Well it varies substantially from market to market. In gateway markets CBD properties should do well because it is so difficult and expensive to build new supply. From a higher level capital markets perspective, 70% LTC construction loans are back, mezzanine/junior loan growth has exploded, pro forma rent growth is unsustainable, and cost/expense pressures at high for both construction and operations.

There is the old saying about knowing when to exit the stock market when the cab driver is giving you stock tips. Same thing goes for RE, but when those not in the industry are all getting into or talking about home flipping or small scale multifamily when valuations are at record highs.

 
Most Helpful

I'm a VC at the moment, and couldn't agree more. I've been saying for a while that there is a massive, massive over-allocation to venture deals at the moment. The history of venture capital is short and predicated on a small number of scrappy technologists exploiting US government R&D dollars (either through the military or through universities that get the preponderance of their grants from the government) to take risks that traditional financiers wouldn't take.

That is not the current state of affairs. What made the field viable and what would perpetuate the field is an influx of money and talent into principal research that actually changed lives. I know more people at high-end start ups than almost anyone, and a lot of the country managers at major VC-backed unicorns were the same people that got annoyed with me being a boring cunt talking about the markets or macro issues a dozen years ago when I was in graduate school. They are now the same people--uninterested at their core in global macro trends--who are running large swaths of the tech start-up ecosystem. Things like Lime, for instance, aren't transformational. They're unnecessary. And a lot of the people that run Lime were never interested in global markets. I know them well.

Or if you take the example of something like Medici Living Group in the real estate sector. It's a co-living platform. They're the largest co-living platform (basically a shared housing arrangement for 20 somethings). They're masquerading as a tech company. They're raising money at SaaS valuation when they're clearly a real estate company. While their TAM, SAM, and SOM are all high, their capital needs are intense, their valuation is bloated, and they should probably be a REIT.

There are hundreds and hundreds of examples of these sorts of companies which--for one reason or another--are raising funds from the VC world which really shouldn't. Beyond that, basic bitches like my own mother are willing to place money into IPOs for loss-making entities like Uber. My mother has never taken an Uber, but she likes talking about (what she considers) interesting investments with her friends at dinner parties or over cocktails. This is the exact same thing that happened before the dot.com bubble burst in the early 2000s. Valuations got silly. Normal people got silly. Professional investors kept putting money to work because, you know, what else would they do--that's their job. And then the bottom fell out. The difference this time is that the majority of the money flowing into these venture originate from private capital sources (endowments, foundation, pension funds, family offices, etc) so the bubble will grow larger than last time. But that's where we are right now. We are at peak bubble.

The more McKinsey and GS types that jump ship into a VC role, the more I worry about the space. It is ill-suited to large inflows of capital from allocators. It is best handled by a small number of tech gurus who disdain finance. Finance is a necessary evil to sustain business operations so a true venture can scale quickly enough to become cash flow positive. We now have moron consultants coming into the business who understand nothing about actual risk-taking manipulating the numbers and messaging the story to convince other investors that growth is the only thing that matters. But that has never and will never be true in finance. The bottom line matters, but we've seemed to forgotten that.

And yet, money still pours into the space because there are few alternatives. I just had drinks (pardon my rambling) with the CIO of a large endowment. His hospital system is forcing him to allocate money to a corporate VC, and he's pissed. It makes little sense, but the CEO and CFO want to have something interesting to talk about at cocktail parties. This is an insufficient reason for creating a fund. They don't really intend to make money from the fund. They just want the PR exposure that comes from making these sorts of investments. And among their C-suite friends, they want to be able to talk about it.

I can't convince anyone that it's a bubble if you can't see this sort of evidence and come to that conclusion on your own. We each make our own choices, but don't be the guy that chases sexy money at the most-ballooned portion of a bubble because you're unwilling to put in the hard work of sticking with a high-paying corporate role for a few more years while the bubble bursts. Patience is a virtue.

 

Rates are so low because the total sum of max potential future EBITDA is substantially lower than the sum of total future debt service. Therefore, everything is getting refinanced into perpetuity at lower and lower rates now with larger and larger interest reserves/accrue pay until the notes start getting underwater and eventually a huge mark-to-market will occur.

 

I was an analyst during the financial crisis. I really wanted to trade exotic derivatives and structured products because that's where I thought the money was. I remember interviewing for trading positions while in graduate school and telling the man who would eventually become my boss why I wanted to work on his desk. It essentially came down to the money. I remember him looking at the other MD in the interview and saying something like, "That's it. That's the top of the market." He went on to jokingly explain that the surest way to spot a bubble is to survey the incoming analysts and associates to see which desks they wanted the most. Since we didn't know much, we were essentially a 'dumb money' signal to him.

It turns out, he was right. My first day on the trading floor was the exact day that Lehman Brothers collapsed. I got moved from exotics to flow derivatives since liquidity in structured products and exotics dried up almost overnight. No one really talked to me for the first week since everything was such a shitshow, but at our first after-work drinks outing, I reminded my boss of our interview (which he had forgotten). He then drunkenly repeated that anecdote to his boss (the other MD who was in the original interview), saying, "I told you I called the top." To which his boss responded, "Then why the fuck are we losing so much goddamn money?"

It just goes to show--even smart money doesn't necessarily have the discipline to get out of the market even when they know they should. After all, if you're an investor in a particular asset class, and that's your whole job, what are you going to do? Convert all your holdings to cash? Migrate into another asset class outside your mandate? You're kind of stuck playing in your sandbox.

 

That's the thing. Big funds don't pay the most in RE. Most shops run lean, think like 3-5 people and tons of contractors. Carry and Co-Invest bonuses are all given at low levels because there isn't much hierarchy, and no need for the years of grinding for that precious carry.

I'd say the VP's probably make more for the same reason some junior guys make alot in RE. Mid level management doesn't provide much value in RE and the jump from analyst to deal maker is hard.

Most people have to just leave and start their own firm to get higher up. They just fee up deals and syndicate them out, obviously a little more complicated but the fact that it is so easy to explain just makes this post that much more real.

 
Controversial

I think the whole idea of certain professions/industries/subsectors paying better than others is almost entirely bullshit. Once you make the right adjustments, things are a lot more even than they seem.

Classic myth: go to IB, you'll be rich. Reality is, juniors make little per hour as we all know. Midlevels and seniors make a good amount, but you have to also count everyone who didn't make it that far. How many ended up in Corp Dev or something else entirely (often after having to sink a lot more into b-school)? If you look at the full outcomes for the class, you'll find that IB isn't much of a better deal than anything else available to a top college grad.

To use a simple and more extreme example: average NBA player makes a ton, average NBA hopeful (say a good D-1 player at age 18) doesn't make squat doing whatever job they do today.

Counterexample: some jobs really do pay shit. Teachers are famously underpaid. But even then, I think we're headed to a future where a star teacher gets hired by some national education co and teaches algebra to a million kids a year and gets paid six or even seven figures. Sure that belief is extreme, but so is today's world with 40,000 algebra teachers in the US when we might only need one. So even if you're in a legit low-pay profession, past performance may not indicate future results.

Bottom line: difference between professions are overplayed. People who are great at what they do are almost always rich. People who are average or worse, are rarely rich.

So get into RE if you really like it and think you'll be great at it. Don't get into RE, or anything else, because you think that's where the money is.

 

Consequuntur eos rerum nisi magni ducimus debitis voluptas. Maiores dignissimos magnam omnis nihil fugit. Atque perferendis soluta maiores debitis quibusdam rerum. Unde facere aut ea itaque temporibus.

Sit et ut omnis fugit. Molestiae voluptas numquam ab vitae architecto voluptatum. Quidem esse voluptatem qui nihil ut cupiditate voluptas debitis. Dolores aut ex quam aut delectus non. Distinctio cupiditate asperiores nisi provident.

Eos voluptatem rerum sapiente ipsa. Possimus repudiandae ea eum.

Career Advancement Opportunities

March 2024 Investment Banking

  • Jefferies & Company 02 99.4%
  • Goldman Sachs 19 98.8%
  • Harris Williams & Co. (++) 98.3%
  • Lazard Freres 02 97.7%
  • JPMorgan Chase 03 97.1%

Overall Employee Satisfaction

March 2024 Investment Banking

  • Harris Williams & Co. 18 99.4%
  • JPMorgan Chase 10 98.8%
  • Lazard Freres 05 98.3%
  • Morgan Stanley 07 97.7%
  • William Blair 03 97.1%

Professional Growth Opportunities

March 2024 Investment Banking

  • Lazard Freres 01 99.4%
  • Jefferies & Company 02 98.8%
  • Goldman Sachs 17 98.3%
  • Moelis & Company 07 97.7%
  • JPMorgan Chase 05 97.1%

Total Avg Compensation

March 2024 Investment Banking

  • Director/MD (5) $648
  • Vice President (19) $385
  • Associates (86) $261
  • 3rd+ Year Analyst (13) $181
  • Intern/Summer Associate (33) $170
  • 2nd Year Analyst (66) $168
  • 1st Year Analyst (202) $159
  • Intern/Summer Analyst (144) $101
notes
16 IB Interviews Notes

“... there’s no excuse to not take advantage of the resources out there available to you. Best value for your $ are the...”

Leaderboard

1
redever's picture
redever
99.2
2
BankonBanking's picture
BankonBanking
99.0
3
Betsy Massar's picture
Betsy Massar
99.0
4
Secyh62's picture
Secyh62
99.0
5
GameTheory's picture
GameTheory
98.9
6
dosk17's picture
dosk17
98.9
7
DrApeman's picture
DrApeman
98.9
8
CompBanker's picture
CompBanker
98.9
9
kanon's picture
kanon
98.9
10
numi's picture
numi
98.8
success
From 10 rejections to 1 dream investment banking internship

“... I believe it was the single biggest reason why I ended up with an offer...”