Let's Talk About the Pros and Cons of our Gigs in RE Finance
I'm not trying to rehash the debate about where the best place to start is or what career path within RE is the most promising. I just would like the community to layout their position and what they feel the pros and cons of their current situations are.
Extremely eager to hear what the various I-Sales brokers, debt and equity placement agents, true REIB (M&A / Capital Raising) bankers, REIT associates/analysts and GP/LP investors and developers like about their role in the RE industry and what they wish they didn't have to deal with as much.
For Example:
Role: Owner-Operator with multiple PE fund series
PROS
Ability to understand the deal process from cradle to grave. Experience in formulating value-add business plans as well as tons of experience in direct acquisitions on more stabilized, high-yield properties. Feel like I could go anywhere from working for a GP developer to a strictly LP-side investor. Additionally, great starting salary and bonus potential.
CONS
I spend a lot of fucking time talking to lawyers, bureaucrats and environmental consultants. Leasing and PM work can be a major drag. The operating side of the business is a lot more granular than the ownership side of the business. Sometimes I wish I could just throw money out of the door and rely on the GP to get into the weeds with lawyers and PCA consultants.
Current Role: Fund Manager of a rolling value-add fund series.
The Good: After spending enough years deep in the weeds of building out excel models and laboring away on IC decks it's nice to have an analyst team to cover that while I focus on the high level. Feels great to present at our quarterly meeting when our fund beats expectations. Also enjoy business development initiatives of going out to dinner with different brokerage teams. Get a lot of good whiskey sent to me after deal closings too, which is always nice.
The Bad: Overseeing administrative work for the fund can be a hassle. I spend a lot of time meeting with our accountants and dealing with tax matters.
The Ugly: Investors. Road show after road show, red eye after red eye to try and bag new investors and expand the size of the next fund gets brutal.
Looks like the thread title changed as I was typing my submission. Not sure if it's relevant, but this is a cool idea @LReed", hope it takes off.
Role: NYC broker (6 years, IS + some recent tenant rep office assignments)
PROS:
CONS:
I’m sure I’ll think of more over the weekend.
I think this is a pretty good thread idea
Real Estate Investment Banking Analyst (the type that does equity offerings / M&A)
PROS:
Wide variety of transaction type (private entity level capital raises, portfolio asset sales, JV Equity Raises, Initial Public offerings, private debt financings, sale lease-backs) across almost every property type. This is the biggest pro for me especially considering you can work on both asset level and entity level deals
Few straightforward deals. Most deals are major strategic moves for the company
Higher pay than almost every entry level real estate role
At most investment banks, real estate is one of the more laid back coverage groups. You'll work less hours than the traditional groups for the same pay
You don't have to explain to people that you work in real estate. Just say you're an investment banker
REPE Recruiters will take you more seriously solely because of your job title
Cons:
Idea / relationship books. Basically you put together a presentation outlining a deal a company could do or you give them a market update book on the property type they cover. Mainly for relationship building. Hopefully this company will let you sell 10% of the shares on their next follow-on offering
Work on fewer deals than your typical real estate analyst. I think this is a fair trade-off given the complexity of the deals
Typical banking cons
Will never work on Argus which is a deal breaker for some buy-side firms
Pro:
1) Steady paycheck that pays the bills handsomely.
2) 100 years ago I'd be shoveling hay in the hot sun.
Con:
1) Self-imposed prison. Slave to the job. Slave to the bills. Wonder if I will look back on my deathbed at the decades of cubicle drudgery wondering if I could have done more with my life.
You ok, man?
ROLE: Real Estate Development Manager
PRODUCT TYPE: Multifamily & Mixed-Use
PROS:
I love being the quarterback of the team - getting the best architect, contractor, property management team, etc. you can afford and guiding their expertise to deliver a product you envisioned. You feel outrageously accomplished, proud of your team, and...
The product of your work is permanent (or at least mostly permanent.) I can always look at a building and know that I was responsible for its existence. Even better if you can look at a neighborhood and compare how it is now versus how it was when you bought the land and see bustling communities versus abandoned crap.
I like that the job changes. From finding land, to modeling a deal, to closing, to design, to the construction process, to lease up, to disposition - your goals, objectives, and day to day tasks change say from quarter to quarter, ensuring that at no point are you doing the same thing day after day after day after day after day for long.
CONS:
95% of multifamily is boring as sin commodity product that all looks the same (Google "Developer Modern") and has 95% of the same features/fixtures/finishes. Any innovation or uniqueness is VEed out unless it's ultra-luxury like a town center deal I did that I love or a high rise that other people in my company developed. Hitting singles is boring.
At my company, the project is never fully yours. You can always get overruled by the owners, often to the detriment of the budget you're tasked with keeping.
Similarly - and this is a small company issue more than anything - there is a lot of bitch work because I don't have a team of analysts to do the blocking and tackling. I'm out there trying to block for my own touchdown passes, which is exhausting. First world problems, sure, but it gets old.
Role: Debt & Structured Finance (hybrid VP/Analyst) for primarily MF/mixed-use. I work with the MB's to close their deals.
Pros: - Deal Flow is tremendous. In 2018 alone, I reviewed 270+deals and almost 60 of them ended up closing. Total volume was over $1B - Viewing deals all over the US from BFE to Seattle/San Fran - Get to see the good operators and bad operators. Lots of value add players. Good deals and bad deals - Get exposed to all kinds of scenarios...TIFs, Tax abatements, Ground leases, Flood Zones, High crime, etc. It's awesome to be exposed to how lenders view the above and how to structure around them - Growing ability to multi-task a million different things all the time.
Cons: - Some of the idiots involved in Mortgage Banking just baffle me. Also majority throw temper tantrums when the deal implodes cause they failed to adequately source potential issues. They will push you and bullshit there way to get you to think their deal is not shitty. - Explaining to both how a 4.25% cap rate on a 1960s vintage value-add deal in a so-so midwest small market is unrealistic. - Dealing with angry LifeStyle Clients who don't know shit and still think they should get 80% LTV + build up for a deal in a high crime area where they are budgeting R&M at unrealistically low numbers gets old. - I am the analyst and manager, so I am fielding the phone calls, selling to loan committees, working the powers to get the deal done...while also building the models, running the basics and doing the analyst job.
Not a lot of representation from the direct lending side so far, so I will chime in.
Role- Associate at a mid size bank that has a national & an international presence. I focus on originations, work on all product types nationwide. I have one year of RE finance experience, a MSRE, and graduated from college four years ago.
Pros
Pay- I have absolutely zero complaints. I am paid very well and in fact I think I am paid about $15-20K above market. In my view, with the debt side (particularly mid size and large banks) more so than the development or REPE side, you will see some slips through the cracks where you will have some people making above market pay. The banks are either willing to pay more to retain talent (lots of 20+year veterans at many banks), dont care that they are paying more than they should or dont know what's market pay. The development or REPE side of the business often have very lean groups and due to the nature of their business model, there can be absolutely no room for people making above market pay.
Quality of Life- When I was a intern and an analyst, I worked my butt off, worked 80-100 hour weeks, stayed past midnight and worked on the weekends frequently. Now, as an associate, I already see the light at the end of the tunnel. I now work 50-55 hour weeks and the days where I can work 40 hours are not that far away. So, from a quality of life and pay from a $/hr perspective, the higher up you are in the debt side, this is a great gig.
Deal Flow- The amount of deal flow you are exposed to on the debt side especially at mid size and large banks is crazy. I take a look at one or two new deals every day. This deal flow helps me build experiences, stories and relationships. I often write down interesting things I learnt on every deal in my evernote folder. This gives me talking points if I were to ever interview at some other place. The deal flow I am exposed to across product types and geographies means I can interview for a corporate real estate position, a data center REIT (I have financed 4 data centers in the last six months), or a hospitality shop (which is a third of my business).
Cons
The cons are tied to the pros.
**Pay ** While I love my pay, have a way higher base than my peers, I also recognize that my upside is limited. Development and REPE offers better upside. If that matters to you, you should work in development or REPE. For the lifestyle I want to live and my goals the debt side is a perfect fit and if I play my cards right, I am looking at making a $200K base very soon and the pay can only go up from there but this is way more than I need for my lifestyle.
**Monotony ** Some parts of the debt side especially underwriting and asset management can bore you death after a while especially if have your systems down to make you more efficient. Its just rinse and repeat deal after deal, day in and day out for years. Originations offers you a little more variety. I am a deal junkie, I enjoy working on new deals every day and moving onto the next on, so originations is a better fit for me.
ROLE: partner, real estate development. Very small two man shop.
PROS: 1. Lifestyle. Very much a get-it-done on your own terms environment. Wear whatever I want, work wherever I want. Major flexibility to travel/work remote, do something in the middle of the day if I'm not buried, take time off without any approvals, etc. 2. Exposure to variety. Development guys know it's all about deal exposure. Similar to any small team, I get to be involved in every single component of the deal: underwriting/due diligence, design, entitlement meetings, financing programs, broker interaction, etc. 3. Intellectual challenge. This is the first time I've been in a position where I realize if I can't figure something out, nobody else is going to do it. That environment really forces you to learn on the fly and figure out tough situations, which is probably the most fun part. 4. Decision making and future potential. It's exciting to be in on the ground floor, responsible for a lot of decision making that directly impacts these long-standing projects. Pumped to see where the venture takes us. 5. Good comp with promote upside.
CONS 1. Cyclical hours. Right now I am in a pretty manageable stretch where I'm only working 8-10 hours per day, maybe 2-3 on weekends. First three months straight were 75+ hrs/week pretty much straight through. Small shop = amplified ups and downs. 2. Administrative BS. I am a principal, but also the secretary, photo copier, excel monkey, HR employee, etc. There is a ton of admin crap that makes you want to put a shotgun in your mouth. But, it is honestly kind of humbling and keep you in check, which I like. 3. Stress. A lot more stressed than prior jobs, since the actual trajectory of my career is at stake.