Real Estate Acquisitions vs. Asset Management – Which One Wins?

Acquisitions and asset management are two of the most popular career paths in the commercial real estate industry, but even though these both tend to be some of the most desirable jobs for new entrants into the business, these are two very different career paths built for very different people.

I personally spent several years in both acquisitions and asset management roles, and while I learned a lot in each of these experiences, these jobs were also extremely different from one another. This was especially true when it came to what each offered from an experience and career growth perspective, and what each required on a day-to-day basis.

If you feel sold on a career in commercial real estate but you’re still not sure which path you want to pursue within the industry, this article covers the main differences between a career in real estate acquisitions and a career in real estate asset management, some of the biggest pros and cons of going each route.

If video is more your thing, you can watch the video version of this article here:

Pay Differences

As much as people don’t like talking about this, one of the most important factors when choosing a career path is the income potential that each path offers.

When comparing careers in acquisitions and asset management, acquisitions careers tend to involve a high level of risk with a very high income potential, while asset management roles tend to involve a lower level of risk and a slightly lower income ceiling.

When capital dries up, whether that means equity investors are backing out of the market or lenders are moving to the sidelines, the need for acquisitions professionals can also dry up very, very quickly. And at times like these, an acquisitions team becomes extremely expensive overhead for a commercial real estate firm, and a very easy target when a company’s headcount needs to be reduced.

On the other hand, asset management roles are often the most crucial jobs within a CRE firm during a down market, since these are going to be the people responsible for working on things like lease modifications with struggling commercial tenants, communication with equity investors and lenders, and determining the optimal time to sell or refinance an asset.

However, less volatility often comes with less upside, and acquisitions professionals can often generate materially higher compensation packages, especially when factoring in a variable compensation component.

Income potential in commercial real estate tends to be highly correlated with the amount of revenue an individual can generate, and acquisition fees are often a significant source of revenue for private equity firms. In addition, things like asset management fees, construction management fees, and even promoted interest are heavily reliant upon getting deals into the portfolio in the first place, which makes acquisitions professionals highly incentivized financially to buy as many deals as they can.

While asset management professionals can do a lot to drive NOI and maximize the value of a property, a significant amount of deal performance is usually going to be attributable to macroeconomic factors, and less fee income tends to be generated overall as a direct result of an asset manager’s actions.

One exception to this is a leasing override fee, where some firms will take a percentage of the total contractual base rent owed on all new leases signed during the company’s ownership period. Senior asset management professionals can often participate in a portion of these fees, but for the most part (especially within more junior-level positions), acquisitions roles are generally going to offer higher all-in pay than asset management roles at a similar level of seniority.

Who You’ll Work With

Both of these career paths involve interacting with and managing people, but the types of people you’ll work with in each of these disciplines tend to be significantly different.

Day-to-day interactions for asset managers generally involve communication with commercial tenants, property management teams, construction management teams, third-party vendors, and often debt and equity partners, with a mix of operations management and reporting responsibilities taking up the majority of an asset manager’s time.

But for acquisitions professionals, the vast majority of their time is going to be spent on deal sourcing and business development through activities like interacting with brokers and sellers, touring potential acquisitions, and working with title companies to close transactions.

In an asset management role, you tend to have to wear multiple hats, managing compensation levels, deadlines, and incentives for both internal and external teams. In addition, you’re also often going to be responsible for managing investor expectations, serving as the firm’s direct source of communication with capital partners.

In an acquisitions role, your responsibilities are generally going to be centered almost exclusively around business development and sales, with a focus on activities like convincing brokers and sellers that you can (and will) close, selling equity investors or internal investment committees on the attractiveness of a deal, and making sure the deals you put under contract end up making it to the finish line.

Ultimately, acquisitions is much more of a sales-focused role, whether you’re selling to potential equity partners, lenders, or even convincing brokers that you can perform. Alternatively, asset management is a lot more about managing expectations and the actions of your team over a sustained period of time, and making sure that investors and lenders feel confident in their decision to place capital with your firm.

Personality Types

One of the biggest differences between acquisitions and asset management is the personality type that tends to be happiest within each discipline, with acquisitions professionals usually being drawn to sales and business development, and asset management professionals often considering themselves optimizers that like to see a project through to completion.

Especially at bigger companies, the acquisitions team tends to be relatively far removed from deals after they’ve been transitioned into the portfolio. With that, the vast majority of the day-to-day tasks of an acquisitions professional are going to be focused on underwriting and touring new deals, submitting offers, and negotiating contracts, rather than working to implement the business plans that they initially mapped out.

On the asset management side, however, you have the opportunity to maximize the performance of an asset and improve a property over time. Most often, this is done through managing renovations and major capital projects, materially increasing rents, or making major leasing, financing, or sale decisions that maximize returns for investors on a deal.

People who love to constantly work on new projects tend to feel bored and complacent in asset management roles, since these positions primarily involve a lot of blocking and tackling on a regular basis. However, natural operators that enjoy project management and process optimization usually end up with some sort of an “empty” feeling in acquisitions, having to hand off deals when the real work is just getting started.

How To Break Into Acquisitions or Asset Management

If you want to make sure you have the technical skills you’ll need to land a role in acquisitions, asset management, or any other analytical position in the commercial real estate industry, make sure to check out our all-in-one membership training platform, Break Into CRE Academy.

A membership to the Academy will give you instant access to over 120 hours of video training on real estate financial modeling and analysis, you’ll get access to hundreds of practice Excel interview exam questions, sample acquisition case studies, and you’ll also get access to the Break Into CRE Analyst Certification Exam. This exam covers topics like real estate pro forma and development modeling, commercial real estate lease modeling, equity waterfall modeling, and many other real estate financial analysis concepts that will help you prove to employers that you have what it takes to tackle the responsibilities of an analyst or associate at a top real estate firm.

As always, thanks so much for reading, and make sure to check out the Break Into CRE YouTube channel for more content that can help you take the next step in your real estate career.