Theres no statistical evidence for this but, why is real estate second to most other financial services jobs? Most people in business school are primarily looking for IB, consulting, AM or corporate roles. And even on employment reports of many top b-schools, real estate is rarely even listed, although this could be due to it being merged with out categories.
Either way, why is real estate such an unpopular job destination? You dont have to jump ship as often, you make good money with chances at late 6 to 7 figures and work-life balance is better than most alternatives. Like its flat out better than some jobs like accounting for example. Same hours if not better and a higher pay ceiling.
Anyone know why this is?
It’s not that real estate is an “unpopular job”, it’s that the real estate world is an extremely small world with very few players at the high level. Large amounts of capital and large amounts of property in the hands of few. There is also a limited quantity so this also limits the need for the number of people in the industry. It’s an exclusive world where the work life balance is amazing, money is good if not better, and deals are just as intense when compared to IB. You typically won’t see real estate investment companies at job fairs or posting many jobs because most real estate jobs are hiring through networking.
Not only can one do this in real estate, one can do it without dying before reach said title/paygrade
My two cents as a REPE analyst...
REPE is a niche industry that runs lean and doesn't typically hire a ton of students every fall like IB. I got into acquisitions at a REPE firm direct from college, which was unheard of. More firms are hiring out of college but usually aren't at career fairs, advertised on campus, etc. I had to figure out which firms to target in the one large MSA I wanted to live in and work my ass off to network and do it on my own. Eventually had 2 really solid PE offers (institutional groups with AUM of $40B+) and a few investment sales and development offers, but it took work.
In terms of work life balance and pay compared to banking, it's not even close. REPE (or just my firm) is WAY better in terms of hours...70hrs/week on average with typically no weekends for the first two years then can decrease to 50-60 until you're an AVP, usually around year 4. Drops off to 40-50 beyond that.
Salary is better than every one of my banking friends and bonus can be up to 50% for the first two years and 100%+ beyond that, based on personal and fund performance. Tons of upward growth potential on the buy side and the income trajectory is exponential (huge jumps in base YOY, bonus multiples, GP points at VP).
I think the work itself at a lower level is way better too.....closed several deals on my own in my first year and closing a lot of them by myself now.
REPE is a hidden gem that I hope IB hardos keep shitting on while they slave on pitch books for 100 hours a week.
RIP your PM box. Hope you're prepared to get a million messages from people asking you for a how to guide.
You're basically saying RE is so desirable with so few seats that most people don't even bother. Even a kid who went to Harvard and finished top of his GS analyst class needs to settle for Blackstone/KKR/Bridgewater because he needs to pursue realistic dream jobs; who's got time for a pipe dream like becoming a rock star, playing in the NBA or working in real estate right?
Sorry, gotta call bullshit on that. If real estate was as uniquely desirable as you say, it would still appear popular. It would just be like the top PE and HF jobs that are difficult to get. It wouldn't be confused for unpopular, as it is today.
I suspect that reason RE is unpopular is because it might be seen by some as simplistic and/or boring at first glance. Boring is bad because, well, boring. Simplistic is bad because young finance people believe their smarts are what will get them ahead in life, and anything that appears simplistic will also appear to be less of an opportunity to get an edge. This view is probably supported by the fact that real estate, while full of talented people, is also uniquely full of superficial and mediocre people who seem to have more of a relationship/sales skill set than a critical thinking/investor type of skill set.
Again that's just my suspicion looking at RE from the outside. For those who enjoy it, more power to them.
Uniquely full of superficial and mediocre people? High finance in general is literally stereotyped as being full of superficial, backstabbing, and greedy assholes. I am not saying that Real Estate doesn't have those, but to say it is unique is definitely wrong.
Ironic given how shitty investment professionals do at beating a typical 401k account held by a high school graduate.
There's nothing unique about RE finance really..
It's just a different asset class with the same players (i.e. investment sales and acquisitions agents in place of M&A, equity/debt placement agents in place of cap markets, mortgage lenders in place of corporate banks, REPE in place of normal PE and REITs and other asset owners in place of typical asset owners like E&Ps etc).
The difference is.. RE as a private asset class is niche. Most people don't know about RE beyond their local estate agent and people who do tend to come from well off families already involved in RE somehow.
It's not that it's unpopular, just less opportunity, as others have noted. Major bulge bracket banks employ as many junior level employees as huge swathes of the RE industry.
And the following is my opinion, but having worked for several years in IB and now in RE, I think there is a lot of truth to it. First off and less controversially, the guaranteed money is better in banking. If you go in as a junior, you know you're making 75k or whatever, and as long as you're baseline competent, will get a substantial bonus. You also know that if you're good at it, you'll always have an upward trajectory in terms of increasing comp every year. That kind of safety blanket, to know that you'll be pulling in ~$200k+ by age 30, is a major appeal, I would think. This isn't the case in RE, where a lot of times your salary is dependent on how well the firm is doing, and your advancement is very much a function of space opening up above you.
Second, I think there is a "keeping up with the Joneses" attitude in banking, which makes the conspicuous consumption (and the associated salary) more obvious and more glitzy. You have a whole bunch of other VPs/MDs whatever that you're working alongside and competing with to a certain extent. Also having that peer group in place means there is just more opportunity to discuss comp and obviously more interest in competing to make more and be better than your pal in the office over. I feel like by nature of being much, much smaller, you are much less likely to have intra-company competition since you have fewer peers at your pay grade.
It also doesn't hurt that you have plenty of movies/books/other media about how much money bankers make, enough to have it be in the cultural consciousness, and almost none about real estate folks except maybe Million Dollar Listing.
I work in acquisitions and to most of my friends (who also graduated Finance/Accounting) think I sell houses or am a property manager. Love hearing that.
I don’t know, but let’s keep it as is. I don’t need to fight any more people than I already am for that one Analyst position posted every week.
Risk. People associate real estate with risk which is ironic. Millenials saw their parents lose huge savings in GFC which was a real estate driven event. Pay is not publicized to the degree that it is in Corp fin /IB / MBB / BigLaw roles, nor are big pay days guaranteed. The lack of transparency into the compensation picture IMO deters many folks right off the bat, in addition to the fact that recruiting at these firms is largely a black box. In b school, how enticing is it to go after a career path that doesn’t really come on campus to recruit, has a mystery salary, and will likely not employ you until after all your friends have secured their jobs that they’ll most likely be looking to leave 2 years out of school while you’re just settling into yours? The road less traveled is named that for a reason, and herd mentality in MBA programs unfortunately drives people to make decisions that don’t always benefit their true passions / goals in life. Fortunately for those of us who don’t care what others think, there’s real estate. I think if the career was associated with more stability, and folks knew just much money could be made, they might think twice. Working 55-60 hour weeks and being able to clear 7 figures in a year isn’t for the faint of heart.
100% this. Though I'm not sure why you say the "risk" part is ironic, since that is what RE folks are being compensated for. Your carry is far more risky than a discretionary bonus. If you are a producer at an IB position, you have a rough idea of how your bonus will track your revenue. And if you don't get paid, someone else will be happy to take on your clients and pay you that number. So yes, risk, but not the same kind of risk, since you're only risking an opportunity cost and not putting up actual guarantees or exposing yourself to capital calls.
Long story short I agreed entirely, but it seems to me there is real risk in real estate, and not to the same degree in IB.
Buy side gigs will always encounter more risk than sell side in my opinion. Investing by nature equates to the risk/reward continuum so I agree with your point. Much of what we do though is really risk mitigation—to the point that contingency funds can and should salvage a good return in the event the business plan doesn’t go perfectly. I should have been more clear—perception of real estate risk for the majority may be having multiple houses foreclosed on during the GFC, while not considering what leverage even means or how to be sensible about capitalizing deals. The most extreme scenario related to RE that could have played out did, and so that’s the image engrained in a lot of folks minds. On a risk adjusted basis though, I would absolutely put money into value add and multifamily development deals vs. the stock market right now, which to me brings a ton of volatility in the near term.
Most probably look to IB, consulting, AM or corporate roles because those roles are more widespread and can cover different assets and there are more exit opps while they figure out what they want to do long-term. Many hop out to something with a better work-life balance because of how much time is spent just working. Real Estate is one asset and is a small world. Most firms only have one office. There generally aren't multiple offices with the exception of select brokerage shops and large megafunds. And because most are small many don't have any need for traditional recruiting methods at the junior level, if they even like to add junior people. Deals may appear small, but splits can be great since shops are quite lean.
Another thing to point out is most don't know about these jobs in finance or how to explain what an IB, PE or AM firm does. And getting into RE is already very specific. Have you tried explaining to friends and family outside the industry what you do? I have. Most think I just work in a cube all day doing accounting or paper work. When I correct them or explain it, it's only a confusing look to explain why my company might work with a Life-Co to originate a commercial property loan.
So don't worry about it being "unpopular" you know more about the end result than others do.
Mostly because it pays less than true private equity, it’s more simple, less challenging. So it makes sense if you think about it
Edit: someone just went through this thread and monkey shat every single one of my comments here. What a waste of silver bananas lol
There is no question that real estate development (perhaps not private equity, I have no experience there) is far more challenging than "true" private equity.
This is you:
“I won’t comment on REPE because I have no experience there. But I can say with 100% certainty RE development is more challenging than corporate private equity... although I have no experience in corporate private equity”
Hmmm
Bull Shit - Take the most well known PE shop: Blackstone. You think the RE guys are pulling in less than the corp guys? Go back to school
You get paid in a PE shop due to the size of your fund, not the industry. If your fund is 5bn and you take in 2% management and carry it will all depend on performance of the fund, not the sector.
Less REPE jobs out there because it's more niche. You won't convert easily into a regular PE job because your skills are not as comparable and not as technical. Those are valid negative on REPE, but if you know that's what you want to do you don't really care whether a regular PE shop will take you.
Lmao this is beyond idiotic. Obviously if you take the best player in the REPE space, yes, they will get paid just as much as the best players for the corporate PE space.
However, if you go anywhere beyond the top 25 REPE shops, it's almost guaranteed that the corp PE guys are pulling more at the same level. The vast majority will work in the MM, where the corp PE guy will destroy the REPE guy in comp. So yes, corp PE is far, far superior from a comp perspective
To be blunt, real estate takes a special tolerance and ability to work with idiots. I have no idea how guys in the business deal with that level of horseshit on a daily basis.
This is an oddly aggressive thread for a simple question.
Why do so few go into real estate? Because they don't know about it and because there aren't as many jobs.
Amen. These 20 year old kids will one day realize their itch for prestige and getting"complex" job is silly. We're all crunching fake shit numbers on a goddamn screen, not saving lives here. You want a complex job, go operate on dead brains or make rockets for crying out loud.
In case any are curious, RE is the second most popular forum on WSO (behind IB)
Cause all the cool kids played with legos and the lames played with an abacus.
This is honestly probably one of the most up-to-date outlets for RE talk. Most other forums are about flipping houses or something.
Look at my post count...
It's been said already, but I'll aggregate:
1) There are fewer jobs that offer prestigious pay for 20-something year olds when compared to PE, IB, Consulting, Tech.
2) Exit opps are better from the aforementioned track. For example, it's way more challenging to get into H/S/W out of real estate compared to the typical track for individuals high in intellect and trait conscientiousness whose parents have been railroading them their entire lives. Another example: you're not likely to transition from RE into a cool VC role.
3) It's easier to lateral into real estate later in your career after working the typical I-banking stint. You'll see lots of these profiles in their late 20's / early 30's in NYC PERE and development after they jumped ship.
4) It's true that you have to have a high tolerance for working with idiots. It's unreal how uneducated the majority of the real estate world is. It's usually a lot more fun to work with smart and creative people versus type-A uneducated asshats.
5) There's a lot of risk and you don't get compensated well until you're at the top. Outside of a sales position, the road to a 300k per year salary is a lot more challenging in real estate than in the other fields. That's not saying it's easy in the other fields, it's just EXTREMELY rare to be paid in the 300k/yr base range in real estate. Price's law in respect to real estate compensation is undeniable.
6) Unless you work for Blackstone or a comparable firm, everyone you meet thinks you're a realtor or a home flipper. :(
1) Real estate is the most valuable asset class in America, by far. There are a ridiculous number of people in real estate. Way more than other financial services positions.
2) Why do people out of an MBA or undergrad business not look to real estate more? Real estate generally pays like shit. You make real money as an entrepreneur, not as an employee. IB/PE, in contrast, allows you to make a lot of money as an employee.
I think there is a tendency for people who are a cut below the typical type A finance person to go into real estate.
As I did with all the other people who made this stupid comment, I'm having a hearty laugh about this comment. Finance folks are the most self-congratulatory and un-self aware people out there. "Type A" folks don't go into finance. They go into more entrepreneurial fields where they get compensated for risk. Finance, especially in it's early stages when you're down the totem pole, is most focused on people who put a high premium on both being able to boast about an above average income while also avoiding risk.
Yes, some folks end up starting their own firm, or end up putting their own capital into a HF or PE shop, but those are the tiny minority of all the people who start on Wall Street.
When I tell people I work in COMMERCIAL real estate, they still assume I sell houses. So I think many are just very uneducated on what the real estate industry has to offer beyond residential.
However, I am glad CRE is the path less traveled because I got into a top boutique brokerage in my area, work on a top team, am involved in every process of every deal, and get paid a lot more than many of my peers 1 year out of undergrad. Also, had a sub 3.0 gpa lmao
It definitely is a high risk-high reward career and not for the faint of heart though.
Let me try to summarise my observations from my time across two BB RE groups (think top 3 US IBs by revenue, PE loan origination and RE principal investing) as well as one of the largest REPE shops around (>50bn AuM). I am based in Europe so not all of the below may be true for the US.
2a. It is worth spending a bit of time in the industry just for the broker meetings. It feels like sitting in a room with sexist dinosaurs in 2006. They spend the first few minutes of a meeting discussing their watches, their competitors' trophy wives, the receptionist's outfit or their French riviera holidays. Tech bros are vanilla at best vs these boys.
2b. It is (often) untrue that models aren't complex and underwriting isn't as challenging as for corporate PE. While modelling a single, standing office building is easy, modelling a minority acquisition, an NPL portfolio or a hotel management company is pretty much equivalent to corporate or special sits modelling. We often make much more granular assumptions than corporate PE shops and run a lot of scenarios because we have lease-level information and our top line is determined by fewer variables (we actually understand our product, you could argue that's not the case for investors in e.g. Semiconductors). You can even run Monte Carlo simulations on your inputs (almost nobody does that though), there is a lot of academic literature on that. The above is however only true for large shops that aren't afraid of more exotic deals. Your learning curve is fairly flat if you specialise in office or multifamily asset deals early on. Having said all this, if you really wanted to capitalise on your advanced monkey brain, you should join a HFT shop after your Math PhD, not the private buy side, where you are at least as incentivised to deploy capital as you are to engineer returns.
3a. Partners in the business get carry, in some shops even juniors get carry. I wouldn't be worried about your millions in RE vs other asset classes as long as your fund's hold period isn't 10Y+ (as may be the case for some Infra shops). Two caveats: IRRs are sub 20 and RE isn't exactly acyclical.
There are simply fewer large PE shops in RE vs corporate and only large shops go through standard recruitment schemes, making it a less obvious/visible choice for students that want to do 'Finance', as they tend to consider themselves future masters of the universe - they just don't want to be seen as doing something 'easy'
RE isn't tech. You won't finance the next moon landing but do the same thing RE people have always done. Buy, fix, sell. And maybe build.
In Europe, the only people considered morally inferior to investment bankers by the general public are probably real estate investors (to varying degrees across jurisdictions). Most of your returns are driven by rent increases, and there is a strong sentiment against rent increases and large private landlords in many markets, as many people suffered after '08 (think mass evictions or RE developers going bust and disappearing with your deposit). No matter how much complexity you put into a deal and how great your model, you will still have to admit at the Christmas dinner table that you are making 3-4x the median national wage with 1 year of work experience because you increase rents (unless obviously you are a 'sustainable multifamily developer' helping to reduce supply shortage in the affordable PRS segment)
I can only speak for myself, but I found real estate to be incredibly boring, and couldn't wait to get out. I was at a real estate PE fund that was the most successful in Asia, so it wasn't that the money wasn't right. But at the end of the day, I just couldn't stand looking at buildings all day. I contrast this to some of the PE work I've gotten to do in healthcare and tech, and those are just much more dynamic industries. A PE fund in real estate is obviously looking to maximize returns and minimize risk, which to us usually meant buying value-added / core-plus buildings in up-and-coming countries. That way we were buying assets that didn't have too much hair on them (not too many issues) and yet had a decent shot at upside if we really understood our city macroeconomics correctly. It's tough compare that to getting to invest in exciting new technologies. But that's a personal preference. I'm certain I'm far worse off financially for making the choice to leave REPE. My younger brother is in REPE in the US, and he's doing just fine.
Making a $300K-$500K salary is not exactly a simple matter, either. It's not like they're a dime a dozen out there.
You're also still working for someone else.
And finally, the reason you risk it is so you can make far more than a couple hundred grand a year.