Regrets About not Going to Corporate Finance?
I'm sure most of you here have a passion for real estate, and that's why you work in the field or are trying to get into the business. But I have a controversial question... Skip to the last paragraph if you don't want to read my rambling examples in the middle.
For the Brokers, do you ever wish you were taking 2-5% fees on massive acquisitions like Amazon's purchase of Whole Foods, Microsoft's acquisition of LinkedIn etc? What if you were the advisor to Vornado in their acquisition and subsequent spin-off of JBG? Is that not more complex / interesting to you than brokering the sale of the $20mil apartment complex down the road? The two jobs are similar, yet the fees are higher and the work appears to be more interesting on the IB side.
For the RE lenders, do you ever wish you took more finance classes in college and ended up financing M&A between major corporations, LBOs for jumbo private equity funds (sometimes 10x the size of a major REPE Fund), distressed loan acquisitions etc? This would net you more fees as a senior person, and a higher junior level / mid level salary. Simultaneously, you'd get to learn about tons of industries instead of focusing on real estate.
For the private equity / owner /operator guys, how many different ways are there to execute a turnaround plan and re-lease an office building? What about an apartment complex? The turnaround strategies are likely the same from property to property, city to city, cycle to cycle. Re-do the kitchen and bathroom in the apartment complex, Remodel the lobby in the office building and hire the best agency leasing guy, bring on a new operator for your hotel etc. Think of all the operational and strategy nuances to 3G Capital's acquisition (read about some of them here https://www.fool.com/investing/2017/12/09/is-the-…), does this not sound more interesting to you?
What about when you get tired of the hustle / stress of doing the above? You can exit to a corporation in the area that you covered, make good money, and still have time for your family. In real estate is there an option like that?
I guess my question is this: Your job in real estate likely has a counterpart in private equity. That guy likely makes more money than you and has learned a great deal about business along the way. If you could start over and land a good job in an area of IB / PE / LevFin or whatever are of corp fin interests you the most, would you do it? Why not? Some of you will look through my post history and claim this is a troll account. And you'd be right. But this isn't a troll question. I'm genuinely a 1st year analyst at a cross-roads in deciding whether to stick with real estate or pursue IB, so I'm hoping you all convince me that I'm being a prestige-whore or whatever
When I was just starting out, I was at the same crossroad you are at now and I chose real estate. Everyday I regret it. No discipline in real estate is all that complex, interesting, lucrative, or fulfilling. Every day I look in the mirror and think to myself, "What if I had gone into corporate finance? How much better would my life be?"
None of this is intellectually stimulating. I mean take an office building development for example: all you have to do is pick a piece of land (any old piece of land will do), find some guy who's got the right licenses to oversee the construction, and have a team of guys build according to the rough sketches you have. If it's a tall office building, then it's the exact same process, but you've gotta rent a crane. Then, once it's built, you sign some sucker to a 10 year deal 10% over market and voila, you're done. It's time to sell the fucker. Everything is just rinse and repeat. There's no nuance or variation to any of it.
If I had gone into corporate finance, I'd definitely be making way more money, I'd have better exit options, and I'd be more fulfilled. If I had gone into corporate finance, I'd be smarter. If I had gone into corporate finance, I'd be 6'5", 250 lbs with six pack abs (that are visible while sitting) and I'd look like Ryan Gosling. If I had gone into corporate finance, I'd just be better.
If I were you, I would go into corporate finance. Don't make the same mistakes I did. You'll be much better off.
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As a development manager I'm not entirely sure what my counterpart on the "other side" would be - a start up entrepreneur? Or I guess, more specifically, a product line manager working for a start up entrepreneur? I'm not sure that's a solid comparison in my case and the skillset between building apartments and coding the swipe right feature in the next cool dating app and hoping it IPOs don't overlap all that much.
I went back and read the rest of your post and your thesis seems to be that real estate and "real finance" are the same thing, but real estate is simple and boring and not intellectually stimulating. In reality, real estate can be super simple and super complex - that just depends on the company and the individual deals. "Boring" and "not intellectually stimulating" are more opinions than anything. If you're not personally into real estate, and work in real estate, that's more a problem with you than the industry. I geek out over door latches, kitchen finishes, bedroom square footage, LVT innovations, etc. because I like the industry. If you don't, why are you in it? Seems odd.
I think your thesis, that real estate is some sort of sub-finance, is incredibly flawed.
Edit: I see now you have an IB tag, so I'm assuming you don't work in real estate. That makes this thread somewhat pointless, no? It could be titled "Person Who Doesn't Work In Real Estate And Doesn't Like Real Estate Doesn't Understand Why Other People Work In Real Estate" You say you're a troll account - I think that's probably accurate.
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I've never really understood people who have a particular fascination with the public real estate markets. The beauty of real estate, IMO, is that a large portion of it trades privately so it's inefficient.
Also, to your original post, real estate accounts for more millionaires than any other industry in the United States, so I don't know where you're getting the idea that you'll get out-earned by corporate finance peers. You'll make more as an IB analyst at 99% of firms, but mid-late career comp in RE is off the charts for the cream of the crop.
Lol... So your asking why I would rather develop a luxury condo in South Beach than work on a share repurchase for a large Potato Chip company?
Everyone has their own preference in what they find interesting. Personally, CF sounds boring as fuck. Also, don't forget that RE can sell for just as much $$ as a business depending on the product/location. Just becuase youre in a VC group that lends $5-6M to some indian guy in California doesn't mean youre making more than the guys at Blackstone who are buying $2B hotels in NY.
These are all things I’ve thought about too. Some large deals are way bigger than VC deals I know of. But the opportunity to quadruple your equity is more limited in RE compared to VC so there are trade offs
Replied to you above, but I have to point out that that there is also significantly more opportunity to completely lose your ass on an investment in VC than RE.
Elite,
Over the past few weeks I’ve noticed that you’ve been spending more and more time on the real estate forum, and have been more vocal. This leads me to believe that this may be a genuine question it just sounds kinda douchey the way you asked it. Either way:
This question depends on who you ask. For me personally what attracted me to CRE was the entrepreneurial spirit, and the hustle of it. You hear stories all the time abou guys who graduated bottom of their class from a no name school breaking in to the top firms all because they had hustle and drive (somewhat happens in investment banking but I would argue that these are lottery picks and not the norm). You also hear about guys with barely a high school education worth 50+ million because they know how to invest in real estate. In this business a lot of people pay their dues and a lot go out and make a name for themselves. You have to figure out where you fit. Like the old saying “ get in where you fit in”. Do you like you work? Do you find it interesting? Would you rather open up a development firm one day, or run a hedge fund? These are questions you need to ask yourself. If you think you would prefer IB I would start reaching out to people and talking about their day to day. Try to get a feel for what they do and see if you would like it. Also beware that some of this may be a normal first year burn out thing.
Bazooper. Corp Fin > RE
What about REIB (entity level)? that way you can get IB work with a real estate basis. I've looked at some of those and that would probably be "sexier" to you. Although people Ive talked to say you basically sit on PP all day and night, no real deal experience, plus you're training to be a business salesman as opposed to property salesman.
Theres also CMBS securitization. But I had an informational with a guy at GS a few months ago. He basically told me to stay where I was at though... He left a month later.
I think if you want to be "blown away" by RE, I'd suggest you look for an acquisition shop that'll offer carried interest. Judging by your comments on this thread, I think you just might be at a really boring RE shop imo.
Troll account
We got a detective over here
Kind of sounds like you're particular real estate job is boring. I can't possibly imagine how corporate finance could be more challenging or intellectually stimulating than development. You have to know a little about architecture, engineering, and design. You need to be able to underwrite a deal, figure out comps, understand the financing side. You need to be able to vet what your lawyers are doing. You need to be able to interface correctly with politicians, community groups, lenders, contractors, etc.
I'm not in corporate finance so I can't speak to that experience, but it's tough for me to imagine it's as stimulating. Also, if you're really good at what you do in the real estate world, its much easier to go out on your own, and that's where the real money is.
I know REPE firms that put in less than 3% of the equity and get a 20% promote above a 12% IRR hurdle, and that’s on top of a 1% acquisition fee and a 1% asset management fee. If you’re just purely interested in the dollars, that seems pretty exciting to me.
I came from corporate finance, and absolutely would never want to go back. I think for most people that are passionate about real estate, it is more than the transactions and the dollars. The thought of being able to make a significant and lasting impact on my local community some day personally gets me going. But if you like feeding your ego and are a prestige whore - your neighbors probably won’t give a shit if you put together a graph for the Amazon/Whole Foods pitch book, but they will definitely remember if you put together a deal that significantly alters the skyline of your city.
Did you come from literal corporate finance like working in CF at a Coca-Cola? If so then I get your point. However, I've yet to hear from someone who worked in IB for two years, went to PE as an associate and made $300k a year, hated it and then got into real estate
I did my UG in corporate finance, and interned at an IB doing M&A. I didn’t need to work for 5 years to realize that it wasn’t what I was passionate about. I imagine that most people that go the real estate route from IB choose to exit in CRE rather than go into traditional private equity
Real estate is legalized gambling—the kind that could leave your city better than your found it and make you very rich if you’re entrepreneurial and find a little luck. Wouldn’t trade it for anything, and working at Amazon or Dr. Pepper Snapple would make me want to gouge my eyes out like that chick who did meth outside her church a few weeks back.
Quality of life is great, and the business is all about people and deal making. Also, people are typically working for you if you’re a principal.
Some days I don't feel smart enough to work in commercial real estate. I'd imagine in corporate finance I'd feel that feeling every single day.
I like to carve a niche. Become an expert in that niche and dominate.
Real estate is a niche business for dumb guys like me.
Also i'd take 50% less salary to have 50% more free time in my 20's and 30's. I guess I value my time a little bit more than I value my money.
See here’s a guy who tells it like it is. I think real estate at the senior level and junior level are totally different animals. At the senior level, youre more involved and some of the nuance of doing deals will make your job more interesting. But at the junior level, the work is less difficult to wrap your head around compared to IB
I was an IB Analyst and I'm now an Analyst at a top developer. I find the work is far more intellectually stimulating. In IB, once you've gone through your first year / seen a few deals, the work gets very repetitive. Pulling comps, plugging figures into template DCFs / LBOs and formatting slides for 15 hours a day gets old quick.
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