Money vs. Experience


At the beginning of every year I always think of the classic debate, money vs. experience.

In Real Estate, many of us have gotten in with the dream of owning our own portfolio. However, sometimes the pay in Real Estate is significantly lower than other career paths (IB, PE etc.) and I often wonder what is the best path forward towards having your own portfolio.

Real Estate is something where experience matters significantly, however is also capital intensive to own, so in the ideal world if you could get both experience and money in your current role that would be best (although in reality sometimes you trade one for the other).

Which do you guys think is more important? Is it money to start doing your own deals or is it the experience?

My thought has recently been leaning towards money, as it is easier to tie up deals and you don't need to be as creative to start doing deals. In this day an age, I believe real estate has changed with the amount of information available - going back 30-50 years ago (in my opinion) you could be extremely creative due to the lack of available information. Real Estate players could seek out great opportunities with less capital if they were experienced, which I am not sure is the same case anymore.

Even with a lot of experience in this day and age, you still need some sliver equity as a GP / operator to have investors come alongside you, which can be a significant amount of money (i.e. 20% equity in a $5M deal with 60% LTV is still 300K).

Wanted to get some thoughts as I constantly struggle with this debate. Would love to hear from people's own experience or what they have seen other's do.



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Comments (3)

  • Analyst 1 in RE - Comm
Jan 4, 2022 - 2:12pm

From speaking with people in the industry about entrepreneurship I've always heard opinions that are polar opposites in nature. I either get feedback that says 1) get the knowledge and expertise. The money is out there and isn't the issue 2) money IS the issue. Never really hear a middle ground. What I said doesn't add much value to this discussion, but thought I'd chime in with what I've heard.

Also, question: Isn't GP equity in a deal more like 5-10%?

Jan 5, 2022 - 3:22pm
REmonkey2, what's your opinion? Comment below:

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