REPE is overrated
I'm currently a SA at an EB and in the last few days, I talked to headhunters about entry-level roles (analyst 1) in REPE. While the base is comparable (100-200 EUR difference a month), the bonus makes a significant difference. At my EB almost every analyst made a 100% Bonus, the majority of REPE roles can't compare. I also read that specifically with REPE the pay can be significantly lower in the pre-carry days (associate / VP). It seems like only the guys at upper MM (3i) and megafunds make more than banking (and work even more).
So why do people choose a career in REPE instead of banking, is it the better WLB (my offers are in the 40-60h range)? Or is my logic flawed because 2018/2019 was an anomaly, and the bonuses will go lower again? Will carry make up for the lower pay in the first few years?
People go into REPE because they like real estate and can start to do their own deals. If you like banking then stick with it, work hard, and you'll make money either way.
Im going to spit truth.
Barriers to entry in real estate are very low. This business isn't rocket surgery, you dont need to be particularly smart. Hours are very light (40-50 hours a week for most). Thus entry and low level pay outside of the mega funds can be low. Within two years you'll still be making well over 100K with no MBA, working minimal hours. My wall street or traditional private equity friends work so much more than I do, and on many weekends. I haven't worked a weekend in years. When the difference in pay is 450 vs 400 I'll give up 50 to have my weekends free and generally always leave the office before 6:30.
Real estate (or more broadly non public investments in general) are much more of a relationship business. Your value later in your career is the relationships you've built along the way, thats what is valuable to future employers and when you really start to make money. Otherwise in the beginning you're doing work any who has taken financial calc 101 can do.
Its just a supply vs demand, there's just a lot more supply of analyst/associates for REPE firms because there's a relatively similar pay ceilings later in your career, lower barriers to entry, less work hours.
Things aren't over or under rated. They just are what they are. Everyone needs a job and everyone has different priorities and interests. My honest guess is there are not many of us in the industry that had a choice between traditional banking roles and a equity real estate role. The actual work is so different it would attract very different candidates.
Because there's more to life than money. People do REPE because they're actually interested in real estate, not because it pays more than banking.
Banking and PE pay more early in your career and similarly late in your career (and TBH you really shouldn't give a shit about your pay early in your career as long as it affords you a decent quality of life...), but you work ungodly hours and generally have a horrible work-life balance.
In REPE, I'll go against the grain of what I'm seeing in this thread and say hours are still more than a 9-5 - typically if there are live deals you're working about 50-60 hours a week and 70 hours during heavy crunch times, but you typically have your weekends to yourself and are working 8:30 or 9 to 6:30 or 7 most days, very manageable. Anyone here saying they're working 40-50 hours a week who aren't Director level or up must either be at a shop with an excess number of analysts, or that isn't doing too many deals (or potentially smaller deals that don't have institutional partners that are more demanding in the output they receive).
But irrelevant of WLB and compensation, which is all the kids on this forum seem to care about, you should go into the industry you're actually interested in. If REPE paid double what traditional banking and PE paid, but you don't find real estate itself interesting and are looking for a career path that is quantitatively challenging, you'd probably be a lot happier taking the banking/PE route.
If you make your career choice purely based on the amount of money you're going to make, you're going to be miserable within the next 10 years. Quote me on that.
I think people are missing that at the top, REPE and PE are pretty similar. Comparing your a small local RE player to a well established UMM PE fund is silly. Same with a LMM PE fund and Oaktree Real Estate.
But compare the Brookfield team that took GGP private and the team that works at SilverLake or whatever the big corporate PE funds are these days. The biggest difference is the industry they cover - the rest is nitpicking.
Side note, look up KSL Capital Partners. Good example of corporate PE / REPE hybrid