Let's Talk About Broker Compensation
How much do brokers actually pull in?
I'm talking about your net of everything. So you pull in your commission and have a split with the company (anything from HFF/ CBRE to smaller boutique shops). Larger deals typically have multiple hands in the bucket (at least from what I've read- correct me if I'm wrong). So you split with your partner(s). Typically brokers have to source their own business- so after expenses of doing that (maybe it's client dinners, maybe software, etc.)
I am just curious. Comp has been talked about on other threads and I know it can go wildly all over the place. Some lazy broker in the middle of nowhere can make 0, Darcy can make it rain. I'm just curious.
This question applies to both Investment Sales, Leasing, and Debt/ Capital Markets/ Structured Finance.
** Also, where do you see the future of broker compensation? Is the space getting more or less crowded?
You more or less answered your own question - it’s all over the map. Some people make $0 while others make multiple 7 figures. It’s also highly dependant on market - a NYC tenant rep can do a 10,000 square foot deal at $65 per foot over and make a lot more than the Charlotte tenant rep doing a 10,000 square foot deal at $28.50 per foot. It really is a hard question to answer because it’s all over the map. What I can say is it looks like most brokers make a lot of money because it’s self selecting in a sense. If you are not a good sales person you just won’t last making $0 so people wash out. The sales people who have remained, remained because they do / did well.
Great points.
I should articulate my question better: Off of a $50,000,000 sale/ loan, how much should a broker expect to net? I understand the numbers for a sale and loan will be very different. And a loan can vary widely, so just assuming a senior note.
In my experience the fee for a sale is typically ~50-100 bps split 50/50 with the firm and then anywhere from like 5-50% of the net is distributed to other brokers/support staff who helped out (and then taxes take a big chunk of the remainder).
I'm at my second major brokerage and knowing nothing about the deal besides its size, I would say probably 90-100 bps for a sale and 55-60 bps for the financing. So for example, if you work in IS, you're looking at a bit under $500k in fees and then half to the house. Brokers would take home roughly $250K on that, but if its a team (which it almost always is for that deal size), that is split up between the group (assume the top broker gets half of that?)
I personally think it is a much better time to be a debt broker in terms of comp.
No "retrades". Yes a lender can back out at the last minute, but assuming it is a good deal/numerous bids were made, a lot of the time it's just next man up.
Tons and tons of liquidity in the debt markets.
The best debt brokers know how to raise equity for the sponsor and generally have a great understanding of the capital stack as a whole.
A lot of deals are quite easy, truthfully, and thus the broker and his team can juggle a bunch at once. There is significantly less work for a $50 million refi of a stabilized asset than for a $50 million construction loan.
Just my $.02 but would love for others to chime in on whether they think its more lucrative (speaking very generally) to do debt/equity vs IS.
yeah, all over the map with a lot of survivorship is basically the whole thread.
What would someone like Darcy come out of the Stuyvesant deal with for example?
I read that she got 90-100bps on it gross. No clue how to calculate the net though. Above responses provide some clarity though, although I’d imagine Darcy’s splits are far from the usual.
Per this article, https://therealdeal.com/issues_articles/large-deals-generate-less-than-…, the brokerage commission was .09%. It came out to $5MM. I think worst kept secret is that everybody discounts commissions, but would never advertise that they discount because then everybody would start asking for reduced commissions and it would be a race to the bottom.
Yeah well that makes sense, right? Brokers aren't taking any risk, and from a pure effort standpoint, it's hard to make the case that there is 20x more effort going into selling a $2b asset than a $100mm asset. Making that five million is a lot of money, regardless of project; the idea that broker pay should be tightly scaled to sales price is laughable to me. On smaller deals, it should be a higher percentage to properly compensate a brokerage team for their work, and that should scale down (on a percentage basis) as the dollar amounts rise. That seems to be the industry standard, as well.
Yeah agree here. There's a little bit of 'fungability' for difficulty of the deal that comes into play as well. For example, a piece of land/development deal where the broker is going to have to help negotiate things like milestones, entitlements, etc., there will be more effort required than a single tenant net leased sale deal. A multi-tenant business park or portfolio, for example, where there's a lot of effort that needs to go into putting the financial/marketing packages together, would warrant a spread in fee as well. Generally speaking though, at least in my markets, you see something like (deal size on left; commission on right):
0-15 M; 2.5-3% 15-50 M; 1.5-2.5% 50-100; 0.75-1.5% 100M+; have seen as low as 30/35 bps on the massive stuff up to about 0.75 on the stuff closer to 100M. Some exceptions to the rule are not exceptionally rare (i.e., I've sometimes seen a point or more on 100M+ under certain circumstances).
Then obviously there's anywhere from 30-50% of that which the brokerage shop keeps. The rest gets divided among the brokerage team(s) depending on pre-negotiated split agreements.
I know a few. Anywhere from 0 ro millions a year. In residential starting off is hard but once you are rolling opportunities often present themselves in the form of referrals.
Aside from the top 3-5 people in a given market/specialty, most brokers rarely exceed a net income average of 350k a year (pre tax). I would say most good brokers fall into the 100k-200k a year range. Sure, some brokers may be hot for a couple of years, but the good years must carry you through the bad years. A lot of "top" brokers live in fairly modest homes. Every year begins at zero.
You can count on one hand the brokers who fly private. For most, it's a decent way to make low six figures but not much more than that.
Disagree strongly on this. Are you talking about residential? If so then I agree. On the commercial side, there are a lot of people that make a lot of money on both the leasing and sales side.
Commercial.
A top title threshold (...not very top, but top...) at a big firm can be achieved by bringing in gross commissions of 800k a year over 5 years. After splits (we'll say 65/35 being generous), that leaves you with 520k a year over 5 years.
Most brokers are not in this top tier. A title tier below that only requires 500k in gross commissions per year/over 5 years. Also, the split is worse at this tier level (closer to 50/50).
That means if you bring in 650k in gross commissions (which is still really good/very hard to do), you are left with 325k. Please see my original comment in which I state most brokers do not see a net income average greater than 350k.
325k annually, while a great income, is low six figures. Also note that this does not include if you hit a "bad" year. Also note again, that most brokers do not fall into this tier as well.
The 80/20 rule in sales always applies. 20% of the brokers do 80% of the deals.
Very few brokers bring in $1mil in fees a year...very few. The ones that hit this number tend to do it a lot and far exceed $1mil. A lot of guys hit $500k+ a year but not every year and I would guess less than 20% achieve this figure. Tons of guys out there gross $100k to $200k by closing one or two sales a year.
I've recently taken on some leasing for a client of mine. I gotta say, you can really make a lot of money in leasing. I don't think it will ever be a strict focus of mine but with the right client in the right location (coastal) I really enjoy it and the checks are pretty decent for easy closings. Also, the leasing keeps my name out there with folks in the region because of the for lease signs and listings. With this client, I'm always on the tip of their tongue now versus just when we're buying buildings.
Residential depends. I have first hand experience with that and in high COL areas it’s not unreasonable to make $500k+ and not be the absolute top. Top people here gross a ton, spend a ton, and net enough. Just not the lifestyle I want.
This is very wrong, the top 20or so brokers in my office make make more than that each year.
I keep hearing about these agents on AM radio in SD selling 30 homes a month. I know it's a team but I have yet to see one 4 Sale sign, lol. When I lived in East County SD this guy named Jim Carmichael appeared to own the town. Dude had a listing on every block. Probably grossed $1mil in the late 90's. Crazy money.
A lot of people don't like for sale signs in their yard and sometimes sign ordinances make it so the signs are tiny. Not too familiar with SD honestly.
I was with a team that grossed a little over half a mil (3 of us) a year. Made more money then than I do now even as the junior person on that team.. haha. But it's not the lifestyle I would want.
Same. I make just a little more now than what I made when I worked in residential RE. But my lifestyle now is so much better. One- I have a higher base and a more stable gig and secondly I rarely work on the weekends which from a quality of life perspective alone makes it so worth it.
Debt and Equity Broker here. We'll do anywhere from $350MM to $1Billion/year (that was an amazing year) in deals, netting between $3.5MM to $10MM in commissions with a team of less than 10. There's no denying its far and few between of firms that can match that especially for our size, but what doesn't seem to be getting mentioned in this forum is repeat clients.
I can say with confidence that 90% of our deals come from the same 5-10 repeat clients. These are either smaller private-equity funds who are always needing acquisition financing, or family offices looking for refinances, investment firms with $50-$250MM in AUM, etc.
I know talking about networking is like beating a dead horse, but it really is the key to being a broker. Starting charity golf tournaments with clients and lenders. Taking clients out on vacation or to sports games with great seats, etc. You're not just building professional relationships, you're building friendships. Its your friends that will stick with you through all kinds of economic cycles, even when other firms try to discount their fee and win their business.
ALSO -- Reading and negotiating loan docs. I don't think enough can be said for that. Our job, no matter how high the fees may be, is a service job that can be ~80% handled by AI and automation in the future. However, the negotiation of loan docs with Borrower and Lender's counsel is where a D/E broker should really prove their worth. Being able to negotiate the terms and get into the weeds of the deal, regardless of what the coupon may be, can make or break the deal for your client. It also often leads to repeat business.
This is a great post, +1.
Thanks for the response! Really great information here. Mind if I PM you?
Your average broker is really only working with a few clients at a time. Maybe 5 clients on average. I can tell you this, there are some HNW family offices that due to reputation risk (a product of the internet) really need a good mortgage broker.
There are CRE lenders that literally carve out a niche on "no google searches." LOL
Interesting information but it makes sense.. thanks!
+1 agree wholeheartedly. When you say "loan docs", are you referring to the negotiation of term sheets, too? Or do you mean the actual loan docs in particular, aka after a deal is under app?
The term sheet is just the beginning. It's a signed document outlining ideas. It's not until you get to the loan agreement, promissory note, guarantor documents, deed of trust, etc. do you really get into the weeds of the deal. Obviously as a broker your job should include marking up term sheets (no TS should ever be immediately signed when it comes in without some markups on it), but your responsibilities should go deeper and include keeping up and reading every redline put out by Borrower and Lender's counsel in the full loan docs discussions.
There's been a multiple times Borrower's counsel (YES, Borrower's counsel...) and/or Lender's counsel, included language in the docs that was not what the Borrower actually wanted, and it was our job to step in, clarify the language and reword the document(s) inline with the Borrower's intentions. I have dozens of anecdotes that are similar and highlight this exact point.
If anyone else needs a relative proxy... $6.23 million for Campbell if all went as planned.
https://therealdeal.com/2016/07/22/heres-how-much-a-top-capital-broker-…
THis Guy is so poor at managing his finance, despite making millions
That's quite common amongst the professional class. Buy shit you don't need to keep up with the Joneses.
How much does a guy like Dustin Stolly of NGKF net? Reading an article and said he closed about 12bill worth of loans in 2018. Curious.
He's rolling in it, short answer.
Let's say that conservatively (his splits will be better than this at that production level) he gets 50/50 with the house. Let's also say that the average deal fee is 50 bps (depending on the difficulty/size of the loan it will be different, but lets use that as an average). So 0.50% on 12 B is 60 M; divide by 2 and that's 30M. Not sure how many people he has on his team and what those splits are, but I'd be really surprised if he didn't walk away with 15M at those numbers.
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