Niche Sector - Opportunity or Self-Silo’ing?
Currently work in multifamily and have been approached with a role in a niche product (think specialized retail, etc.). Straight up main temptation here is compensation, would be nearly a $75k total pay increase. At 5-7 year mark for multi at ~director level.
However I am worried it may be short sighted going from a hot, “name brand” sector to a niche product that may be harder to capitalize on towards the end of my career.
The goal is to start building my own portfolio within the next 5 years and the limitation is capital, like everyone (come from a very middle class background). Apartments just seem like a very easy sell by comparison if I ever were to raise capital from F&F / start my own firm. I say all this with the understanding it’s extremely difficult to get to end game but that’s where I strive to be.
My ideal scenario is take the pay bump as a way to build wealth faster, as well as learn new skills in a new asset type, and parlay that back to multi eventually.
Am I being short sighted? Should I stay in the multi space and wait for the VP or higher level after a few more years? Or take the risk? Thank you in advance.
In my experience working for a few different firms (ranging from $500M AUM to $50B AUM) it’s much easier to fundraise as a nobody in a niche sector than it is in an established sector in which you have much more institutional competition. Takes less for you to stand out and get to the top of the pack - in multifamily, why would an investor choose a small operator with no track record when there are 100’s of firms to choose from that have been doing it for decades? You will either need a really strong relationship with a capital provider(s), below market fees, or find and tie up a remarkable deal for someone to justify choosing you over one of the large players. None of which are easy to do.
Compared to say self storage - lots of unknown developers were able to secure equity from institutional capital over the past 5-10 years as a result of there not being a ton of institutional sponsors for LPs to give money to. Had these sponsors focused on a less-niche sector, I doubt they would have achieved the same success.
In your situation I would ask yourself what the long term outlook is on your niche sector (ie. is it going to continue to grow in the foreseeable future?). Also, do you think you’d enjoy it? Despite the fast growth of self storage, I found it a bit mundane and couldn’t see myself devoting my career to it.
Honestly man all the fellas who have made shit tonnes of money have done so from specialising in a niche and riding the wave. Every sector eventually has its day in the sun and retail (at least in Europe) is on the up. It definitely gives you the ability to hone the trade and specialise which will actually give you good optionality.
If it doesn’t work out you can always return to Multi
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