Looking for guidance finding my path in commercial real estate
Looking for guidance finding my path in commercial real estate
I am currently employed at a mid-size commercial real estate shop (Think M&M competitor) in the Houston Texas Area. We are a locally founded shop, but also have satellite offices in a few other large metros. I specialize in retail investment sales and have been employed with this firm for the past 12 months. Although I have learned a lot, I am not passionate about brokerage or the office culture. There is a lot of slacking off, lack of presence in the office, and little/no training. Most people are more concerned about 3PM happy hour, rather than working hard to close more deals. I have learned a good bit from being around other experienced brokers, however I have come to realize that brokerage is not what I want to do longer-term.
I love the idea of creating something from nothing. The tangibility of real estate development fascinates me.
With that being said, I am looking to pursue a new career and welcome any suggestions, comments, or criticism regarding my future aspirations.
I have always been an entrepreneur at heart. My longer-term objective is to work for myself in development - whether in residential or commercial. Ultimately, I want to facilitate the entire development process. Closing the deals, planning, designing, and orchestrating the entire development process from start to finish. I’d like to specialize in town-homes and larger multifamily properties.
I'd like to gain enough exposure to be able to go out on my own in five years.
Thoughts and paths I'm considering taking:
-Work for a larger national developer as an analyst - Probably will take longer to gain exposure to deals
-Work for a local niche developer - May gain more exposure but will probably be less of an education
-Work for a local homebuilder - Confused as I feel this is more construction oriented and my not contribute to my longer term goal of being a real developer.
-I’m also considering just starting to learn deals by doing smaller fix & flips and rental units on the side. I could stay in my current job (being it is so relaxed, and do this on the side)
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If anyone took the time to read this; I greatly appreciate your time and any advice/guidance you could provide.
Best Regards,
Kyle
Any suggestions would be greatly appreciated. Thank you in advance
It sounds like you have a handle on the various paths you could take to get to development, but I'd just chime in to say that if you want commercial development, you should go into commercial development. While there are obviously similarities, there are nuances with respect to home-building and other, true 'commercial' development.
When you say 'employed' on the investment sales side, do you have an analytical background, or are you basically pounding the phones? If you want to go into development, having a formal analyst training period might not be bad since it will teach you the financial/technical aspects of underwriting, capital stack structuring, JV/partnership structures, etc. If you've already been doing this, I'd say your best bet is to try and get a development associate role or something similar at a niche developer. I think that your pro/con of gaining more exposure but less of an education is inaccurate because at the small developers you are going to be doing more stuff 'hands on' and there isn't as much division/specialization of labor since there are less people. In my opinion it's better to start at a smaller shop, make some $, get some deals and experience under your belt, then if you want to go into one of the big shops at a VP level+, that's the way to go. Money is better at those shops at the mid levels but it is harder to get promoted just due to the number of people vying for those spots, so easier to lateral in than going for direct promote. At the later stages, developers can chime in but I think the money at small developers is greater than the big shops (if the deals pan out) because you have more ownership stake.
If you have any other specific questions I'm happy to help, although I'm hoping other people chime in since I'm not a developer.
Thank you for your response. I apologize I am so late to respond to this.
Regarding my current position: I am currently involved in all aspects of the deal process, IE: Initial underwriting, comps, valuation, creation of BOV'S and OM's, and of course many many colds calls. I am knowledgable in underwriting a basic multifamily investment and I know the common expenses associated with my area, how to pro forma a deal, etc. I definitely agree with your viewpoint of working for a smaller niche developer. I feel this would give me more access and involvement to the deal process. I've also found that urban infill town-home development interests me. I've been offered a position at a local firm that has completed various transit oriented multifamily developments. Basically, the position consists of being a junior project manager. The organization does not have a GC so they have their inhouse project facilitate the construction process. My worry with this, is that it is more construction oriented and less development oriented. They tell me it is a combintaitno of both, but from looking at the job description it seems more construction oriented. Although, maybe this could help me learn the construction side to be able to do my own infill townhouse deals....
I'm a bit all over the place as you can tell. Any advice/suggestions you could provide to this would be very much appreciated.
Thank you
To start, good work making a sincere effort to figure out the most important aspect of anyone who is planning their future - your desires, strengths and skill set and how that fits with potential career paths.
I am an associate at a regional developer and MonkeyWrench pretty much nailed it - easier said than done but landing an analyst/associate role at a small developer would give you the best blend of hands on experience and learning. Smaller shops typically have less bureaucracy which provides more access to decision makers and allows everyone to wear more hats versus large firms where roles are more specialized.
Touching on your desire to head out on your own within five years, if that is your goal you will need not only a full time role like the one I described above but also to concurrently be working on your own projects to accomplish this. Being an efficient and effective developer is hard - the best principals of small to midsize firms (I am excluding big or institutional companies as they can hire the best VPs/experienced deal makers or afford to hire specialists for roles) are generalists who quickly switch and wear many hats. This involves not only basic knowledge of many subsets of the real estate industry but also an extensive network and most importantly an understanding of the tact to handle each of them.
On any given day a developer might:
Analyze a term sheet for a new project from a lender (financing knowledge of loan terms, guarantees, loan documents, pricing, advantages of fixed versus floating rate debt, loan provisions)
Negotiate a joint venture structure with their limited partner (private equity knowledge of typical developer fees, waterfall structures, typical contribution levels between LP/GP, understanding of buy/sell provisions in your partnership agreement)
Walk through and provide feedback on conceptual plans of a new project with your architect/engineer (design knowledge of product, optimal tenant sizes, amenities to include and to what extent, advantages/disadvantages of different building systems, exterior finishes, color schemes)
Lead and identify key areas of concern at the weekly construction call for a project underway with your general contractor and consultants (construction knowledge of building systems, the seemingly endless list of acronyms that contractors love, general idea of costs for different scopes of work, general understanding and timeline of the construction process so you can help coordinate trades/consultants that GC may have missed)
The reason why I went into such detail is to emphasize that if you really want to be a developer and run your own shop then you need as much hands on experience as possible. Most shops get around the above by having a partnership model with one principal specializing in deal flow, branding and financing relationships while the other is operational and focused on construction, design, etc. but that still is a lot of network and nuance to develop over your career.
Experience is also what is the driving factor behind the other big challenges of striking out on your own - deal flow, being able to borrow at reasonable terms and most importantly being able to raise the necessary equity at reasonable terms from your limited partners. Once you have the experience (in other parties' eyes) and have shown you can execute you will know about private deals that are not openly marketed, you can borrow at cheaper levels and you will be able to convince your limited partner this is a good investment for them.
Hopefully this gives you a brief roadmap for what small to midsize development looks like in the real world. I didn't set out to write a novel but it is this level of detail, strategy and nuance that make it so much fun for those of us who choose to pursue it so if this still sounds fun to you then definitely go for it!
Any questions feel free to reach out to me.
Hi.
You are a good candidate for securitization in the CRE space. You can learn to do this in the most practical sense -- getting dirt under your fingernails working on live deals on day one.
Understand that the most profitable thing you can build is high density housing and the easiest thing to get approved these days is senior-assisted living space.
The best part is that yes, you can create everything out of nothing.
It helps if you have a phone tho.
Expected Knowledge of a Newbie trying to get into Commercial Real Estate (Originally Posted: 10/24/2016)
I was curious as to the expected knowledge requirement of someone new trying to get into the industry. I want to join somewhere that will be able to teach me the ropes. Operating under the assumption that I know nothing about the industry what would I need to know to get a junior level position?
Network, seriously network.
Aside from networking, learn excel modeling or at least be literate in excel and real estate. Although any place will understand that you should not have any knowledge base coming out of college.
So many ways to go here man. Where do you want to end up? If you want brokerage, just network in. If you're looking to start in something more finance oriented, start working on some basic excel courses and network in. By working through the courses at least you'll have heard most of the terms before.
Ask a more specific question and you'll get a better answer.
You need 7 years experience and a MSRE for an Analyst role.
JK (we'll sort of)...I'm in same boat except I have a little relevant experience. I'm taking a modeling course right now and networking my ass off. Every guy I speak with tells me I'm doing everything right and to just keep pushing. You'll get there man. Just don't expect to get a job or even interview after a month of trying. I've been trying for around 3.5 months now. It's tough.
There are about 600 threads on what to do to look solid enough to get hired in RE at this point, but to sum up the points I think are most important:
You seriously don't need to be some sort of excel wiz or real estate mastermind. Just know the basics and for the most part firms will hire you if they think you'll fit in.
Resources for items 2 & 3: I honestly think having an Argus cert looks great on paper if the person reading your resume has not met you yet. If you network in, it probably does not matter if you have it since it is pretty easy to teach. REFM is a good course to take to brush up on financial modeling/excel. Honestly even if you just took the level 1 cert course, that might get you just about to where you need to be to start off. Doing level 2 and understanding it well would 100% have you further along than you need to be to get an entry level job at most companies.
I will likely want to go either into brokerage or I'm finding Investment Sales to be more interesting. I am thinking of starting in a non NYC/Chicago area to get started and perhaps transitioning there as I progress in the profession. It seems like learning Argus and perhaps getting a cert in argus would be a great start as terms I feel like are acquired on the job?
In brokerage moving to a new market is like starting from scratch. Building a network, learning the market and establishing yourself can take a long time. If you want to end up in the NYC or Chicago market I suggest starting there.
If you have a Real Estate club on campus, join it. There are some case competitions that revolve around ARGUS, which is what you are going to be using over excel most of the time in the brokerage arena.
Also, learn about cap rates, how interest rates effect debt, DSC (debt service coverage), LTV (loan to value), and understand the basic format/content of appraisals (appraisals are a HUGE part of CRE).
I've seen a few people in non target schools (i'm non target) become a commercial appraiser then switch to brokerage, etc, do you think this is a wise move? I should mention I'm 2 years out of school job switching from the residential side.
If you're switching jobs and not in school, your approach will have to be different than those previously prescribed.
-Networking is huge. If you were in sales, you should know how to do this. Call/Email people at CRE companies, get involved with local university MBA groups, etc. and tell everyone you are making the transition. Invite people to informational interviews and get a feel for their company, role, etc.
-Financial Analysis is important. Learn the foundation of real estate financial analysis and real estate financial modeling. Buy the REFM course and work through it 2-3 times. Also, PropertyMetrics is an excellent website to get the basics on financial analysis in CRE.
-The above two things are the most critical. If you know how to build proforma cash flow statements and you can network, you'll eventually get hired on to a group.
If your goal is to become an Investment Sales Broker, I would recommend working for as an Analyst at a company where the top brokers operate. You'll see deal flow, see who clients are, hear the broker negotiate deals, and get a firm foundation as to the financial analysis and underwriting of a deal. Keep in mind, this is only one path. Don't let anyone tell you that you have to do (A, then B, then C). You can do the above path (which is what worked for a few people I know who are top brokers), or you can be an appraiser and make the transition. Or you can join a brokerage and cold-call until your elbow is stiff from holding up the phone. Up to you.
The only things you need to know are how to underwrite deals and network. The rest will fall into place assuming you are a fit for the group you're looking to join.
Best of luck and PM me if you have any more questions. I broke into CRE through dogged persistence after being a residential broker for two years.
CRE Career Path Advice (Originally Posted: 08/09/2017)
Hi all,
I've worked in tech for the past 4 years in product and operations, and before that investment banking as an analyst for 2 years. I want to transition into CRE, specifically multifamily – long term goal would be to become an investor myself, perhaps even a fund manager in this space.
Any advice on what this career path would look like / where to start? I'm located in Seattle.
I'm open to start off by joining CBRE or M&M as an analyst in a multifamily group – just not sure which brokerage is strong in multifamily in Seattle. Getting into REPE also looks interesting, but I'm not sure I could jump right into it from my current background. Any thoughts on the possible paths here?
Thanks!
Bump
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