The Good [& Bad] of Real Estate Acquisitions

Acquisitions is one of the most popular career paths in commercial real estate, and it’s pretty easy to see why that’s the case.

The pay in this part of the industry can be really good, the day-to-day work experiences you’ll have are challenging and exciting, and for people who want to build their own real estate portfolios, these can be some of the best roles in the business to prepare you for entrepreneurship.

But like all good things, there are also some downsides that you need to be aware of if you want to go the acquisitions route. And in this post, we’ll walk through both the good and the bad of career paths in real estate acquisitions, and what to know first before getting started.

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#1: The Numbers Matter

The first thing to know about a career in acquisitions is that, if you don’t consider yourself a numbers person and can’t see yourself working in Excel for a sustained period of time, this part of the industry is probably not for you.

When you first start out in acquisitions, you’ll almost always start at the analyst level, which will primarily require you to underwrite deals and build models in Excel.

And even though you do tend to get further removed from Excel-related work as you progress within this career path, in almost all cases, you’ll need to spend about 3-5 years working in analytical roles before that starts to happen.

Excel Never Goes Away Completely

Even when you do move on from the analyst level, you’ll still need to be able to review and audit models that your analysts or associates put together, and you’ll also need to understand what kind of adjustments need to be made to assumptions that can help a deal pencil.

Some people really like the analytical portion of things, and this is an upside of the acquisitions career path to them. However, if numbers and math just aren’t your thing and you can’t see yourself spending at least a few years working pretty heavily in Excel, a career path in acquisitions might not be the right fit.

#2: Travel

The next thing to know about working in real estate acquisitions is that travel can end up being a really big part of your job, and that isn’t always a good thing.

When you’re just starting out at the analyst or associate level, significant travel tends to be pretty rare. However, as you move into manager, director, or VP-level roles, you’ll often be responsible for covering a handful of different geographic markets. And because real estate is a tangible asset and extremely dependent on location, regular travel at this point in your career starts to become a necessity.

The Reality of the Road

While this might sound good in theory, in practice, most of this travel usually involves visiting the same 3-4 markets every single month. You’ll often find yourself on the road about 2-4 days per week, which can be tough to manage as you get older and start a family.

In most cases, the travel destinations you’ll be going to also won’t be places that you’d voluntarily sign up to visit, and unless you’re only working on acquiring Class A office properties in central business districts, a lot of your time will very likely be spent in slower, suburban areas (without much going on).

If you really value travel, you enjoy touring different buildings, and you appreciate connecting with brokers and sellers in person on a regular basis, this can actually be a pretty big benefit of working in acquisitions overall. But if you think of yourself as a homebody and you don’t want to be on the road for the majority of the workweek, this is something to know before going down this path.

#3: Income Fluctuations

The next thing to think about when considering a career in acquisitions is that income levels in this part of the business can be extremely variable, and these are often out of your control.

One of the biggest benefits of working in acquisitions is that, while salaries are often pretty high, bonus potential can often be even higher as you move into more senior-level roles. And together, this combination can make your all-in pay extremely high when performance targets are hit.

However, the main issue with this is that even though this is technically a pay-for-performance structure, the performance you’re being judged on isn’t always in your control.

You could be an extremely talented acquisitions professional, but if you’re dealing with a fickle ownership group that says no to the majority of opportunities you present, you’re working for a company that has a difficult time raising capital, or economic conditions have shifted in a negative direction overall, you’re not always going to get paid in proportion to what you contribute.

Ultimately, if deals don’t close, bonuses aren’t paid out. And when you move into more senior-level positions (where bonuses can often be 100% or more of base salary), your take-home pay in a bad year might be less than half of what it would be in a good year, even if the amount of work you do personally stays the same.

If you end up working for a growth-oriented company that’s well-capitalized and market conditions are strong, this can be much less of an issue. However, if you’d have a tough time dealing with major income fluctuations on a year-over-year basis, this is also something to consider before going the acquisitions route.

#4: First to Be Laid Off, Last to Be Rehired

The next thing to think about before getting into this career path is that when the economy slows down and transaction activity slows with it, acquisitions professionals tend to be some of the first people to lose their jobs and the last people to be rehired.

If deals aren’t getting done, an acquisitions team very quickly starts to look like overhead that can easily be cut. And the bigger your salary is as you move into more senior-level roles, the more likely it tends to be that you’ll end up being let go.

Down cycles in the real estate market also tend to take a while to turn around. This means that if you lose your job at the beginning of a downturn, it might be several years before you’re able to fully get back on your feet at the same level you were before.

Where Layoffs Are Most Common

Layoffs in commercial real estate tend to be most common at smaller firms that rely on transaction-related fee income to keep the lights on. If deals don’t get done and that income isn’t generated, payroll costs are often one of the first things to get cut.

When you’re working at bigger firms, however, this can sometimes be less of an issue, since revenue streams tend to be a lot more diversified the bigger a company gets. Either way, the odds of losing your job in acquisitions are significantly higher than they would be if you ended up working in asset management, portfolio management, or even in lending, so this is worth knowing up front.

#5: Difficulty Breaking In

The last thing I want to bring up in this post is something that I don’t think is talked about nearly enough, and this is that acquisitions analyst jobs are arguably the most competitive roles in the real estate industry, and the hardest to break into when you’re first getting started.

Because of a lot of the reasons we mentioned throughout this post, acquisitions tends to be one of the most desirable places to be in commercial real estate. And this means that when you apply for these jobs, you’ll be going up against people from the best universities, with the most real estate experience, and usually with the most industry connections.

This can end up making it harder to get your foot in the door than it would be if you were targeting more operations-focused roles to start, and this can also make the timeline to land a job in the first place significantly longer.

Getting your start in acquisitions requires a lot of networking and informational interviews, a really strong technical skill set, and a really impressive resume that ties all of these things together, so there’s usually a lot of work that needs to be done up-front before landing a job offer.

Just know that if you plan to go this route, it’s probably going to be a lot more difficult to get your foot in the door than it would be when pursuing just about any other role within this industry, but the potential upside is worth it in many cases.

Final Thoughts

In my opinion, this is one of the most exciting parts of the real estate industry, but these are some things I learned during my time in this part of the business that I wish I had paid a little closer attention to before starting out.

And if you’ve gotten to this point and you still think that acquisitions is where you want to be, and you want to make sure you have the skills you’ll need to make it through interviews and pass an Excel modeling exam that might be given to you during the process, 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, which 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.