Real Estate Mogul

Associate 1 in AM - Other

How do some of the most wealthy RE moguls create such substantial wealth? I understand that compensation can be quite high, but even at the top level of REIT comp (somewhere around 20M/year) that's nowhere near enough to lead to the net worth that some of the famous moguls have.

Comments (81)

Mar 11, 2020

Most wealthy RE moguls aren't c-suite type guys at REITs. The wealthiest people in real estate are typically the ones that went off & started their own firm and happened to be in the right place at the right time. That isn't to say that all these guys had was luck. Most of them are extremely intelligent and know how to raise capital. On top of that, they leverage their deals and when successful make a killing when they exit.

I don't know how true this is, but I feel like a lot of them aren't typically your rags to riches type. They don't necessarily have tens of millions of family wealth to deploy, however they may get a little jump start & have the smarts to turn a small family business into an empire.

Another thing about these real estate moguls is that you don't typically see young ones. Real Estate isn't tech where you can become an billionaire over night.

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Mar 11, 2020

I don't know how true this is, but I feel like a lot of them aren't typically your rags to riches type. They don't necessarily have tens of millions of family wealth to deploy, however they may get a little jump start & have the smarts to turn a small family business into an empire.

This is very accurate in the family office space. The family became millionaires in some other business (very commonly construction on most of the US, the jewish NYC families were often in the garment business during the turn of the 20th century) and then deployed that capital into real estate (often to support the family business) only to find that you can make as much money on real estate as their operating business but with far far less employees and headaches.

Fisher's were originally general contractors
Durst's were in the garment business
Kaufman's were in the garment business
Stern's originally sold parakeets which turned into a pet supply company
Rose family, another garment business
Tisch's, surprise surprise another garment business
Rudin's started with a general store chain
Tishman, department stores

It takes a lot of capital to invest in real estate so its often those who made money elsewhere (with lower barriers to entry) who are the "real estate moguls" you see today. Also keep in mind all of these families are not rags to riches in one generation. They were wealthy enough to own their own business over 100 years ago, investing in NYC when it was a factory city. Now 100 years later, with the power of compounding interest, the families are the moguls you see today but built on the backs of a few dollars spent a long long time ago..

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Mar 11, 2020

Looks like I'm changing fields and getting into the garment business

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Mar 11, 2020
SE RE 2016:

Most wealthy RE moguls aren't c-suite type guys at REITs.

This goes for literally everything. The way to build "generational wealth" (as someone on here termed it nicely) is to own. Own a piece of a business, of fund upside, whatever that may be. Yes, you can make a lot of money pulling in those 2-3mm cash bonuses every year, but that won't make someone a "mogul". The wealthiest finance folks own a piece of a fund. Own their own bank. Etc. Wealthy people in general own their business. That's the only way to generate real wealth

Mar 11, 2020

Thanks for the response! Most of this makes sense. With that said, is most of their wealth then tied up in real estate ownership? Or are their funds/investments throwing of paychecks that dwarf the bonuses that REIT CEOs get?

On another note, why are founders of REITs typically not as wealthy as those who run large private shops?

Mar 12, 2020

J Kushner?! went hard af and ended up brokering middle eastern peace deals

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Mar 12, 2020

Jared is a fucking slumlord who makes all of us look bad by association.

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Mar 12, 2020

Josh is married Kloss and for that I give him props. Kloss is like a 10/10 on every scale I can imagine.

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Mar 11, 2020
Associate 1 in AM - Other:

How do some of the most wealthy RE moguls create such substantial wealth?

Through entrepreneurship, not by working at a REIT.

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Mar 11, 2020

The moguls are a different breed from your typical real estate entrepreneur worth 50+ million

One example I've seen is a guy who is worth around $70 mil but isn't Tishman level of rich. He started out building single asset senior housing with friends and family money with extremely attractive promotes and took fees as well. He would build, stabilize, refinance, pay back his investors + their required return with the refinance proceeds to become the sole owner of the building. Then he took what little cash he had and did it all over again. You basically double down over and over again and eventually you have a handful of properties with $70 mil of equity.

I'm simplifying the process, but this is one way it's done. Cheap Country Club equity + high leverage development built at such an attractive basis you can take out most or all of the equity with the stabilized financing + timing works out such that you can do it multiple times within a bull market

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Mar 11, 2020

This right here is probably the goal of 90% of the guys on this forum working in development or hoping to start getting into development (myself included). This is how its done. Thanks for putting it so eloquently.

Array

Mar 11, 2020

Mind expanding on what Country Club JV Structure consists of? Is it basically a single hurdle with a 5-8% pref and 50/50% split of cash flow thereafter? Is the only real difference that it has far fewer hurdles and a far larger split above the hurdle?

Mar 11, 2020

You basically nailed it but it's not as generous as 50/50 (at least in my short experience). One I've seen recently is a GP who puts in 10% of equity, but takes 30% of cash flow above an 8% IRR (this was not for development however). Look at CrowdStreet as well if you'd like to see how these developers structure their promotes with non-institutional money

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Mar 17, 2020

Work a "Country Club" type real estate shop. We are getting 6-8% pref, 50/50 on the back end. Charging a 1-2% acquisition fee and 5% to manage the GC during the development process. But the real money is in your basis. It's about your ability to have hyper local knowledge of the land development code, property owners and construction costs. We have made some of our investors very wealthy over the years, so the money flows both ways. Good luck!

Mar 11, 2020

Not to beat a dead horse, but to summarize what everyone is (correctly) saying here, building wealth is about increasing equity in assets that generate cash flow, put simply. If you can use leverage to do so, even better.

In a single lifetime, you may not be a "mogul," but what's that title really worth when you're dead anyways? Just make enough to live the life you desire. I believe the statistic is something like ~90% of self-made millionaires achieved their fortunes via rental properties (in conjunction with good personal finance practices).

Array

Mar 12, 2020

I find it extremely hard to believe that 90% of self made millionaires achieved their wealth through rental properties. Someone's trying to sell you something if they say that.

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Mar 11, 2020

You mean someone like this!?

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Mar 11, 2020

Just bought his seminar. Super excited to learn!

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Mar 12, 2020

All this MS for some light hearted sarcasm... Tough crowd.

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Mar 12, 2020

Haha is that Grant Cardone?

Mar 12, 2020

On a scale of 1-10 how full of shit do you think he is?

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Mar 12, 2020

What net worth do you need to achieve to be considered a mogul? over a B? I have a lot of low 9 figure guys in my data base and they seem pretty comfortable..

Mar 12, 2020

Over $250mm or $500mm should be the cut off.

Mar 12, 2020

Why those numbers? There's a big difference between a quarter of a billy and half a billy.

Mar 12, 2020
Surfboard:

What net worth do you need to achieve to be considered a mogul? over a B? I have a lot of low 9 figure guys in my data base and they seem pretty comfortable..

I think it is more of a range than a hard and fast number. Is the person dominant in their market? Someone worth $250mm in NYC isn't a mogul, there are plenty of guys hitting those numbers. If you're a developer in Austin and you're worth that? Then you're probably one of the bigger players.

Also sort of matters how you got there, what you're doing with the money, how active you still are, etc.

Mar 12, 2020
Ozymandia:

Is the person dominant in their market?

That is how I would define it too, although perhaps one would need to be dominant in a couple markets or at least a force to be reckoned with wherever they go.

Mar 12, 2020
  • High Net Worth (HNW) individuals are classified as someone with $1MM in liquid assets.
  • Very High Net Worth (VHNW) individuals are classified as someone with $5MM in liquid assets.
  • Ultra High Net Worth (UHNW) individuals are classified as someone with $30MM in liquid assets.

I would venture to say that anyone that owns positive cash flowing real estate equal to 3-5x the UHNW classification could be considered a RE Mogul ($90MM-$150MM of RE property). The discussion then becomes: Do those figures include debt or not? Hmmm.

Array

Mar 12, 2020
umioryi60:

. The discussion then becomes: Do those figures include debt or not? Hmmm.

Absolutely not. If you're "worth" a billion dollars but you have 99.9% leverage, then you aren't wealthy at all. Any time someone quotes you a number that isn't net of debt, especially in a high leverage-reliant industry like RE, laugh them out of the room

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Mar 12, 2020

Sam Zell is the ultimate business man and RE pro. If you are younger and looking to learn about business and how to become a millionare, read his book and listen to everything he says on Youtube. even his bad bets will shed light on how to think within the constructs of today's and yesterday's economy, and how to adapt and what to watch out for in the future

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Mar 12, 2020

Just bought his book

Mar 12, 2020

legend. and he never wants to touch development.

Mar 14, 2020
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