This is probably a noob question, but I was curious what the rules surrounding conflicts of interest within the industry? If I was a broker would I be able to invest in properties for myself? Would I be able to consult for a 3rd party investor?
I ask as similarly IB employees have rules surrounding investing in stocks, what are the rules surrounding investing in properties?
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This is really only an issue with a property you are serving as the listing broker (in IS capacity) or landlord rep (in leasing capacity). Brokers buy and invest in properties all the time. It's only a potential conflict of interest when you are doing so with a property or party you have a true brokerage relationship with (hence, the source of the conflict). Even then, disclosure can potentially make it okay. If you are acting unethically, you are (or should be) fucked either way.
You should also see what your state license law says, but this is pretty common. It is nothing like the I-bankers have to deal with (this is due to the nature of publicly traded securities and public vs. private info)
Okay, so if I were, say, an analyst working in an IS team that specializes in medical offices, and was approached by a small REPE firm looking for me to work part-time helping to underwrite properties that also invested in medical offices, I would be okay if the relationship was disclosed and I wasn't taking advantage of my broker position?
That situation is a bit different because you're essentially moonlighting. You're definitely going to want to talk to your boss about that one - I could see people having an issue with that.
Okay, this is more what I figured, but it's good to know as I am in the midst of wanting to invest in my own properties (probably much easier to do as a broker), and being asked if I wanted to work for a REPE firm on the weekends. They offered $45k for 10hrs/wk and it's hard for me to turn that down lol.
Is there a reason the REPE firm doesn't just...hire you full time? Or do you not want to go that route?
They are young, and their founders are all working full-time with FAANG companies. So there is only three full-time employees, the CIO, the asset manager, and the controller. They want to add an associate, but they said they don't want to make them full-time until they reach $1B AUM. They also aren't high growth since half their staff is working part-time, and they treat themselves almost like a family office with most of their equity coming from friends and family.
@Cre said it well, this is really an employee/broker/management type issue. If you are a 1099 contractor with your firm, you have a lot more flexibility, but "rep-ing" to things in real estate could be tough (the broker may ask you to leave if the see some issue with it, not uncommon). If you are a W2 employee of this brokerage, they have a lot more rights to set limits on what you do.
Either way, I'd advise being open about it. Some brokerages could care less so long as you are not literally doing something that could take away commissions or clients to another firm, some will want to give your "desk/spot" to someone who will be sole focused. You probably know the ethos of this firm before even asking.
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Son, this industry was built on conflicts of interest.
If you're not using your insider brokerage knowledge to buy or invest in some prime deals, you're doing brokerage wrong. When the market tanks and you don't close a deal for two years but still have to pay the lease on your brand new broker Tahoe, you'll be incredibly happy about the three cash flowing medical office buildings you and your buddies invested in.
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