Why RE over IB?
I have multiple friends who are doing banking and ask me this. My usual response is that RE is really what I’m passionate about. Also I tell them I have a long term vision of how it will all play out and hopefully in the future I can get good carry in deals or even start running my own deals at some point which is extremely lucrative, if it works out. WLB too is a major plus. So my question is if any of you guys on here get this same question, what is your response?
I started off in IB then moved over to REPE. Being an investor blows being an advisor out of the water. People on the buyside are far smarter and have less of an ego so it’s a way better work environment. There’s also more analytical thinking vs throwing a story together and picking out the data that supports your story.
Comp is usually a little worse unless you’re at a megafund but as you said, you’ll be doing great and likely better than your IB counterparts once you get some carry in your pocket. People also have this idea that everyone in IB goes on to BX PE but the fact is, most people end up exiting to some F500 corporate function making minimal money to save their sanity.
Made the same move and couldn’t agree more. The buyside is so much more sophisticated. Pay is very high at top shops and less cyclical than IB. I also think your senior level exits (if you’re forced out before partner) are much better on buyside vs IB
Agree. I've found that IB is a lot of people who are smart, but not as smart as they think they are, desperately trying to find a way to upsell something they often don't know much about. The iterations that come with this are hellacious. In Dev now and I feel like the people I work with are relatively humble and kinda just know their stuff but also know what they don't know. There's no driving ourselves crazy trying to cosplay as experts of something we don't do often because it's a slow market and we need a deal haha.
what was your last IB position before switching to repe?
Do what you have interest in and stop worrying about other peoples paths. You’ll live a much better life that way.
Because I am a moderately intelligent guy who enjoys traveling for work, meeting new people and working 45 hours a week making $200k-$400k a year. Hard to beat this life.
damn that's some good comp. how many years out of school are you?
I crossed $200k about 6-7 years out of UG in a tier 2 market. You should be able to get there earlier in a gateway market.
To answer your question: I like the improved WLB, I love being involved in ground-up developments from acquisition through to construction completion, I love how inefficient of an asset class it is (off-market deals / often (2+2)>4), and being a market specialist (I primarily cover one city). It is also an industry where it's much easier to go out on your own and do your own deals once you know the right people to partner up with. Going out on your own in IB / PE requires a much longer tenure to have trust of clients / LPs.
To offer some advice: stop justifying to people why you've gone down the RE path over others. I started in IB, most people in IB do not have a passion for it and those that insist they do are more often trying to convince themselves than you. Certainly at the junior levels (analyst / associate), most are in it because they don't know what they want to do and pursue whatever is the most prestigious job because they're Type A personalities. They all think they'll be a PE partner or BSD IB MD, reality is most will burn out into a good corporate job (there's nothing wrong with this).
When your IB friends ask you, don't oversell it. We don't want more burnt out IB people in this industry.
Work life and I am not a hardo
Plus - being able to do interesting developments - like the arts district
1) much better WLB (I've rarely worked late at night or on a weekend in ~10 years in the industry)
2) some people prefer the relative simplicity and/or tangibility (sorry) of RE vs large businesses
3) generally much easier to break in (few RE companies require an ivy league degree or extensive internship history to get an interview) + therefore less prestige-driven assholes or people who spent all of college in the library you have to be around
RE is certainly less paid than IB, no argument, but a) you'll probably make more per hour worked b) you'll still make more than like 95% of the population and c) there are a thousand great RE opportunities all over MCOL/LCOL areas if you don't want to be tied to somewhere like NYC and go somewhere chill where your paycheck will easily afford a great lifestyle.
RE is paid less early on, but the probability of higher comp later in your career is actually higher in RE if you go out on your own.
Yep. If you live in major gateway cities, this can be tough to understand, but there are plenty of extremely wealthy real estate folks living in small cities all over the country. Probably not a lot of bankers or consultants in Buffalo, NY or Arlington, TX - but I'd bet there are a bunch of extremely wealthy real estate families in both. Being an entrepreneur in real estate is comparatively easy. The number of bankers who end up as Bob Greenhill or Ken Moelis is vanishingly small... but there are probably hundreds of not thousands of real estate businesses in this country worth $50+mm
nothing like slapping a 6 cap on a property that is fully NNN. bliss. Compared to trying to figure out EBITDA, we got em beat!
Ha! You should have seen my face when I underwrote my first Multifamily deal and somebody told me there is a template for it that is totally adaptive and doesn't even require you to retrofit it to varying source data. Coming from Infra IB, I was euphoric to realize I'm leaving IB modeling headaches behind.
One other comment, coming from an ex-Ibanker. While IB pays well consistently, if you're competing for the top RE jobs that the types of people with Target backgrounds go for, you're talking about the same comp even at a junior level.
Like it is true that doing AM at a small-cap, private REIT or something doesn't pay as much as Ibanking at a BB. But it's not like the kids from target schools with 3.5 GPAs that pursue real estate are going for those roles. They're going for gigs at Harrison Street, Stepstone, etc. and banking just as much as their peers who go the IB route.
The only thing I do worry about is if I don't make VP / Partner or whatever in the PE world of real estate, I'm not sure it will be as easy to bail into Corp Dev like bankers easily can and do haha.
You just go “down stream”. I’ve seen guys at top tier NYC shops leave and go somewhere entrepreneurial GP with 3 employees in Miami. Some people do this by choice, but I think it’s a good backup option.
Also people can move to life insurance companies, bank lenders (if you come from a debt fund), public REITs, etc. If you get pushed out of a top shop, you’ll find a home. Might be tough in todays market, but in a bull market I wouldn’t be worried
No way you tried to sneak stepstone into this conversation lol
Generally what you’re saying is true but Harrison Street 100% does not pay the same as BB IB.
Most real estate shops don’t pay similar to IB
I am not in RE but there are very few things in the world that has as much upside as being able to do your own RE deals
Interested in making this switch. For those of you who successfully went down this path, how did you go about breaking in if you came from an unrelated coverage group? Any resources, books, or networking efforts you'd recommend?
I didn’t ever work in IB, but the Linneman textbook is what you’re looking for
I did this (came from banking also). Got lucky, took a massive pay cut, and basically had a trial pd for a few months before officially coming on FT. Also not at a super reputable shop, just recently working my way upstream. YMMV though. Recs below, but PM me if you want to chat.
(1) Network your ass off and understand that it will take time (more time than you think). I didn't network as much as I should have, but found actually found something on a job site (luck). Start with family/friends who know ppl in RE (or if they know someone who knows someone), then go to your broader network (college/high school/internships), and then cold email/networking groups (ULI is a very large networking group, and there are probably various local ones by you). Not a huge fan of these groups if you're going in cold, but if your RE network is limited it might be the best way.
(2) Have a good story for why you're interested in RE - don't want to just say "it's tangible". Hopefully you can leverage prior life experiences (an uncle/aunt was/is in RE adjacent field and you always found it interesting, you did a construction internship freshman yr of college and have always been interested in buildings/their creation after that, etc.).
(3) Know the technical stuff (sort of obvious, but still). You don't have to be a god at intense RE modeling, but you'll definitely get modeling case studies.
(4) Don't start applying right away, but after a month or two you should have your story ready/technical knowledge mostly ready (you'll want to keep practicing as you go on). After that, start piping apps out. Also, after a few months of applying, see what your traction is like. If, for example, you're laser focused on acq roles, but keep striking out (assuming it's not an interview performance thing), maybe expand your search to brokerage, asset management, or even capital mkts/lending (the banking background might be a draw for them). In a particularly tough market now, and IMO always easier to pivot roles once you're in the industry.
Few other comments:
- You're associate 1? So 3rd-4th yr of banking? Some firms might be annoying about your "level" (i.e. age). From my exp these are going to be the bigger, more rigid shops. Just heads up this might come up.
- MSRE/MSRED/MBA are potential options, but when we look at hiring, we still prefer candidates that have direct RE experience even if they're in a program. That said, a program like Columbia/MIT will not serve you wrong (if you the $ for it). I would say give it at least half a year at the very least before you explore this. You need time to build your network and see what's out there.
Why RE? Tangible assets.
It is a lot easier to go out on my own and become an entrepreneur as well. I understand the basics of running a small apartment complex since I knew the owners growing up and they showed me how it was done. The son inherited three apartment complexes, with at least 15-20 units in total per. The apartment complexes are all paid off, so the son managed the units and did the repairs. I know several people who own nothing but either commercial lots or apartments.
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