Will real estate private equity be boring (humor me)?
I am working towards getting into real estate acquisitions at the analyst level and wanted to know from active members if they find their day-to-day lives boring, exciting or some variation thereof, and why. Are you satisfied with your choice? What would you do over if anything?
I always envisioned real estate would be different than traditional financial analyst roles (as described by posters the WSO thread 'pe-is-really-boring') since you are dealing with a hard asset with a myriad of specific legal, financial, social, political, structural issues on each deal. Plus, there seems to be more leeway in being entrepreneurial (my long term goal) in real estate as opposed to other finance classes.
Boring. You will never be an entrepreneur on the institutional side and you can forget about ever being able to tour a property.
Sometimes think about going into the development project management side or the origination side in real estate finance.
That is disturbing and hope it is not the 100 percent case.
My plan has been that I would get into a real estate asset level acquisition shop; learn the in's and out's of the process (e.g., modeling/valuation side, due diligence, contract familiarity - lease/sale, etc), paying my dues and then in 6-7 years have the know-how and contacts to do something on my own. Assuming the aforesaid is even realistic, I want to enjoy my life (work) in the interim before getting any skin in the game is even feasible.
Do most RE WSO members have the aim of being a team member in a 3rd party organization 'forever' albeit climbing the levels with commensurate pay and responsibility increase or are most interested in the future entrepreneurial aspect or opportunity in real estate.
This is not entirely true. I know a good deal of acquisition and development analysts at large shops such as Tishman Speyer, Hines, etc. that do sit behind a desk most of the day but are still very familiar with the local real estate market on an indivual property level. After all, these analysts are still responsible for underwriting buildings based on not only the rent roll, but a lot of real estate attributes that are difficult to quantify, such as building location, architectural features, window line, building systems, quality of building amenities comparative to the market, and others that you can't get from merely reading a description.
It depends on the firm. The leaner the operation the more opportunities you are going to have to get more involved in a deal, tour the property, etc. If I was you I'd try to to target the smaller shops. But if you can an analyst job at a big brand name, that would be tough for me pass up.
If you come in as an analyst, you will be doing analyst work. And yes, it's a lot of computer/modeling/financial work/research...stuff that people consider "boring". You will get that anywhere you go. Yes, some companies have better programs than others and will let you get more experience on the ground, but no matter where you go, you will still be doing analyst work most of the time.
As you move up the ladder, it will get "less boring" and you will focus more on strategy and less on analysis.
Plain and simple: If you really want to be in of the investing side real estate, you will enjoy it. Find a good company with a good culture and co workers. It will be fun.
Thank you REFIN and the posters above.
Out of all the areas in RE acquisitions (hotel, office, multi-fam, industrial, etc), which do you think would be the most exciting and interesting on a day-to-day basis (all things being equal in terms of pay and position)?
@Rickman
I would say hotel would be the most 'interesting' in terms of analysis, valuation and general aesthetic/soft qualities, because you use metrics that aren't used elsewhere in the industry e.g. RevPAR, ADR etc. and figures like vacancy swing hugely throughout the year due to seasonality etc. Compare this with office where you take an office building, lease it up at, lets say, average 15 years leases with 5 year break clause. This is 'easier' because the cash flow stream is more obvious and easier to quantify and therefore easier to underwrite. Of course the flair comes in credit analysis of your tenant to makes sure they can pay and all.
I would say number 2 was retail, where you can at least peg lease payments to sales so there's an extra layer of finesse. Also retail is just more interesting b/c you're not leasing to some noname IT company, you're dealing with high street brands or whatever that at least have a tangible meaning to you.
@king_tubby - I've never had any hotel experience but I would love to dive into it at some point. Have you had multi-family experience? If so, how would you compare the two in terms of what you described in your post above?
@Rickman - I think retail is pretty exciting because the tenant's business concept comes into play here. For example, you may have some vacancy that you're looking to fill but the property itself is in an odd location. Or maybe the suite is not what you'd expect an anchor or a blue-chip retail tenant to occupy (crappy visibility). You have to make sure you have the right tenant or mix of tenants. Just because you have open space doesn't mean you can fill it with any tenant. You get to dive into their business concepts and to me, that's unique and thus exciting.
Hotel/Motel sounds interesting..you could use escort service websites as a key indicator of hotel traffic ;)
not really boring. I travel and tour properties all the time, meet with lawyers and bankers and make a lot of contacts / get to interact a lot, meet with architects, consultants, developers and other nuts a bolts people who are interesting... if you're a people person real estate development or investment is a good business
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