Real Estate Private Equity - First Job
Hi everyone,
I recently accepted a job working for a real estate private equity firm in the south which is in a secondary market. The firm is small ( think 4-5 people) and very young (
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If you didn't say small, I'd ask if you work where I interned this past summer. You're giving me flashbacks of being voluntarily poor for 4 months.
Pay is relative though. What are your responsibilities? What city are we talking? It is definitely low, don't get me wrong, but depending on your city that could be "market" for an analyst with no experience in your city. The important thing in real estate is that experience and the connections you make from it, so in 6-12 months, you can always look for a new job with a much more normalized salary.
Thanks CRE for the advice. I don't want to give out too much info but its a large city in Texas. Right now I work directly under the Director of Operations and I'm just learning the lingo and my job responsibilities are all over the place it seems. Its a very small firm so people "change hats" quite often. Yep, I've come to the same conclusion that you did. I'll give it 6-12 months. What do you think a normalized salary would look like for my region?
Pay depends on market/product type/volume/size of company. With it being such a new and small shop I'm not surprised by the pay. A lot of shops that size/age contract out their analysis.
For the opportunity to get PE experience right out of school I'd be more than happy with the pay. Considering the relative difficulty to break into the investment side of the industry at such a young age you're in a good place. Many people spend a couple years as a research analyst or broker then have to hustle into a PE role, assuming they have the cred/connections to do so. If they don't have the cred/connections they end up back in B school.
There is a ton of awesome and free information about RE investing and finance online. I would start by simply doing a google search (or a search on these forums) for basic financial theory and modeling info. Since each investment/development is negotiated/structured differently, a lot of your learning will be on the job; but that's OK because it's the most valuable type of learning anyway, IMO. The following are basics and should get you started: cap rates, NOI, return on cost, IRR, cash on cash returns, discount rates, time value of money, debt service coverage ratio (DSCR), loan to value, equity joint ventures and general partners in (RE) investing, discounted cash flow (DCF) analysis, and understand how loans are amortized.
As far as career advice is concerned, I would run with this opportunity. Grind it out for a couple years while networking with other people in different areas of RE. Learn from the people you meet where you'd like to end up. A larger PE firm, REIT, or development firm would be logical moves after a couple of years, although not the only ones. Perhaps your current role will turn into something too. You never know.
Thanks Coolhandlucas for the advice. Yeah, I'm going to grind it out and learn as much as I can. On one level it hurts to think I spent so much time in school only to graduate and get a job which pays significantly less than what my brother who has no college degree makes but this is an excellent learning opportunity which I haven't seen available elsewhere to someone with my background and no experience.
Real Estate salaries are never the best though because getting a salary isn't a goal. You want to get the experience and connections and then head out on your own
They are paying you what they are paying you because they likely can't afford much more. It may stay that way for a long time. It's good initial experience but if they haven't given you a raise after a year I would get out.
I wouldn't call this REPE, sounds more like a few guys raising money from family and friends to flip properties.
I started my career in TX almost a decade ago and my first job out of school (appraisal) had a starting draw that came out close to that level. However, once I went straight fee (about 6 weeks in), I was doing way better than that - close to 2x).
You said secondary market, so I'm assuming SA or Ausin. For those markets you are still probably underpaid a bit. But since you have no experience, if you can hang in there and get some contacts it might not be the worse thing in the world
Thanks for the advice. Yes, I'm going to be hanging in here for 6-12 months. There is virtually 0% chance I'll be making 2x what I'm making now in 6 weeks. My plan right now is to learn as much as I can, read linnemann, and get better at excel modeling. I've been perusing job requirements for other analyst jobs in REPE to the best of my limited knowledge and it seems like many firms want you to know Argus. I'm not sure if this firm uses that so I'll have to ask. I do know they use ResiModel (if anyone's heard of that) and I'll get some training on that.
Again, my plan is to get some actual leverage through experience so I can market myself down the road if I won't be compensated at a normal level with this firm.
I'd look at the position as somewhat of a post grad internship where you're getting paid. You have no experience or knowledge so they're teaching you the business as you're getting paid-in my day when t-rex's roamed West Texas a lot of small RE shops wouldn't have even paid you at all. You have the right attitude about sticking around for 6-12 months, learning as much as possible and most importantly build your network. Real estate in your situation especially is a very local game and the community is usually very small. Since it's a small shop get yourself in as many meeting with outside people as often as possible. Get to know the players-the brokers, lenders, other investors/developers, etc. And really get to know them: take them out for a beer, see if you can get invited to golf, take advantage of your firm's service providers (brokers, appraisers, prop management firms) and tap their networks-those guys are usually the easiest because they're selling services to your firm and they see you as a young person in the industry as a possible future source of business. Get invited to the industry events: brokers are always throwing open houses and if it's a big new development or shiny office tower they can be pretty big and a lot of industry people of all stripes will attend them. Look at joining an industry group and getting to know people through that. Real estate, especially in secondary and tertiary markets does not require the "prestige" crap like Ivy schools and Goldman on your resume. And real estate is a pretty basic industry: it's not very difficult to get all of the technical knowledge down pretty quickly so it quickly becomes more about who you know and how well you know your market.
The other way to possibly look at the position is that you could be getting in on the ground floor of something that could grow. If you think these guys are going somewhere (and even if you don't) work your ass off, help them build the firm, make yourself an indispensable part of the team and see if you can increase your salary/bonus or better yet get a piece of the action on deals or in the firm overall. If the firm grows and you see a future with it in the 6-12 month timeframe you'll probably want to get above ~$40k but negotiate with them and say you'd like to make a little more, I don't know the number and can't tell you market but say $50-60, but you'd prefer the upside by getting a piece of the deals or fees as they grow. Entrepreneurs in general like that type of employee and especially real estate guys. Obviously they get to keep their overhead lower but it also show you want your comp to reflect how hard you work rather than as someone coming in simply to cash a paycheck. And you can make far more money personally with a piece of the action rather than as someone who is simply cashing a check twice a month.
Good luck.
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