Real Estate Pay – 4 Things I Wish I Knew Before Getting Started

Pay is one of the most important parts of any job, and even though most people have a really tough time talking about this subject, understanding what you’re getting into from a compensation perspective is an extremely important part of choosing a career path.

And when it comes to pay, real estate doesn’t operate like a lot of other industries out there, and choosing to pursue different parts of the business can result in very different income trajectories throughout your career.

So to share some of the “inside information” that I only learned from years of running informational interviews, going to networking events, and working in the industry myself, this article covers four things I wish I knew about real estate pay before getting into the business, and some things you can do at the start of your career to make the most money possible (with the fewest number of detours).

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

Bonuses & All-In Pay

The first thing to note when getting into commercial real estate is that all-in pay levels tend to be heavily dependent on bonuses, even for entry-level roles.

It’s not uncommon to see bonuses of 15%-20% of base salary at the analyst level, 25%-40% at the associate level, and 50%-100% or more for senior-level roles where you’re responsible for deal sourcing or capital raising.

As a general rule of thumb, the closer you are to transactions directly, the higher your bonus percentage is usually going to be. And because of this, analyst roles in investment sales or debt and equity placement will often have the highest bonus numbers in the industry (by far), with acquisitions analysts usually seeing the next highest bonus figures, and asset management analysts, portfolio management analysts, and other operations-focused positions usually seeing significantly lower bonus percentages than their industry peers.

The important thing to take away from this is that, even if you see a base pay number that may have been lower than what you were hoping for, bonus percentages can often make up for this significantly, and can materially increase your all-in compensation in a real estate role.

Real Estate Brokers Can Make *A Lot* of Money

When I was first exploring career paths in commercial real estate and started talking about pay with people who had been in the industry for a while, I couldn’t believe some of the numbers I was hearing. Mid-level producers in major markets can often generate incomes in the mid-six figures, and top producers working with major institutions and private equity firms can make over seven figures annually in take-home pay.

These kinds of numbers, especially in your twenties and thirties, are almost unheard of in industry disciplines like portfolio management, asset management, and even acquisitions in most cases, and if you work for a company on the principal side of the business and don’t strike out on your own, it’s extremely unlikely that you’ll hit these kinds of numbers.

Obviously, there’s survivorship bias here, and not everyone is cut out to be a broker (or wants to be a broker in the first place). However, landing a role on an institutional capital markets team and working in investment sales or debt and equity placement at a company like CBRE, JLL, Eastdil, Cushman, Newmark, or any other major brokerage firm that works with high-profile clients will usually put you on a very direct path towards making a lot of money very early in your career.

Real Estate Pay is Dependent on Location

Differences in compensation packages at the analyst and associate levels between primary, secondary, and tertiary markets can be huge, and this is definitely something to think about if you’re flexible on location and looking to maximize your income.

Pay levels in markets like New York, San Francisco, and Los Angeles can often be 50%-75% higher than pay levels for similar roles in small markets across the country, and this is especially true if you’re in a transaction-focused role.

Markets like these have some of the most expensive real estate throughout the entire country, and if the company you work for generates revenue based on a percentage of closed transaction volume, this often results in significantly more available fee income, commission income, and promoted interest to go around when you’re working on high-value properties.

Understand Vesting Schedules

Participation in a percentage of fee income and promoted interest can become significant as you move into more senior-level roles within the industry, but vesting schedules are extremely important to understand before entering into a long-term employment agreement.

Direct fee participation tends to be pretty rare at the analyst and associate level, and even though transaction activity will usually impact your bonus at the end of the year, you generally won’t have a cut and dry agreement that entitles you to a certain percentage of each dollar the company earns.

However, these types of agreements can sometimes come into play just 5-7 years into your career at smaller firms, but these also usually come with a long-term commitment.

Many of these agreements will include multi-year vesting schedules that require you to stay at the company for anywhere from about 3-7 years, and if you end up leaving before that time to pursue an opportunity at a different company or start your own firm, in many cases, some or all of this income could be wiped out entirely.

Deal lifecycles in commercial real estate usually fall somewhere between that 3-7 year timeframe, so these mechanisms are in place to make sure you stick around and contribute until a property is sold and deal performance can actually be measured, but 3-7 years is also a very long time in the context of your career.

All of this is to say that, even though these types of arrangements can often feel like best-case scenarios, you’ll want to make sure you’re being careful about the company and the specific individuals you’re choosing to partner with long-term.

I know many people who have been burned by these types of structures, losing hundreds of thousands of dollars by leaving a year or two before their vesting period was up, missing out on other potentially life-changing career opportunities because of the income they would have had to forfeit, or just feeling stuck in a tough work situation overall with people they don’t want to work with long-term.

If this is something you want to pursue with another company that’s not your own, just make sure you’re crystal clear on the agreement between you and your employer, and you feel confident that you want to build your career at this firm for the foreseeable future.

How To Break Into Commercial Real Estate

These are some of the lessons I’ve had to learn the hard way over the last 10+ years, and I hope these are helpful for you when choosing which part of the industry you want to focus on, choosing a company to work for, or even choosing whether or not you want to get into this industry in the first place.

And if real estate is where you want to build your career and you want to make sure you have the technical skills you need to land an analyst or associate role at a top real estate firm, 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.

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