Pros and Cons of a Commercial Real Estate Career – My Experience
Choosing a career path is not easy.
When you’re just graduating from college or in the first few years of your career, there can be a ton of pressure to settle down and find something that not only pays the bills and has income upside, but is also something you enjoy and can see yourself doing long-term.
Now this site is all about real estate investing careers and real estate financial analysis, but there are many people who read this blog (or even join our courses or Break Into CRE Academy) that are just dipping their toes in the water, and trying to decide if a full-time career in commercial real estate is right for them.
And in this article, I wanted to specifically address those people who don’t know if they’re totally all-in on real estate yet, because a full-time career in commercial real estate definitely isn’t for everyone.
So, if you’re trying to decide whether you want to set your sights on a real estate investment or brokerage role as the first step in your career, or if you’re trying to decide whether or not you want to stay in the industry after your first few years in the business, this video is going to cover six of the biggest pros and cons I’ve seen in the commercial real estate industry based on my experience, and whether CRE is right for you.
If video is more your thing, you can watch the video version of this article here.
The Pros of a Commercial Real Estate Career
Let’s jump into this article with the good stuff first.
Commercial Real Estate Provides (Extremely) High Income Potential
When people think real estate, money is one of the first things that tends to come to mind, and in many CRE career paths, this industry does not disappoint.
Commercial real estate is an industry where it’s not uncommon to see people in their twenties making multiple six figures per year, and even more for the rainmaker brokers or entrepreneurs raising third-party equity and cashing in on a few major property sales.
As with many roles in sales or finance, assets with a high dollar amount tend to come with equally high transaction costs, fees, and other forms of income that go toward paying commissions, salaries, and bonuses at CRE investment and brokerage firms.
Selling a $30 million property isn’t uncommon at the high levels of commercial real estate, and transactions like this generally result in hundreds of thousands (if not millions) of dollars in brokerage commissions, disposition fees for the seller, and acquisition fees and future management fees for the buyer, as well.
No matter what side of the table you’re sitting on, doing this multiple times per year can get you some big profits, which leads to big paychecks for those involved with these transactions.
Commercial Real Estate Is Entrepreneurial
Aside from the very high income potential in commercial real estate, the second major pro of being in commercial real estate is how entrepreneurial the industry tends to be.
So many people get into the real estate space with the goal to go off on their own one day and build their own real estate portfolio, and despite how capital-intensive real estate is, it doesn’t take more than a skill set, a network, and a dream to make it happen.
In the traditional startup world, you may need to hire an entire team and raise venture capital before starting out and earning any revenue at all, and you may end up spending that money you’ve raised before you’ve even earned a dime.
With real estate, however, most firms are started by just an individual or 2-3 partners who raise third party equity on a deal-by-deal basis, and rely on third-parties and contractors to do much of the day-to-day management work on the property portfolio.
This allows real estate entrepreneurs to keep their overhead extremely low during the first few years of operations when things are just starting to ramp up, “de-risking” the entrepreneurial path in comparison to many other industries where this just isn’t possible.
Real estate also has incredibly high financial upside for entrepreneurs, specifically, especially for those acquiring and managing assets in the eight or nine-figure price range.
I mentioned transaction fees based on deal size, which can be major income drivers for CRE firms with just a few partners and very little overhead. However, the biggest upside for a CRE entrepreneur is generally on the back end of a deal, when an entrepreneur takes a portion of the profits earned over and above their ownership interest in the property.
We go into equity waterfall structures in much more detail in several other videos on the Break Into CRE YouTube channel (see this, this, and this for more detail on what these are and how they work), but in basic terms, an entrepreneur who invests $100,000 in a deal and then sells that deal for a profit three to five years later can often earn back many multiples of their initial investment through something called promoted interest, often resulting in a seven-figure payout just for one single deal.
Real estate is also still a relatively fragmented business, meaning that pricing is less efficient than in many other investment arenas, like stocks and bonds.
And for real estate entrepreneurs, especially for investors targeting properties priced at $10 million or less, investors are generally more likely to find profitable off-market real estate deals than heavily discounted publicly traded companies.
Commercial Real Estate Is a Tangible Asset
Aside from the entrepreneurial nature of the business, another big upside (that finance-oriented personalities tend to like about real estate, specifically) is the physical nature of real estate itself.
Real estate is a unique investment vehicle because it’s something you can see and touch.
And for most people, understanding the operations of an apartment complex or office building is much easier to wrap your head around than the operations of something like a manufacturing company in an obscure industry with multiple different sources of revenue.
Speaking from personal experience here, I can tell you that working in Excel models and analyzing investments is much more exciting when you can actually see the investment you’re working on (through photos or in person), and you can experience the city or area that the property is located in, as well.
I’ve often said in videos and blog articles that real estate isn’t rocket science, and the physical nature of property just tends to make it more easily understandable than many other areas of high finance, especially since real estate impacts essentially everyone’s lives on a day-to-day basis.
Real estate affects the way we live, work, shop, and travel. And with that, many people are naturally drawn to the excitement that certain parts of the industry offer, depending on where their personal interests lie.
The Cons of a Commercial Real Estate Career
Now that we’ve covered some of the main pros, let’s move into some of the biggest cons of working in the commercial real estate industry that I’ve come across during my time in the business.
Now, it’s important to note that not everyone will see all of these points as cons, specifically the first and second points on this list (depending on personality type).
Commercial Real Estate Careers Often Require (Extensive) Travel
With that said, let’s start with con number one on this list, which is travel.
This might sound appealing at first glance to many, and the picture painted by many people just entering the industry involves constantly traveling to new, exciting cities, racking up frequent flyer miles, and meeting new, interesting people in the process.
However, the reality of this is generally a lot more mundane than it sounds on the surface, and a lot of travel related to a commercial real estate career can get really old, really quickly.
For example, if you’re in an acquisitions role, you’ll likely cover anywhere from about 1-4 major markets clustered together. And this means that you’ll be flying to (or often driving to) the same 1-4 cities over and over again.
This means you’ll be dealing with the same three-hour drive to a remote location, waiting in the same security line at the airport, going to the same conveniently-located chain restaurants, meeting with the same brokers, and if you do this long enough, touring the same deals as they come on and off the market over the years.
Asset management roles are a very similar story, and you’ll spend a lot of your time on the road traveling to properties you’ve visited dozens, if not hundreds, of times to meet with the same property management team, and eat at the same restaurants you always do when you visit.
It’s also important to note that not every real estate investment is made in the city center of a major metro like New York or San Francisco, and a lot of your travel will probably take you to much more mundane city outskirts or suburbs, in areas that probably wouldn’t have been your first choice as a travel destination.
And as you get older and start to build a family, being away from home several nights per week can also get pretty tough, so that’s also something to think about if you’re considering a role with lots of travel involved.
Expectations For Networking & After-Hours Activities Are High In Commercial Real Estate
Speaking of being away from home, con number two on this list also involves being away from home several nights per week, and that is networking expectations.
Now again, many people actually consider this a pro, but it is worth mentioning here because it can take up a lot of your time and energy in many career paths in the industry.
Local after-hour networking events and client dinners can become a very regular occurrence in commercial real estate, especially for brokerage or capital raising roles.
And similar to the travel fallacy mentioned above, fancy dinners and drinks can sound great for a young professional just breaking into the industry, but when you’re doing this three nights a week for several years and realize you’ve regained your “Freshman 15” three years out of college, this can start to get really old, really fast.
If you don’t really enjoy talking with people or enjoy social gatherings, real estate can still definitely be for you, transaction-oriented roles will likely be a tough path for you to take.
And if networking events and social gatherings aren’t for you, I’d definitely recommend a more analytical role in portfolio or asset management, rather than a relationship-focused position like brokerage or acquisitions.
Commercial Real Estate Can Be a Dog & Pony Show
Speaking of fancy dinners, finally, the third con on this list is that (in certain situations), real estate can feel like a little bit of a dog and pony show.
What I mean by this is that there are parts of the real estate business that can feel a little bit flashy and over the top, especially in the brokerage space or the capital raising space when companies are trying to win new business.
Some events, and even some individuals, can leave you feeling like you just talked to a used car salesman for an hour and can leave a pretty bad taste in your mouth about the industry as a whole..
And if you are on the side of the table where you’re the one trying to win new business, many prospective clients will expect a ride in a fancy car, to have dinner at a fancy restaurant, followed by fancy drinks at a fancy bar.
This definitely isn’t always the case, especially when you start to move to secondary or tertiary markets and start dealing with smaller, more entrepreneurial firms, but if you’re in a New York, LA, or Chicago-type market working for a major private equity or brokerage firm, this can become a pretty accurate depiction of activities you’ll be expected to participate in on a weekly basis.
Which Commercial Real Estate Career Path is Right For You?
It goes without saying that all pros on this list aren’t pros for everyone, and all cons on this list aren’t cons for everyone.
But with that said, these are six of the most pervasive, common themes I’ve seen in the commercial real estate industry here in the US throughout my career, and I hope they help you get a better idea of what you might be stepping into if you’re trying to break into commercial real estate today.
And if you’ve gotten to this point in this article and you’ve been nodding your head saying, “Real estate is where I want to be,”, make sure to check out Break Into CRE Academy, which will give you instant access to our entire library of courses, Excel training files and practice exams, and private, one-on-one, email-based career coaching to help you land a job at a top-tier real estate investment or brokerage firm and to start your career in the CRE industry.
Thanks so much for reading! I hope you found this article helpful.