Long time lurker, first time poster here.
I'm a recent college grad and have been lucky enough to land a gig at a development shop (NYC), product is multifamily - both value add and ground up. I love the job although things can get crazy at times as my firm is small and we have to wear a lot of hats (which is great from an experience perspective but can get pretty hectic). I am really liking CRE and how different the day to day is at my job. I feel like there are a lot of opportunities for creative problem solving and entrepreneurial thinking in the industry especially working on the ground in deals as a developer, which I like a lot.
Anyways, I'm pulling 60k and living in NYC, which is pretty tough given the COL here. I am saving zero money whatsover and have pretty substantial student loans to deal with. I pretty much live month to month and i'd by lying if I said I wasn't a little bit envious at times of my friends who went more traditional finance routes and are making twice my salary by now.
I don't mean to complain because it's overall been an awesome experience and I feel very lucky to be working in Dev right out of college. But serious question for the development guys on here - when should I expect to start seeing higher comp? I feel like it is very difficult to find reliable data on typical progression / salary for this kind of position (I do understand that comp in development isn't clear cut and varies widely from shop to shop). Have heard anecdotally that at the 2-3 year mark comp improves a lot. Since I am putting in the time now without saving anything I would like to get a better sense of what I can expect if I stay the course. Iv'e read everything I can find on this forum and looked at the CEL survey etc. but still feel like I am in the dark as far as what this career will look like as I gain more experience.
Thanks in advance for any insight!
First off, congratulations on even getting the job straight out of college. I think the knowledge you gain from working at this shop will enable you to eventually start up a development firm of your own. That is, if your current firm doesn't offer you a piece of their deals once you've become more seasoned.
My partner and I are currently looking at a small piece of land in Brooklyn to build a 10 family on. I used to be in commercial brokerage, and I quickly found out that most of the developers that I sold land to made the most money. Good luck on your career in development
Would you mind elaborating on how you made the switch from broker to developer? Just personally curious
Me too, but in brokerage right now and have guys make the switch from my current company. Seems build relationships from the brokerage side, need probably a 1 year+ experience in investment sales then look at analyst type roles.
You meet developers in the industry and send deals to them too, build relationships with them, grab drinks, etc and they'll eventually let you know about openings or you keep looking every few months.
It's not really that big of a step if you are in the right field of brokerage. I'm working as an infill land broker right now, and can see a very direct path to development when that time comes.
I spend 10+ hours a day talking with developers and property owners of all sizes (think Greystar all the way down to a small local townhome developer), learning acquisitions criteria, digging up development sites, gathering DD to get the deals through IC and entitlements, working with cities to determine site feasibility, and basically doing anything required to put development deals together. Working with these groups/people all day everyday putting together deals for infill developments of every type (multi, office, hotel, mixed-use, etc), and having a developer database of 500 development principals and MDs will make the transition very easy comparatively.
Real estate development is far more about networking than formal credentials and preftige. If you have the exclusive on a compelling site that makes financial sense, have the ability to work a project through entitlements, and have the connections to accomplish the financial, architectural, construction, legal issues then you can get a deal done. You may need to partner with a more experienced development manager at first to get financing comfortable, but you can get going that way. Lots of broker/developers get their start this way.
Alternatively, I do have the basic qualifications to land a role at a larger institutional shop (Finance degree, public redevelopment/planning experience, and ability to build the development models/pitch books), but lacked the connections and private development/live deal experience after moving to a new booming city from a blighted and dying area with no private development happening. Now I'm working with these groups on a daily basis helping them find sites and put deals together. No doubt that I would have a much easier time with that transition now than back when I didn't know anyone and didn't have deal experience.
I'm not even at a large institutional brokerage (local boutique that mostly does MM multi-fam IS and some land), but am in daily contact with the preftigious institutional developers that everyone fawns over. The key is to get in a position where you actually get to talk, pitch, and run deals quickly as opposed to spending 3-5 years in a back office putting together models that no one believes or OMs that nobody reads. Real estate is all about networking, and is the only way to get the deals and connections needed to be of real value to principals. The sooner you can do that the sooner you can make the jump. No need for an expensive MSRED or other superfluous credentials. Just hustle and wit
Congrats on getting into development right out of Uni.
I feel your pain, I am in the exact same situation in London right now. 1.5 years in with a top developer but salary similar to what you mentioned above. Couple comments:
How does your company compensate in terms of bonuses? Guessing you might not have received one yet if you are only starting out. At my company, this sits at around 40% at the analyst level and it can go a long way for paying off debts / saving to supplement low salary over the rest of the year.
Salary Progression: From what I have seen here in London, the development salaries are actually pretty close to what you get paid in REPE - but they are just 2 years behind. ie. after 2 years working in development, you will be on par with what "traditional finance" people are making in their first year (hopefully with far fewer hours). After a few more years (5-7) our salaries catch what one would get in REPE per year of experience. So lower starting salary but should grow faster than REPE.
Can you expect a bonus? 60k for a straight-out-of-college job isn't crazy, but I would also be surprised if there wasn't the potential for discretionary comp, maybe another 5-15k at the end of the year.
My completely personal take on it is that it takes about 2 years to get good enough at this job to be able to do the basics without hand holding. That is when you should expect your comp to increase dramatically, or at the very least, when you can start advocating for that because your skill set will allow you other options.
Thats definitely reassuring to hear. I do get a bonus but being as I haven't been working a full year so i'm not sure what to expect
Hi,
I am based in London and would love to get some advice from you.
I am a little stuck at the moment with job applications but I would like to go down a similar career path to you. If you have a couple of minutes free to have a chat it would be great.
Looking forward to hearing back from you! Armond
How long have you been in this role? If it's less than a year, I'd hang tight. If it's more than a year, or your annual review or something is coming up, I think it's high time to highlight your accomplishments and responsibilities and ask for a raise.
$60k isn't unheard of, but it is low, and as you said, NYC makes that all the more painful. Also, at the lower end of the comp range, another $20k can make a world of difference.
Coming up on a year in a few months, will feel it out but i'm definitely planning on having the conversation
The conversation won't hurt you. If anything, if you approach it in an intelligent and reasonable way, it might help you, even if they turn you down.
I would start gathering now a list of things you've learned/improved on, things you've knocked out of the park, extra/new responsibilities you've taken on, etc. I would personally respond well to "I've excelled at X, taken on Y, and improved dramatically at Z. Other people with my responsibilities in the market make $XX,XXX. I am respectfully requesting $YY,YYY."
Just don't make it sound like you're entitled to a certain amount just because some friends of yours make that at other firms. Boomers are very sensitive to anytime a millennial (or younger) fits the media stereotype of a millennial.
That salary does not surprise me. At the end of the day RE is a pretty low skill industry. Depending on the path you go down there are skills to be gained but those skills are rarely intelligence/scholastic based but industry experience and deal based. This means RE companies have a plethora of candidates for entry level positions. This is why the ramp up in pay is so large in NYC RE. Once you prove yourself in your company, prove that you fit well, take on responsibility and have an eye for the business raises come on quickly.
After my two years in brokerage I moved to a family owned company making 50K + bonus (low bonus), the next year I got a raise to 75K, the year after than was 85 or 90 but a much larger bonus (50 or 75%), then another raise in to the 100's. Six years into being with my company and I'm around 300K all in.
This also mirrors my friends experiences as well. First year always seems shockingly low compared to other numbers you hear but that's because you jump up pretty quickly.
You have a leg up on me because I had to do two years in brokerage before I made the jump. Just put in work, learn the business and the raises should come. If they don't then move on but do not get stuck on this number in year 1. Just work on proving you "fit in"
I would say 2-3 years of development execution experience is generally enough to warrant a $100K+ all-in comp package, assuming you are at a fairly reputable shop with real deal flow. From there, you may get to $250K all-in at a VP type of role, and maybe slightly higher ($400K) in a senior role. Salary compensation is (generally) capped around these numbers, and I think part of your question concerns equity participation in deals. Most shops don't offer equity until you are at a senior associate+ role. The payout on carried interest on development deals is usually longer term--5+ years (entitle, design, build, lease, then sell for profit), but can be big bucks.
Work hard...make contacts...and the rest will fall into place. I know that seems like generic advice...especially when you're first starting out...but it's true. Each step in my career has been completely unexpected.
As others have mentioned...you should be able to hit $100k fairly quickly. A straight-line progression could look like this...
Development Associate Development Manager/Project Manager Director of Development VP of Development
I know someone who just took a development manager position. The starting salary is $110k...with an opportunity for bonus (which likely won't be too robust). He previously worked as a development analysis for a couple years.
A director position would probably require anywhere from 5-7 years of experience. The salary range is likely anywhere between $120-170k...with opportunities for bonuses.
A VP position would probably require a minimum of 7-10 years of experience...depending on the size of the firm. The salary range is likely anywhere between $200-300k...with opportunities for substantial bonuses.
Once you start to reach the upper levels...I suggest paying close attention to the bonus structures. Depending on the firm...you can negotiate this aspect of your compensation package.
Some firms will offer a bonus for each deal that you complete...others will do an annual profit share...others will allow you to co-invest on the sponsor side equity contribution (this gives you a share of the promote and thus favorable cash distributions per the waterfall structure)...others will offer a small carried interest position.
Again...this varies from firm to firm...but once you reach the VP level and above...some places expect you to contribute some equity for new deals.
Ultimately...the way you generate true wealth is through participating in deals.
If you want to create true value when first starting out in the development space...source a deal...and negotiate a payout for yourself for bringing that deal to the table. When you consider the economics...it becomes a no-brainer. For an institutional grade MF development...a developer could end up making $5M (that includes development related fees and cash from the proceeds of a disposition).
In this market...access to deal flow is the obstacle...not the capital. So bring value through bringing an opportunity. While there's greater value in providing a deal opportunity...there's also value in bringing the debt or equity to the table as well. In such instances...you could get a small percentage for placing the debt or equity.
I do institutional grade MF. I would gladly pay $100k to someone who sourced an opportunity that I ultimately closed. It doesn't matter to me if you're a 18 year old or seasoned real estate veteran. Btw...that's not a solicitation...just a piece of advice on how you could create value. And the quicker you can start to think like a developer...and how the overall business model works...the better positioned you'll be to exceed in the space when climbing up through the ranks.
So...how to do you pull all of this off? Let's say you have a friend who's an analyst at a PE shop. Ask that person what kind of deals their firm does. And maybe you find out there's an alignment there between your firm and your friend's firm. Have a friend who's a broker associate or research analyst at a real estate brokerage shop? Let them know what kind of deals your firm is trying to do.
And here's the easiest way to source deals...share deals with other firms. An example: a peer from another firm looks at a deal that a broker brings them but it doesn't work for them. Now...that doesn't necessarily mean the deal is bad. It's possible that it just doesn't hit that other firm's investment criteria for whatever reason...could be due to the density...capital requirements...geographical location...etc. Anyway...perhaps you can get that peer to share that opportunity with you...and it works for your firm.
Big caution here...always be ethical...always respect NDAs...and don't do anything that would constitute you acting as a broker. That said...there are ways to pull this off. One way could be for your peer to simply tell the broker that the broker should consider contacting you and your firm as you might be interested in the opportunity.
This response certainly became a bit lengthy...but in conclusion...if you want to make more money and rise through the ranks quicker...go above and beyond...be resourceful...bring value.
thanks for this great reply with a ton of relevant info, I was wondering if you (or anyone else) could elaborate on or provide an example just with ballpark #'s on how a developer could end up making $5M on an institutional grade MF development? Is this money that is pocketed directly by the developer over the course of the development? Or what exactly would this payout look like?
On a $55MM deal...a developer might make $2MM as a development fee (paid out in installments beginning at closing and through certificate of occupancy).
Due to the waterfall/promote structure...the developer can easily make $3MM at disposition.
Then the numbers can go up even more when you factor in cash flow...potential asset management fee...potential construction management fee...potential profit if the developer also serves as the GC and conducts operations in-house...etc.
Market development fee seems to be 4% of total costs (net fee, no circular reference). Sometimes LP's will fund "construction overhead/management" too which will offset salary burden. On top of this the developer gets an out-sized split of the profit over their equity contribution percentage based on IRR performance after disposition. This is simplistic, but the developer should achieve a return on equity 2-3x higher than the LP if the IRR surpasses the final accrual tier.
you say that you would gladly pay 100k to someone who sourced an opportunity that you ultimately closed -- what exactly do you mean by sourced here? just showing you a property with an investment thesis and models/market research to justify it? or is there more to it
Also interested in this question - how much of the leg work do you have to do to "source" the deal? Do you have to fully execute the DD and investment thesis, or simply bring in an off-market opportunity through your connections that your shop wouldn't have known about otherwise?
Thanks for the insight everyone, super helpful to hear all of your perspectives on this - was not expecting this many in depth responses
Based on everything here seems like i'll be in a good spot if hold out for now, have really been liking the job and company so far so definitely excited about the future and seeing where it goes. i'll focus on making contacts and building more of a network in the industry as I get my feet under me with the current position. The goal is definitely to get to a spot where I can help source deals / equity etc. to provide real value but that's a while down the road - will focus on absorbing as much as possible and learning everything I can about the development process for now
On the development side the way to get comp increases is to take ownership of development management on a critical long-term project(s) then ask for a comp increase or back-end participation once you have this leverage. Development analyst is easily replaceable while a development manager mid-project is a giant pain in the ass to replace...
True. From a developer's perspective...they look to be stingy with their operating cash. But then are apt to be generous when it comes to sharing the returns from the value they create...or at milestones when they collect cash.
Hi,
I am trying to break into development here in the U.K and am struggling to figure out exactly what kind of roles to apply for (small/mid or bigger developers). I am also potentially interested in working in commercial real estate lending.
I currently have experience in real estate agency work, running my own small property management business and intern/junior level development work.
If someone can take a few minutes to give some advice would be much appreciated.
Thanks, Armond
Typically, something like a "Development Analyst" is an entry level role in America. I would start there.
What type of annual raises would you expect for the first few years in development at sizeable shop, assuming you perform well? 10%?
10-20% typically at a brand name institutional shop/REIT. It can definitely stretch higher at smaller shops where the base salary might be lower. This is largely due to a developers at the smaller level tending to pay out more at critical lease-up milestones, whereas it seems to be a set percentage at the larger guys regardless of milestone.
Either way, a lot of your bonus as percentage is largely going to be driven by what you can bring to the table as far as how far can you push the project along with minimal oversight, experience, and contacts.
I appreciate the insight. How about raises in the first few years? Typically ~10% as well assuming you work hard and smart?
Any insights for corporate finance roles expected comp ramp up, REITs would be helpful, that execute the firm's financing plan as well as IR and other finance functions?
Stats: 3.5% annual growth over 5 years: includes one promotion, added responsibilities, successes, etc. No increase in eligible bonus
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