What it’s Really like Working in Real Estate Private Equity

Joe Stampone Start a Career 19 Comments

I talk to a lot of aspiring real estate professionals and many of them want to get into real estate private equity. In fact, two of the most highly-trafficked posts on the blog are about navigating the real estate private equity interview process (part I / part II).

Real estate private equity is an appealing career path, yet it’s incredibly competitive and often-times misunderstood. One of my good buddies from Tufts has been working in real estate PE for the past 5 years and I asked him to share his story and shed some light on what it’s really like working in real estate private equity.

Download the ASotREG Guide to Starting a Career in Real Estate Private Equity
Click here to get the guide now!

Why did you get into real estate and what led you to seek a role in Real Estate PE?

I grew up spending high school summers working as a construction day laborer on a variety of residential and commercial projects. Although I was at the bottom of the labor ‘totem pole’, even to this day I believe there are few feelings more rewarding than taking part in transforming a home, a small shop space or an office floor from tired obsolete space to an aesthetically pleasing modern efficient space. Over my four year stint as a grunt, I developed an appreciation for architecture as well as a satisfaction for tangible change. Fast forward and during my undergraduate studies I quickly found architecture to be far more art history based early on (read I am impatient) and that economics/business was a far more intellectually stimulating field for me. After college, I had stints with a retail developer and a debt financing shop. Both were educational experiences where I began to grow the foundation of my real estate investment education. That said, I eventually yearned for an opportunity to become a real estate investor where I envisioned I could look at an array of real estate investment opportunities and use my finance background coupled with construction and design passion to prudently choose which investments I believed were good risk adjusted bets.

Why is Real Estate PE so sought after?

A lot of Real Estate PE candidates read headlines in the WSJ, NY Times or other publications regarding massive property purchases, recapitalizations of shiny towers and so forth and find it very appealing/sexy industry. Real estate PE really took off post 2000 and clearly was a poster child pre the Great Recession. Everyone wants to be the next Jon Gray.

What are some of the challenges of the business?

There is a good deal of competition in the Real Estate PE space. It is becoming a more and more efficient niche as information becomes further disseminated. That said, it takes more creativity and expertise than ever to find prudent investments.

[In recent posts I talked about the increasing importance of property operations and the opportunities created by the evolution of the real estate business.]

Another challenge is information is becoming more efficient, real estate remains a relationship driven business. Finding the best business partners is always a challenge no matter what industry one works in.

Lastly, the various capital vehicles (be it core, core plus, value add or opportunistic) set up to invest in Real Estate PE each have their own structural challenges. Examples include some funds have finite investment periods, other funds have a variety of allocation thresholds, some funds can only play in the debt space while others in the equity space, some funds are so large that they can’t “waste time” on smaller attractive investment opportunities etc. There is no perfect fund structure in my mind.

What are some common misconceptions about Real Estate PE?

In my opinion, the concept of working in private equity has been glorified to lead to instant wealth and success. This is still an industry where wealth is built over long term periods of time and a result of a lot of hard work.

Walk me through a typical day.

Typical day isn’t a word I am familiar with. One important key to success in my opinion is being well organized and efficient with my most precious commodity (time). Some days are spent crunching numbers for 8 hours while others are spent on property tours, construction meetings, involved in leasing and capital market decisions for the existing portfolio etc. The more investments one is involved with the more ad-hoc in a sense one’s routine becomes.

What are some of the career paths within Real Estate PE?

There is no set path. Some people climb the ladder and desire to become a partner of a fund. Others take their experience and take an entrepreneurial gamble to set up their own fund or become an operating partner.

What advice would you give to a young person looking to get into Real Estate PE?

Focus on the nuts and bolts of the business. Understanding the underlying math is paramount. Read a fair amount of text books and case studies regarding real estate finance and potentially enroll in a course or two.

Real estate private equity is a great way to learn the business, but there is no linear career path and there are many ways to get involved in real estate. The most important thing is to start somewhere. Feel free to leave any questions in the comment section.

Download the ASotREG Guide to Starting a Career in Real Estate Private Equity
Click here to get the guide now!

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  • LJ

    Hi Joe

    Thanks for all the informative articles and interviews! One of the question I want to ask is what is the education background of your interviewer? He mentioned that he went to college (tufts I assume?) and study business/economics–was that enough qualification to transition into private equity? Does he think that an MBA or Masters in Finance or CFA (which of the 3) are important qualifications to get into the industry? If one has real estate experience (mainly on the developer side) what kind of additional courses would one need to take to be qualified for the job?

    Thanks!!

  • Hi LJ,

    Yeah, he’s a buddy from Tufts. I think CRE is unique in that employers highly value experience over things like an MBA/CFA, although those certainly don’t hurt. CRE is an operational business where the best learning is done on the job.

    Best of luck,

    Joe

  • Tonya Butler

    That’s a really nice article there! What I would like to know is do they really teach you real estate courses at reputed universities? I live at Toronto having completed my degree in Business Administration and would like to pursue a career in the real estate industry because I believe I’m built for it. I tried searching for options and found a training center( http://www.royallepagemississauga.com/ ) in Toronto. Can you help me choose the right place? The right place need not be the best.

  • Hi Tonya, thanks for the comment. The reality is that it’s really hard to teach real estate and it’s best housed as part of a larger business discipline. In terms of learning the business online, I recommend you check out REFM – https://www.getrefm.com/index/referrer/CNWR_16781292355068

    Best of luck and let me know if there’s anything I can do to help.

  • agcl

    Hi Joe – Thanks so much for this article. I was curious about the exit opportunities in Real Estate PE. What are the common paths that people take after REPE if they choose not to stay in the PE side?

  • No typical route, but many go on to start their own shops.

  • mert

    Joining a Master of Real Estate Development program can be a good start to get into the sector?

  • lemoustache

    Hi Joe,

    Thank you for the article, I find it very useful. I am in the process of starting a carrer within the industry, and so I have been looking for as many resources as possible to be best prepared in advance. Specifically, do you know any resources for the underlying math? As well as where I can find Case Studies to practice for the interviews?

    Thanks in advance!

  • It certainly can be. There’s no single path to REPE.

  • Michael Min

    Hey Joe,
    Is there a particular age range that most firms look for in the REPE industry? I’m 40, getting my MBA, and want to make a career change; however, and as I started to network, I’m told my age will be a factor. Thoughts?

  • It’ll be a barrier, but not something you can’t overcome. Best of luck.

  • Sevan Uncu

    This article is great, thanks for that. I have a degree in architecture and have worked as an architect in several projects for around 2 years. Then I joined a management consultancy firm and have 2 years of experience there too. I wish to join pere (or repe) industry and do you think having no financial background would hinder that? What would you suggest? Thanks in advance.

  • Richard G.

    Agreed. Not many colleges/universities offer the program, and getting accepted can be competitive.

  • Suraj Nambiar

    Hi Joe,

    Big fan of the blog. I am analyst working for the projects team for a large real estate consultancy who has been looking to get into the investment side of the business. I’ve got some finance background from taking summer schools and online courses, but could never substantiate the experience into making a credible jump. I’ve just started studying for the CAIA – Chartered in Alternative Investments, and would like to ask about its relevance and credibility in the RE space.

  • Craig Arrowsmith

    Hi Joe,
    Thank you for this great article. I am a private investor and have done a few smaller apartment buildings and have been relatively successful with them. I worked as a financial planner for 15 years and want to move into real estate as my main gig. My idea is to start very small (3-5 million maybe) deals in which I can make friends and family members of the LLC. From there, I would like to hopefully grow the business into something larger, but really want to take it slow from the beginning. Do you feel this approach is sound and can you recommend any of your favorite reads on the subject? Thank you again.
    Craig

  • @surajnambiar:disqus it may take an intermediate step in order to make the transition, however networking is the key. You’re going to need to find a person to take a chance on you. Best of luck.

  • Hi @craig_arrowsmith:disqus this is a great approach and very manageable for a first time investor/entrepreneur. Feel free to email me at Joe@ASotREG.com if you have any questions. Best of luck.