What made you decide which property type to specialize in?
I honestly have no idea. I have some thoughts as of now but nothing concrete.
Im leaning towards multi-family or affordable housing development.
I’m thinking multi family because the demographic im targeting (Miami) has a pretty big housing shortage and it’s a stable business (people always need somewhere to live).
I’m also thinking about affordable housing development because it’s similar to multi family but has an added layer of complexity to it that increases the barriers to entry for other developers. Im also thinking the skillset is fairly transferable into multi family.
When I was in university, I interned at various companies that worked across product types - I interned at a multi shop, a fam office that did CRE, and a mortgage bank that financed all asset types. I decided on product type by assessing what i found most interesting, relatable, and honestly aligned with my risk tolerance. Housing was the obvious option since I knew it’d be resilient across economic environments. Office, Retail, Hospitality, etc. Sounded enticing due to the added complexity but I knew it was more cyclical and capital intensive. As a result, I settled on multi. It felt more “real” to me and so I focused on that.
So ask yourself what asset class you’d like to own more of and that’s probably a good place to start…
It's always best to weigh out career stability (MF, healthcare, industrial being recession resistant), complexity of deals, and personal interest. Personally, the thought of buying a self storage facility doesn't get me out of bed in the morning but someone might LOVE those. I personally chose a firm that doesn't pigeonhole itself into any one asset class. We develop MF (both apartments and BFR), retail centers, office towers, etc.. I chose this company because its diversified and thought I would get bored at a company like Welltower or anyone that is highly specialized.
Ultimately, its not like real estate modeling is drastically different from each other and you can always pivot between the different asset classes as your career progresses. I wouldn't focus too much on which asset class you start in and just start with whatever you think is interesting now.
I fell into my sector, but as it's a niche one, I have much more job security than I imagine people working in MF do.Data is limited, underwriting is nuanced, and sourcing is different from most other sectors. It means when recruiters reach out about an opportunity, I may be the only or one of a few people they reached out to.On the flip side, focus on MF or Industrial and you can work just about anywhere but may be competing against 100 other applicants and 100 other buyers (if acquisitions).
Affordable housing. If I go out on my own, no real equity requirements. Also, as you say, large barriers to entry on the knowledge/regulatory side of the business.
One thing I've noticed in NYC at least (and pre-COVID) was that lots of people who didn't really know what they were doing piled into development on the market rate rental and luxury condo side, buying small to mid sized land parcels for insane prices and crossing their fingers, which drives up the market for even rational actors. Being in an asset class where complete idiots can freeze you out of the market, or force you to join in the insanity, is super scary to me - obviously those people go bust, those bubbles pop, and being around to pick up the pieces can yield nice profits - but how do I pay and retain staff for years on end if I don't have new deal flow in the interim? It's basically like starting over at the beginning of every cycle.
You don't see that in affordable, because no one hits home runs (not really) and there isn't a quick fortune to be made, and because you can't even do it if you haven't spent years learning the ropes.
So while I think some of the other comments which say "work with whatever asset class you enjoy the most" aren't wrong, that only goes so far. Does anyone really love buying last mile industrial/warehouse? Versus self-storage facilities? Making a blanket statement is dangerous, but I'd argue most people in real estate love deal making for its own sake, love the interdisciplinary nature of putting together and executing on deals, love the challenge of working with complex assets that require multiple experts to build/maintain. At some point, "do what you love" is bad advice if it isn't paired with some meaningful reason to be in that space. I'm sure everyone would love to be buying trophy office properties, but that's not a reason to go into office. Find a niche in which you can take a defensible position. Did you grow up in St Louis? Maybe your knowledge of the local area will help you focus on that MSA.
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