REPE is overrated

I'm currently a SA at an EB and in the last few days, I talked to headhunters about entry-level roles (analyst 1) in REPE. While the base is comparable (100-200 EUR difference a month), the bonus makes a significant difference. At my EB almost every analyst made a 100% Bonus, the majority of REPE roles can't compare.
I also read that specifically with REPE the pay can be significantly lower in the pre-carry days (associate / VP).
It seems like only the guys at upper MM (3i) and megafunds make more than banking (and work even more).

So why do people choose a career in REPE instead of banking, is it the better WLB (my offers are in the 40-60h range)? Or is my logic flawed because 2018/2019 was an anomaly, and the bonuses will go lower again?
Will carry make up for the lower pay in the first few years?

 

Because it isn't only about how much money you make, lol. Maybe some people actually like real estate!

Also, personally I'll take better hours and less pay any day of the week. When you're 23-25, it's nice to have free time. I started in REPE out of undergrad and my hours are around 40-50 a week and the culture is very relaxed in general.

And REPE associates at true mega-funds with traditional "associate" programs, which an REPE analyst at a smaller firm would be eligible for after ~2 years, make $200k+

 

Yep - I definitely made less out of UG than anyone in IB. But I don't know anyone in IB consistently working ~50 hours a week. I'd go IB as it sounds you're more interested in comp, and it's pretty easy to lateral from IB to an REPE acquisitions role if you want to

 

Money isn’t everything.

I can’t speak about the European experience, but I did a whole two year stint in IB before moving to a PERE 50 firm. I took a ~30% pay cut, but I’d make the move 9 times out of 10 and know most of my peers would as well. IB hours in a coverage group aren’t as bad as people claim, I’d say 70 hours is the norm (not 100+). The problem is the work itself. Most of the work is extremely brainless and uninteresting. Combine that with longer hours and it’s hard to not smash you head against the wall. It’s not abnormal for people to leave within a year.

Buy side work is usually a lot more intellectually stimulating than sell side work. It’s the reason why it’s so coveted now that people know about it. IB can pay more than PE and HF as well, but most wouldn’t argue that PE and HF are overrated.

 

Im going to spit truth.

Barriers to entry in real estate are very low. This business isn't rocket surgery, you dont need to be particularly smart. Hours are very light (40-50 hours a week for most). Thus entry and low level pay outside of the mega funds can be low. Within two years you'll still be making well over 100K with no MBA, working minimal hours. My wall street or traditional private equity friends work so much more than I do, and on many weekends. I haven't worked a weekend in years. When the difference in pay is 450 vs 400 I'll give up 50 to have my weekends free and generally always leave the office before 6:30.

Real estate (or more broadly non public investments in general) are much more of a relationship business. Your value later in your career is the relationships you've built along the way, thats what is valuable to future employers and when you really start to make money. Otherwise in the beginning you're doing work any who has taken financial calc 101 can do.

Its just a supply vs demand, there's just a lot more supply of analyst/associates for REPE firms because there's a relatively similar pay ceilings later in your career, lower barriers to entry, less work hours.

Things aren't over or under rated. They just are what they are. Everyone needs a job and everyone has different priorities and interests. My honest guess is there are not many of us in the industry that had a choice between traditional banking roles and a equity real estate role. The actual work is so different it would attract very different candidates.

 
SHB:
This business isn't rocket surgery, you dont need to be particularly smart.

Lol. I would argue you need to be light years more intelligent to work in real estate in almost any capacity, than in banking. Folks on this site are referred to as "monkeys" for a reason - IB is one of the least intellectually challenging gigs out there.

 

Because there's more to life than money. People do REPE because they're actually interested in real estate, not because it pays more than banking.

Banking and PE pay more early in your career and similarly late in your career (and TBH you really shouldn't give a shit about your pay early in your career as long as it affords you a decent quality of life...), but you work ungodly hours and generally have a horrible work-life balance.

In REPE, I'll go against the grain of what I'm seeing in this thread and say hours are still more than a 9-5 - typically if there are live deals you're working about 50-60 hours a week and 70 hours during heavy crunch times, but you typically have your weekends to yourself and are working 8:30 or 9 to 6:30 or 7 most days, very manageable. Anyone here saying they're working 40-50 hours a week who aren't Director level or up must either be at a shop with an excess number of analysts, or that isn't doing too many deals (or potentially smaller deals that don't have institutional partners that are more demanding in the output they receive).

But irrelevant of WLB and compensation, which is all the kids on this forum seem to care about, you should go into the industry you're actually interested in. If REPE paid double what traditional banking and PE paid, but you don't find real estate itself interesting and are looking for a career path that is quantitatively challenging, you'd probably be a lot happier taking the banking/PE route.

If you make your career choice purely based on the amount of money you're going to make, you're going to be miserable within the next 10 years. Quote me on that.

 

A lot of people have already said it more or less, but try to start your own investment bank and tell us how it goes. It can be done, but anywhere near as easily as a CRE investment firm? I’m only a few years into my career, I already know partners in their 30s-50s, humble people from complete non targets, not geniuses or anything, at completely unknown funds clearing $500k annually who quite literally work 40-60 hour weeks. There are few jobs in the world with that kind of ROI on your time and effort as well as with those kinds of favorable odds of entrepreneurial success.

 

I think people are missing that at the top, REPE and PE are pretty similar. Comparing your a small local RE player to a well established UMM PE fund is silly. Same with a LMM PE fund and Oaktree Real Estate.

But compare the Brookfield team that took GGP private and the team that works at SilverLake or whatever the big corporate PE funds are these days. The biggest difference is the industry they cover - the rest is nitpicking.

Side note, look up KSL Capital Partners. Good example of corporate PE / REPE hybrid

Array
 
JSmithRE2010:
I think people are missing that at the top, REPE and PE are pretty similar. Comparing your a small local RE player to a well established UMM PE fund is silly. Same with a LMM PE fund and Oaktree Real Estate.

But compare the Brookfield team that took GGP private and the team that works at SilverLake or whatever the big corporate PE funds are these days. The biggest difference is the industry they cover - the rest is nitpicking.

Side note, look up KSL Capital Partners. Good example of corporate PE / REPE hybrid

Seems like every recession (really I’ve only been in two, this and the GFC) I think about what KSL, Washington Holdings and Guggenheim are up to. 12 years ago they were buyers of debt (B pieces), which was something I was working on.

Good thing we didn’t buy Lehman’s repos, I’d imagine not good. Wonder if buying repos from Citi or bank that still exists, in 2008/9 would have worked out to be a good investment? I didn’t get to stick around to see the results of the trade.

Have compassion as well as ambition and you’ll go far in life. Check out my blog at MemoryVideo.com
 

Because not everything is about total comp? Less hours, decent pay (probably same $/hour) and interesting transactions/AM with tangible assets. And you can make INSANE money in REPE shops when start earning those GP points.. Oh yeah and from my personnal experience people are a LOT more fun & nicer in REPE than in the IB elite boys club.

 

Dont see a lot of IB people doing thisOp, you might want to reconsider your small perspective. I bet this is more fulfilling than running comps

 

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