Did a search and I saw there are a few short threads here and there about real estate, but thought I’d be insightful to get a larger one going, as real estate careers aren’t as transparent as ibanking, equity analysis, etc. I am L2 candidate currently working in real estate for a commercial bank, so I see projects from a lender’s standpoint, but am curious to hear other peoples experiences and paths be it on the developers side, PE, REITs, etc. How did you get to where you are? Has the CFA been helpful or really not all that significant? Better yet was your job accepted by CFAI as experience? Any post MBA real estate careers as well?
I’ll tell you a little about my field of work. I work as a commercial real estate appraiser (in-training; takes 3,000 hours of commercial work plus 300 absolute course hours and a minimum of 3 years to become Certified General). This is a surprisingly complicated field that requires an enormous amount of writing, a lot of training, and a great deal of specialization. Also, if you all think breaking into the finance field is tough, just try to find a mentor in commercial real estate–it’s nearly impossible unless your CLOSE relative or a close friend happens to be Certified General (CG). I completely and totally lucked into my job as I was hired for something different and made a 2 week lateral move into valuation at a large CPA firm (it helped that I had already knocked out 75 of my hours–but I had given up on appraisal because I didn’t think I could ever get hired into the field). The money sucks for a few years, but once you become a CG (or an MAI), you can write your own checks. Why? I live in the Washington, DC metro area, and there are less than 300 commercial appraisers in the Washington-Baltimore corridor of at least 10 million people, although that’s a conservative guess. When I ran the numbers a few months ago, there was something like 50,000 people per MAI in my metropolitan area. The burriers to entry are so high–college degree, requires a 3-year mentorship (who trains their own competition?), poverty pay (literally 15-20k for most people–I’m lucky to be putting away 50k) for the first 3 years. But if you can somehow persevere and you can become an MAI, then you can write your own paychecks. I’m on the 10-12 year partner track at my firm. My best guess is that partners make somewhere around $250-300k per year, work about 45-50 hours per week, and spend 2 days per work week on average at the office, 1 day traveling, and 2 days working from home. Nobody is becoming Bill Gates, but it’s a decent way to make a living. (BTW, this is the slowest 2 weeks of the year thanks to the Holidays, so I have time to write this.) I was reading up on the exit options recently for after I’ve worked here for 3 years and become CG, just out of curiosity. Exit options are fantastic–REITs, developers, CPA firms, government, consulting firms, etc. have a ton of well-paying jobs in commercial real estate for those with experience in the field, especially for those with experience plus an MBA.
Kkent, how will business be post historic real estate recession? I don’t think commercial has been hit too hard, but it probably will. I’d be interested more in commercial RE development as a career, but that is a tough road as well.
My firm works nationally and specializes in multifamily properties, specifically in tax credit and subsidized housing (although we run the gamut of commercial); therefore, we’re somewhat immuned to some of the cyclicality of the market. But you’re right–commercial hasn’t been hit extremely hard. There has been more than enough work to go around.
Does the CFA mean pretty much nil in Real Estate investment word? What about CAIA, don’t they focus on real estate holdings?
I work in Real Estate in Australia. My firm pays for the CFA exams, but thats just to keep us happy. The CFA is not very well recognised here in the Australian Real Estate Industry.
I have worked in commercial real estate for about 11 years. 5 years was at a brokerage firm selling properties, and 6 has been at an advisory firm analysing and purchasing properties, performance measurement, and sourcing debt. The thing I like best about being in real estate is that the markets are inefficient. So by being well connected and experienced and by looking at deals the right way you can earn good returns. Assuming someone wanted to get into the industry on the buy side you’re probably getting in as an analyst chunking out cash flow models for a while, or on the brokerage side. Either way gets you into the industry and learning from those who have been doing it for a while. I’m starting to see more charters in the industry but I’m not sure the CFA will ever get to the level of acceptance that it has in the traditional sectors, simply because the level of real estate coverage in the program is so small and very basic. A lot of people in the industry probably wouldn’t see the point of taking a desgination with such a broad focus unless they plan on changing sectors. I think a lot of us who have the designation did so because they wanted to see the bigger picture of where real estate investing fits in. Some types of real estate experience can be used as credit toward CFA work experience. I think the key thing is that the experience is directly related to the investment decision making process. So if you’re making purchasing decisions it definitely qualifies. If you’re in asset management it may not qualify. I suppose an analysis role could qualify if you are responsible for selecting the assumptions and you make a purchase or sale recommendation based on the models. But I’m just guessing on specifically what might qualify.
Ian, where do you see the big opps in real estate in the next 5-10 years (assuming a major downturn both in residential, commercial, and bank lending)?
Bosy, low-income housing.
That’s a good theme. Not to sound crude, but there should be a lot of Gov’t programs to assist the developers as the masses continue to reproduce. Real estate and privately held companies are exciting for exactly what was said - these markets are inefficient. So no matter what period you’re in, there will always be a deal to be had.
Well I think there are opportunities in every part of the cycle and there will be individual deals in all sectors that make sense. I buy when the market is up and when it’s down but the way I look at each deal changes in different parts of the cycle because you’re looking for exposure to different things. As an example there might be some good mortgage workout deals or turnarounds on foreclosures. On the other hand, development would decrease if a downturn resulted in more vacancy in the markets so I’d be cautious with that. Agreeing with kkent residentials will probably fare ok because people always need a place to live. Especially if they are losing their houses.
I would agree with KKent about exit options - although my view is only on commercial real estate which is a much better field to be in. I work for a commercial real estate fund managers (see my previous MBA post) and do similar work to ian (as well as set the funds strategies). Personally, the CFA is great but not very well recognised in commercial real estate in the UK unless you are only dealing with indirect real estate - even then most firms would prefer you to have a specialist masters in real estate investment and finance or a good MBA with real estate/finance focus. Hot opps for the future - green commercial developments / prime London offices and on a residential side (prime London apartments).
what do you guys think of a masters program in real estate? I am looking to get into a real estate career as well. Because my undergrad is totally unrelated to business, I feel the need to further my education in order to get a entry level analyst position at a real estate firm (i.e. Jones Lang, CB Richard Ellis). I already took the CFA level 1 exam and considering a masters program in real estate…
ian Wrote: ------------------------------------------------------- > As an example there might be some good mortgage > workout deals or turnarounds on foreclosures. On > the other hand, development would decrease if a > downturn resulted in more vacancy in the markets > so I’d be cautious with that. Are you speaking about mortgage short sales? I was curious how these work, and have heard that there is a ton of paperwork, but there are great potential. I actually spoke to a mortgage servicer today and she told me the house must be listed at FMV for 90 days before they even begin to bargain.
globaltrade Wrote: ------------------------------------------------------- > Hot opps for the future - green commercial > developments / prime London offices and on a > residential side (prime London apartments). Isn’t the London market overheated? The only problem with green developments is that I wonder if this current green movement is a fading fad. Environmentel issues come in and out of fashion every 10 years or so…
I used to follow that hilarious blog about foreclosure (iamfacingforeclosure.com) but it got closed down (actually, replaced by something lame). The guy was trying to “short sale” his properties. Basically, the seller finds a willing buyer but at a price less than the seller owes on his mortgage. He goes to the bank and asks them to take the price. Often the bank will ask the seller to be responsible for the remaining portion. Usually the seller says “no way”. In one case on that blog I mentioned, the seller went to countrywide and said I have a buyer for $50k less than what I owe on the mortgage. Countrywide said fine but you, the seller, have to sign a note for the remaining $50k. The seller was penniless and had not an asset to his name but he signed I think. That note is somewhere on Countrywide’s balance sheet (what kind of reserves it warrants… i don’t know). LOL. To give you an idea of the mess the housing market is in, you can search for real estate in your neighborhood on ziprealty and have it screen for only “short sales”. Quite an eye opener…
“what do you guys think of a masters program in real estate? I am looking to get into a real estate career as well. Because my undergrad is totally unrelated to business, I feel the need to further my education in order to get a entry level analyst position at a real estate firm (i.e. Jones Lang, CB Richard Ellis). I already took the CFA level 1 exam and considering a masters program in real estate…” I used to work at CBRE / ATIS Real before my new position. Can’t state how highly important a top masters in real estate investment programme will help you - it show’s focus and HR like it. “globaltrade Wrote: ------------------------------------------------------- > Hot opps for the future - green commercial > developments / prime London offices and on a > residential side (prime London apartments). Isn’t the London market overheated? The only problem with green developments is that I wonder if this current green movement is a fading fad. Environmentel issues come in and out of fashion every 10 years or so…” There has been a correction in prices but it will be short lived with 2008 will see a positive change. Prime offices (West End are doing well and will do due to demand and supply). There can be some very lucrative incentives with green developments - I think it’s going top be a big theme for the future.
I work in CRE also, lender in the CMBS group at a BB. To answer Bosy, even in a downturn, I think CRE will do fine in the downturn, because I don’t think rent will fall very much. Furthermore, of all the industries that will take a hit in a recession, commercial real estate will be the last to take a hit, as income is tied to rent from other businesses and all of those would have to crash before a downturn in operations. On the other hand, the credit crunch kills us right now. Volatility in the CMBS market needs to cool down before acquisitions pick up again.
Personally, I think commercial real estate will get slaughtered in a downturn… just like it did in the 90’s, the 80’s, the 70’s, etc. etc. etc.
Sure, but that’s true for any cyclical industry. I don’t think the effect will magnified for CRE. It’s not like the commercial market has the credit issues that plague the residential market. Sure, there are some aggressive loans out there, but it’s not like people are lying about their income and then taking mortgages on three different houses, claiming there all primary residences, and then signing their loan docs as Mickey Mouse.