also often leads to repeat business.