Golden Handcuffs at 26
Disclaimer that this is not a flex or troll post, as this is an actual problem I'm having (albeit a "good problem").
I'm making $250k / year as a REIB associate (no MBA, analyst promote) but I want to move to the buyside (REPE, debt fund, or REIT) and also move markets.
I imagine most of these jobs would expect me to come in as a senior analyst / junior associate given they have a long line out the door of experienced REPE analysts/associates who are also applying for jobs. Based on past threads on here, I would be looking at pay of around ~$150k all-in pay.
How do I justify taking a $100k paycut as a 26 year old? I think if I told anyone I know that I'm looking to take a $100,000 pay cut for a job with similar hours and responsibilities, they would a) think I'm lying or b) tell me I'm a moron.
And on top of that, it's still extremely hard to land one of these $150k / year jobs. I've only landed a handful of interviews through cold applying (haven't started networking yet). But I'm struggling to get the motivation to begin the networking process given the "golden handcuffs" problem.
Has anyone here given up a cushy salary in pursuit of a buyside RE Role? How did it pan out for you? Would love to hear some positive stories in general of leaving a cushy paycheck for something else and how it worked out. Or stories where it didn't work out? I'm all ears
1) REIB is more process oriented than investment analysis oriented. I think the job at the senior levels is more interesting. Both are ultimately sales jobs, but one involves running a process and one involves making investment decisions, overseeing the value-creation process, forming partnerships with operators etc
2) I want to move to a market where there is basically no REIB so other IB roles wouldn’t really be an option
3) I feel like buyside RE roles have less downside. I’m not sure what laid off REIB people do after. But at least on the buyside, you can move to smaller funds / REITs, start buying your own properties (you already have the experience of doing it yourself). It just seems like there is more long term upside and downside protection
I think at this point it just comes down to what you want to do, if you don't want to do banking you should switch otherwise just stick around for the next opportunity. While taking the $100k pay cut is a big deal (I can't say I've ever been in that situation), there are two ways of looking at it: 1) The cut is temporary and soon enough you'll be making similar or more money all in, or 2) your earning potential is going to be lower than your current job. I can't tell you which one it will be, I don't know enough about IB or REPE salaries, but what I do know is regardless you will be making good money, so the real question is what do you want to spend your working life on? If money is really that important to you that the $100k is a huge determining factor, then it should outweigh moving jobs, otherwise, I'd say hop and enjoy the new job, the money will come.
I was gonna say the same...don't think you need to eat $100k on the cut
seems like you are giving up one cushy paycheck for another, slightly smaller, cushy paycheck. this does not seem like as risky of a move as you are framing it to be. your thinking is also quite myopic - you are only focusing on the 100k less that you will be making now. if money was the only factor, you should be thinking about how this switch impacts your projected future earnings ability (if you think that there is a higher likelihood of making more money over the long run in this other area based on your abilities and preferences, then it would be a wise economic move to make this switch). don't forget to discount your future free cash flows back to the present day, since money now is worth more than money in the future.
I have grappled with this problem myself, as I always saw myself on the equity side of things. But, I have been on the debt side for a few years now, with deferred compensation that would make that move super difficult to make. My personal plan is to ride it out since it feels like my current comp is above market, and it’s just a matter of time before things come back to earth. Not sure if that helps, but it’s my own experience with golden handcuffs.
You’re young. If you want to do real estate, make the switch now. It’ll only get harder. You can make $250K plus in real estate, just not today. If you manage to get a job at BX, you may get back there quickly if you don’t start at that level, but follow your passion, not the money. It’ll begin to get harder and harder to stay if it’s just for the money. In the end, if you think you’ll prefer real estate, make the jump, if not, stay. There will be shops you could probably come in and start around $200K, you’ll just need to find them. For me, personally, I found those roles came up around the 4 year mark, whereas before that it was hard to find, but they existed. Being that you’re 26 (4 years) those roles will exist. There are plenty of funds that only hire (or want to hire from IB) and will pay the freight for it. Keep searching and use recruiters too if you can.
Just FYI, I am already in real estate. I'm an investment banker covering real estate companies. But I think your advice stands either way
FYI Brookfield offered on cycle hires in this current cycle $200k base + $100k bonus (flat across entire class, not performance based)…
On cycle meaning they don’t start the job for another 18 months?
Uhhh what bank do you work for? 250k is pretty darn low for an associate
I work for GS / MS / Cain Brothers
so you work at Cain Brothers...because who else would lump Cain Brothers in with MS and GS
One of those is quite different.....
Is the idea of the buyside role being more interesting of significant importance to you? If so, do it. I was in a very similar position and took a 60% pay cut to transition to the principal side at 25-26 and don't regret it at all. At 26, is your life really that different if you're making $125K vs. $250K? Being bored at 35 and stuck in a boring job with no intellectual upside but unable to leave because you have kids and big $$ options that vest on a long horizon is a problem (and a pretty common regret).
My lifestyle likely wouldn't change but the amount of money I would be putting away would drop drastically.
Can you go into more detail on the move you made when you were 25-26? And why are you happy you did it?
To be honest, I'm considering the reverse switch. It is hard right now to find an equity job that pays well. I've interviewed with MF shops and got to the final round and smaller $1-5 B shops, where, well same.
I've had trouble finding roles where it will pay as much as sell side, and my hours are not great. I'm talking with several vps's at CBRE to have me come in as VP for 2x-3x multiples of where I make now. how much are your 9pm-12am's....your 60 plus extra hours a month? How much are they worth.
I was working in brokerage at a similar income level with expected earnings of an an additional $50-60K the following year, and left to join a development team at less than half the pay at 26. Personally found brokerage really boring...every deal was the same 10 steps, and I always felt like I was giving professional advice that was half obvious to someone with office asset class experience. Working in the development space is more fun intellectually, more travel, exposure to new markets, etc...just overall more fulfilling. And, the longer term income potential is much higher when you start getting access to promote distributions.
I think part of the "issue" you are having (or could have, it's hard to tell how seriously you are actually trying to make this move), is that you have have I'm guessing 4 years max exp and no grad degree. A lot of the candidates for the jobs you want (i.e. will minimize the pay gap, if any), will have a broad array of people with same and more exp + a grad degree. Not sure if you plan on MBA or something, but maybe it should factor into this strategy (but I don't think you need it necessarily, but many of your peers will have it).
That said, getting to that 5+ year mark (and frankly a little older) will make you much more attractive to headhunters, that is the way the really cool gigs get grabbed. I see a lot of people saying to jump now, it only gets harder... personally, I disagree. I think your market value rises next few years, and jumping now (esp. of just for lateral in title and downshift in pay, which is a far assessment) may be sub-optimal. Only jump for a legit awesome gig, don't settle at this stage. The jump from sell side to buy side can be really good at the mid to mid level (maybe loss of current comp, but quickly made up in long-term comp, and way better hours/perks from day one). These roles come by either being headhunted or via networking/relationships (low prob via apply online); you are just a few years away from being in that ballpark.
Caveat to the above, you mention wanting to move markets.... Do you have target/desired market, a list of cities, or do you just hate New York (taking the random guess, you could be in LA/SF/CHI or London, etc., but as an NY'er... I get it)? If you are trying/willing to stay in the "majors/HQ" markets, that is one thing, if trying to go to secondary, it's something else (call Florida/Texas mid-way points in that continuum). General market jumps require a lot more focus, and major networking and cold prospecting. Just something to factor. If you were to do a grad degree, do it in the target market (or program that has most of its ties there), that can be a good way to help make market jumps.
Would an MSRE in say re Finance - alternatively serve him or must he do the MBA?
totally depends on which MBA and/or MSRE programs the OP is accepted into. Given they have legit RE experience in REIB no less, I'd say the value of an MSRE, which are usually tailored to people near 0 CRE experience, is less as they likely know a great deal of the curriculum already. MBA can cross specialize and take wider range of classes, so on that fact alone, MBA might be better.
Still, the "repute" and thus value of each program matters. So, there are many MSREs that would be better than many MBAs (on the repute/name basis alone), all depends!
You will make $250k in REPE if you're coming from IB and working at a top tier Sponsor or allocator/opportunity fund in a Tier I market..........
Agreed, but I’m starting to realize those opportunities don’t grow on trees. A lot of the good opps recruit when you’re 6 months into your banking stint and I opted out of those because I thought that was crazy given I barely had experience.
I disagree with this - many of the names that you know of, and are household names, recruit 6 months into IB stints. But there are many firms you don't know of for many reasons such as, due to size, quietly doing deals, etc., which pay extremely well. Firms generally know/understand that if they are pulling people out of REIB, they will pay, and you'll know up front. You need to increase your networking. The jobs exist, you just don't know about them yet. Are there many of these jobs - no, but there are more than you would think. Most recruiting in real estate isn't on any cycle. It is usually as needed and much of it gets done not through online postings, but your network. I've said this before, and I'll say it again - most jobs in real estate come via network. I've found 3 of my 5 jobs this way and it's friends similar for my peers in the industry. I had a call the other day with a friend who I used to work with - he's been in the industry over 20 years and has only found 1 job through an online posting - it was his first job at 22.
I've faced a similar dilemma and it really comes down to a) what your medium to long-term career goals are and b) what you think you're giving up at your old job in the near-term compared to what the new job can potentially set you up for down the road. You're still young and at the early stages of your career. It would be short-sighted in my opinion to focus on the ~$100k hit (less after taxes) you're taking over the next year or two versus the deal flow, personal growth, networking effects, and economic opportunities (co-investments and carried interest) you could be exposing yourself to in a buyside role.
Thank you, exactly the type of post I was hoping to hear
I intern at a HF and one of the senior guys told me that everyone at his old investment bank would immediately accept if he offered them a job here despite lower pay, less job security, and potentially more work just so they could say they work at a hedge fund. Thought it was a neat perspective and one I've kept in mind, just because something (especially PE) is the socially "better" thing to do doesn't mean it's necessarily right. That decision comes from your personal satisfaction with your job.
No offense but that sounds like a ridiculous view and, if true, says a lot about this person’s coworkers (in IB). No sensible person works at a HF just to say they work at a HF (maybe some junior people get excited about this); it is about the work (different problem set, etc), the pay, etc. And getting paid less at a HF with less job security doesn’t sound like the place to be.
I'm going to echo what people have said and tell you that I don't think you'll need to take a $100k paycut. If you're in true REIB, I think plenty of shops would be happy to hire you as an acquisitions associatea and at a large shop that could get you to $180-$200 all in. Potential for a bit more if true MF. You likely will have to give up some comp, but you'll face that issue at every level of leaving IB and the pay disparity only gets bigger. So if you don't see yourself as a career banker, you'll be dealing with this eventually, and it'll probably be tougher the older you are / more expensive lifestyle you're living.
Thanks for the encouragement. It’s true REIB but not a BB. It’s good (because we do some deals that are closer to the property level) and bad (because I don’t get the same branding / stamp of approval)
Agreed on your assessments of good and bad. I'd say to just shade your resume's transaction history section towards asset deals vs entity deals to whatever degree you can. I think if you especially swing the bat for opportunistic or special situations sorts of opportunities, they'd value your banking experience.
I did this, but my road was different. I was in banking, but on the corporate side, and only an analyst. I did my MBA after 2.5 years in banking and did 1 year as an analyst at a PE firm, then now am an associate at a REPE and just turned 27. My pay is about the same tbh as it was in banking, but I am getting promoted to co-lead our acquisitions starting at the end of the year, and I also get carry.
Pay is going to be completely firm dependent, and my hours are now 50-60 instead of 70-80, and I make about $120k in cash + 2% carry. I live in a very LCOL area, so comparing it to SF or NYC it's probably half the cost, and my taxes are below 20% so I save a lot of money, plus carry has tax advantages as well. The job is much more enjoyable, but also more stressful and nuanced than banking. My firm is also pretty small and we are trying to expand quickly, so spreading my time out when we are trying to close on 4 deals in the next couple months is a lot of work.
I assume you are in NYC, so I have contacts at Starwood there, and had interviews in SF as well. Pay was definitely $150K+ for associates. Now if you are looking for less hours, paycut will probably be $100K, because MF don't really cut hours tbh.
What market?
Mostly west coast, I live in Florida and travel every time we need to acquire a building. We are still small, but expanding. We have 4 deals we are working to close that will add about $250M in assets, and we'll probably hit $1B in properties next year. We are just starting to get institutional traction, but our returns have been pretty good considering we had office buildings in LA, SF, and Sacramento.
Bump
bump
What more do you want from this thread? It's been answered
I jumped over from REIB after my second year and made around $170-180k before I left to join a GP in a SE market. 2020 - my first full year I only took around a $50k pay cut. A lot of this was due to COVID and not doing deals. I work like 40-50 hours on average with longer hours as a deal gets serious. It’s very possible not to take a massive cut. I’m now getting carry and a raise. Long way of saying there are roles out there. You have to look, ping your network and a bit of luck never hurts. Good luck man!
I think that’s part of the problem - associate pay is so much higher that the pay cut seems more dramatic. $170 to $130 isn’t nearly as bad as $250 to $130. Appreciate the words of encouragement
You can easily hit same comp at cre debt fund, repe etc in NYC or similar. On par at many firms or maybe slightly less... but working 70hrs or so avg.
Example I’m at a debt fund. Associates are 100-125k plus 75-150% clearly pending deal team, role, experience etc
On the flip side I’ve heard of analysts with 1-2 years of experience making $90k all-in at a very reputable debt fund. I can’t imagine associate pay at that fund is on the same level as yours
Wanted to come back and bump this thread and say I eventually landed a REPE role that paid in line with REIB.
My main takeaway from the whole job search is that the overall job market has as big of an effect on your search as your individual resume does. At one point, a small but rapidly growing fund responded to my associate application by saying I wasn’t a fit for the associate role, but I could be a fit for an analyst role. I later found out that role paid $130k… 50% of what I was currently making.
Just a handful of months later, I had multiple associate offers at 1.5-2.0x that pay level. What was the difference? The job market went crazy. Deal flow was high and firms laid people off in 2020. Suddenly there was a huge need for experienced associates, but many of them had already accepted new roles. The firm that told me I was “more of an analyst” ended up hiring someone way less qualified than me.
All I’m saying is - don’t feel pressure to take a shitty offer in the middle of a global pandemic or recession. Your value as an employee may just be temporarily dislocated.
The flip side is also true. During periods of a super strong job market (for your role), don’t get cocky. Understand what type of market we’re in. If you’re not getting the type of job opportunities you want right now (late 2021 - early 2022), it’s not the job market - it’s you.
Would you mind sharing more info on your current role/ responsibilities and comp?
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