I've seen a few posts about this, but was hoping to possibly get a bit more specific info. From what I've read, appraisal gives you a great background and education in CRE, but I also get the sense that this is a career path, rather than a stepping stone towards, say, AM or an investment analyst (maybe PE after an MBA or MS). I spoke with a guy who started at a small appraisal shop out of school for a year and a half, and is now doing development and feasibility analysis for an energy company. Would moves like this be common, or do most people do it for two years, get licensed, and continue doing appraisals. These shops state they do a lot of 'consulting' and 'advisory,' does that mean they model, analyze, and advise clients on acquisitions, land developments, etc? I am hoping to get a better idea of what the exit opps are, and what skills you gain in a 'valuation analyst' role.
Very appreciative of any feed back.
Early in my career I spent about 8 months at a multifamily appraisal shop. Probably 4 out of 5 analysts I saw ended up going into something else, and about half of that 80% went into a completely different career path (like, government consulting or nursing school or something). I learned an enormous amount during my time doing appraisals. One of the things I learned was that the appraisal model is a poor overall business model for making money long-term.
If you did one appraisal by yourself, it could easily take 3 weeks and you're charging only about $5,000. Sounds like good money, eh? Yeah, well, try to develop new business when you spend your entire day buried in numbers. It's basically impossible. So the only way to make real money is to become an MAI and to open your own shop where you hire young people to do all the heavy lifting while paying them slave wages and working them slave hours. Also, since you'll have other people doing the heavy lifting that means you're basically an originator of business, which means you'll only be successful if you have the right personality to develop business. So if you have a salesman's personality and you can look at yourself in the mirror each morning knowing that you're paying new college grads peanuts to work 60 hours a week then it's possibly a decent career path.
With regard to exit options, if you're a relatively young person (say first or second year out of college) and you're trying to break into the business, it's a phenomenal way to break in. I guarantee you'll learn more about hands-on real estate at a no-name appraisal shop in 1 year than you would at the nation's top real estate PE firm in 2 years. So it's a great way to start out in the business. Only stay 12-18 months and leverage your transferrable skills into another area of real estate (if you want to stay in the business). It happens every day.
What other areas of real estate could you get into afterward? Depends on: 1) luck, 2) timing (job market, availability, etc.), 3) who you know, 4) how well you put together your resume to demonstrate your transferrable skills, 5) geographic location, and 6) how well known your appraisal shop is. Obviously, working at CBRE or Novogradac is going to make you more marketable than working for John Smith LLC.
I agree with DCD. Appraisals is probably the best way to learn real estate, and no, I wouldnt say it is anymore of a career path than anything else. Appraisals is a great way to start out in CRE much like an IB analyst gig is in finance. What does an IB analyst do? They value companies in every way possible and by the end of the deal they probably know the ends and outs of not only the companies involved but the entire market/industry better than anyone. They also work long hours and do a lot of bitch work, which shows they are dedicated. Welcome to CRE appraisals. Its the same thing.
That is pretty much what CRE appraisers do. You must be an expert on every valuation methodology (DCF, Comparable Analysis, Market Variables such as cap rates, etc.). After a year or two as an appraiser, I doubt anyone will question your "knowledge of real estate". (Most shops I have seen also use ARGUS, which will introduce you to that program as well)
As far as your question of their interaction with clients, I would say it varies, but you wont be involved in executing deals. A typical appraisal job will probably work something like this- 1. Owner/buyer calls you to value their property (they may or may not give you a value that they "think its worth") 2. You do the appraisal and send to them 3. They call you and bitch about your value being too high/too low 4. You justify your reasoning, may or may not revise (actually good practice for a future gig with broker/PE/developer, because it teaches you to not only be able value accurately, but also JUSTIFY that value. Those are not the same thing, and the ability to do both is great for a pitching deals to investors/buyers/boss/etc.) 5. Job is done you move on to the next property (Try to find a shop that does multiple property types, as each type has different nuances that many people overlook, that can greatly affect value)
Exit ops I cant speak much about, but with my knowledge of what appraisers do, I cant imagine anyone not giving you a look to bring you on as an analyst or something of that nature whether in PE, Developer, or REIT. Is it as "glamorous" as being an IB analyst, no. But anyone who knows anything about real estate and runs their own shop puts a lot of value on having some one who can basically put an appraisal value on property, before its appraised.
On my end I just see appraisers as boxes that lenders need to check off so we can get our money. Half the time the lender "guides" the appaiser to get the appraisal we need for the loan amount.
They visit a building for 30 minutes, work off of all the info we (the borrower) send them anyways, ask very few questions.
We've never used an appraiser to underwrite an aquisition or anything like that. TBH I feel they are just backstops for lenders to say "hey look we did our due diligence"
Depends on the organization. The appraisal firm I worked at did 100% of due diligence, from making actual rent comp calls (which was a major pain) to conducting a formal, all-out inspection of the property (if feasible). We rarely used the developer or borrower's information and we maintained a giant database of income and expense statement comparbles, so we also constructed our own I&E. I remember having access to CoStar, Reis, RC Analytics, and LoopNet for sales comparble information and market research. I also remember spending countless hours conducting extensive secondary research on individual markets, constructing detailed maps and determining exactly what new construction was going on in the area. Our appraisal template was literally over 100 pages in Word format, and all 100+ pages were edited. However, I've seen multitudes of commercial appraisals that are completely half-assed (20 pages of fluff), which is most common.
And I think that's the difference between an elite, well respected firm and a "mom-and-pop" appraisal shop. The respected firms get the business of Fannie Mae, Freddie Mac, the FHA, major community development organizations and counties, and major regional lenders.
We do business with the major balance sheet banks, life companies (pru, NYL, NWM, Met etc) and I have not seen one appraisal can I would consider "thorough" but hey other sponsors mileage may vary
Thank you very much for your insight.
Crazy lloyd- what was your experience with appraisal? Are you currently in valuation, or did you use the experience to move on to something else?
SHB- I've heard that the process is used to 'check a box,' but I've also heard the work involves modeling, analysis, argus, etc- skills that would be transferable to something like acquisitions. Would you agree?
I interviewed with Novogradac 6 months ago, but had no idea what appraisal really was. The shop I'm looking at now is bigger than them, think CBRE or other top firms. The feeling I get from the people I’ve spoken with is that you’re expected to get licensed in 2 years and start producing, which I understand, but I don’t really know if I want to be an "appraiser” forever. Is it common to see people on the transaction side of firms, say in acquisitions, or maybe portfolio management, with MAI designations?
In any case, I'm a little under 1.5 years out of school, and have been working in RE research for 11 months. At this point, would this be a strategic next step towards acquisitions or development (while pursuing an MSRE), or would it be better to stay put and look to network into some kind of lending role (while pursuing an MSRE), That pays more too bc i would be making about the same as i am now. Also, Novogradac (which pays well with over time), this place, and CBRE do not hire ‘valuation analysts’ directly out of school, from what I’ve been told by a few sources. They all told me they look for 1-2 yrs RE experience, but at the same time, they are advertised as ‘entry-level.’ Similar to most investment analyst positions I’ve seen.
Your input is awesome, I really appreciate it.
If you're already in real estate research, appraisal will be largely redundant for transferrable skills. The appraisal experience may allow you to sell yourself better if you worked at a respected firm, however.
Novogradac 100% hires entry-level. Every real estate group, appraisal firm, etc. that does not do on-campus recruiting prefers 1-2 years of experience, but I guarantee that they have or do hire entry-level.
MAI is an atypical but present designation throughout the real estate community. It won't hurt you other than someone might question your career path. My former boss at the appraisal firm now works at a top multifamily lender as an underwriter. I don't think he ever got his MAI designation, but he was really close.
Thanks DC. I’ve seen a couple of your posts, and know you have extensive experience in the DC area, would you mind giving a brief outline of your career path.. was your valuation experience necessary, or do you think there would have been a better route to take to get to where you are?
I get the sense some of it will be redundant, however I’ve also been told it will give me a good background using ARGUS and applying DCF analysis. I’ve met and spoken with people at two PE firms who both said the biggest thing they look for at the junior level is that, and actually analyzing investments to buy or sell- which you do not do in appraisals..
My career path. Wow...
Let's say it's been a wild ride. Hmm. Maybe someone will find this to at least be an interesting read.
1) Finance degree from a top tier state university. 2) Did OCR and got on at a pretty top tier municipal finance investment bank and started the Monday after graduation. 3) Sat for L1 of the CFA exam 2 weeks later and found out that I passed a month or 2 later. 4) Became super bored with municipal finance and hated the geographic location I was living in, so after 2 months I resigned and moved home, giving no notice. 5) Started a month later at a top tier multifamily appraisal shop and abandoned the CFA Charter pursuit. 6) Was absolutely loaded down with work for 8 months, but then the 2008 financial crisis was starting to build up. Work dried up immediately that spring and within a week every analyst was laid off. 7) Was hired a week later by a GSE's multifamily affordable housing group where I spent 14 months underwriting LIHTC and Section 8 properties. Best job I've ever had. 8) Was recruited by one of the GSE's seller servicers to join their asset management group where I spent 18 months. 9) My good friend and I were offered the opportunity to open a Mid-Atlantic branch of a retail bank on behalf of an established bank in the Midwest. Spent 2 1/2 years running this bank, made a lot of money, put on 40-50 lbs of stress weight, and then I resigned 1 month ago in a near nervous breakdown--80+ hours of work every week for 30 months, ZERO days off in 30 months, and monthly pressure to hire, produce revenue, and to manage crushing federal regulation finally caused me to walk away. Money wasn't worth it. 10) Started a job 1 month ago as a senior credit officer in a mid-sized commercial bank's lending department. Was told Friday they want to pay for my masters degree in finance. So now I'm on the bank executive track and starting to look for a MSF program. Work ebbs and flows, which is maddening, but I'm in a good spot now. 11) Been developing real estate with my family on the side for almost 4 years.
I would not in any form recommend my career path. I was very, very lucky to land on my feet. If I had any advice for you it would be to hyper-specialize in a field, work on getting internal promotions, and learn your craft really, really well. If I had stayed at the GSE in point #7 I'd be a 28-year-old middle manager right now with a ridiculously high paycheck, A-class benefits and nearly perfect job security. I got greedy and assumed the grass was greener. Should have put my head down and focused on perfecting my craft.
@DCDepository Thanks so much for sharing your experiences. I'm about to enter Real Estate from a finance background through a similarly turbulent entry point. Do you regret leaving banking? How was your compensation at points number 7, 8 & 9 and how would it have compared to similar level of seniority in banking? Was #8s offer that competitive to draw you from the GSE? Wish you the best in your pursuits.
OP, what are your career goals? You can definitely make a career out of appraisal if thats what you want. As with most parts of the industry, the longer you stay in a given role, the harder it becomes for you to change to something else. If your goal is to eventually work in something other that appraisal, it seems like this would be more of a lateral from research rather than a step forward.
CRE Valuation At Brokerage Firm? (Originally Posted: 06/06/2015)
I got an interview in the valuation group of a pretty big CRE broker in NYC. I've never really heard of this job function before. Obviously, this position isn't as desirable as say working in CRE acquisitions, but is this at least a few big steps above doing appraisals for residential real estate? What do the exit opps look for these kinds of positions?
If you are talking valuations, as in the appraisals groups. I have been advised it is a good place to start. The reason being that in an appraisal group you will be writing market reports and doing financial analysis. This slots in easily to an acquisitions analyst who will be writing market reports (or studying them) and doing financial analysis.
I can confirm the above. I am currently apart of a large valuation team in the west coast, and previous analysts from my team, before I joined, have taken acquisition positions for large insurance companies and institutional groups after 2-3 years experience.
I started in appraisal, but at a mom and pop. Was a great way to learn ARGUS/modeling, get exposure to a bunch of different asset types and to learn how to analyze markets. Also learned a crapload about city, county and state zoning, building code, and general regulatory stuff (which is super helpful later) and how to research public records. You wouldn't believe what you can figure out if you get proficient with searching public record databases...
I exited to a portfolio surveillance position, but At the time, I did have another offer at a small developer to be a general analyst (didn't take it because I would have had to move cities).
I have a few friends that have done appraisal at big brokerages. One exited to a big 4 (She went to go work with her husband), one exited to a regional developer and the other to an AM role at a mid sized life co.
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