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WARNING: VERY, VERY LONG POST!
A question for the great minds here. I appreciate all the knowledge everyone here has and continues to share.
A quick refresher (and update) on my current situation. I've been working for a real estate development and investment firm for the past 3.5 years. It is a small firm run by two executives who used to run a division of one of the big national development firms. Our office works on 6-9 deals at a time and only has 6 people...I'm the lowest on the totem pole other than the admin assistant/office manager.
Our firm focuses on new apartment development; although in the past 2 years we've been doing rehab projects as well (repositionings ala Steve 0). We focus on our market and do all projects within 1 hours drive from our office. We don’t even look at projects outside of our area (mainly because the owners don’t want to travel). We do some small deals ($5-20 million), but most projects are ~$50-200 million, although we have 1 deal right now that is $750 million.
My current position has me managing 2 new development projects (from site planning phase to construction completion). One is a $6 million project; the other is $18 million. I oversee and manage all project consultants (architects, engineers, general contractor, etc) throughout the process. I’m usually the youngest guy in the room by about 10 years. (I’m definitely outside of my comfort zone most days).
We operate in a “supply constrained market†and large scale projects usually take at least 5 years to complete from acquiring an option on the land to delivering the last units. Some can take even longer. We just completed the approval process on a 71 unit project…it took 6 years of City hearings to get approved. Now it will be 2-3 more years to build. In the future, I see it becoming harder and harder to develop projects in my area and these timeframes lengthening. The industry is becoming more specialized, sophisticated and capital intensive and we are one of the few “small†development firms left. Most of our market is dominated by big national firms. I see this becoming more prevalent over time.
While I am 100% aware of what a great experience this is for someone my age, I am also starting to think continuing on this path will not help me reach the goals I've set for myself in the time frame that I want to achieve them.
And I see the future of increased responsibility…and it will lead to salary increases and more hours (until I’m the boss, which could be 10-20 years and I would still be considered “young†in our industry.) While I know it may sound like a good deal to many people, I don’t see the point of working 70 hours a week for only $150k in base salary and maybe a bonus from each project, if they are successful. $150k after taxes is a bit over 6-figures, which barely supports a family where I live. And frankly, I REALLY don’t want to move. I LOVE it here, as does my fiancée.
A good example of this is the time issues is the 6 year project mentioned above. One of the project managers has been working on it as his only project for those years because it was extremely controversial and time intensive. He makes that $150k salary and his bonus was based on this project. He worked 70+ hour weeks waiting for this project to cash in and put up with a lot of shit. The approval process dragged on and we missed the market. Now, no one wants to buy this project at all. If it would have been 3 years ago, this PM would have made $400,000. Now he’s looking at maybe $50,000. For six years of work! Yikes. I’m not naïve, I understand this happens with projects and some work, some don’t. But what I’m saying is unless you are the owner of the firm, how do you get more than 1-2 projects at a time, you just can’t unless you work 168 hours a week? So you could work 12 years on 2 projects and make nothing. Seems like you need more balls in the air than that.
The experience is the upside, the pay is the downside. I make a “decent†salary, but for my area is not that much ($70k). I have $60k in debt ($40k on ccards from my early 20s and $20k in school debt at 3.75%) and live in one of the most expensive cities in the US. I’m also supporting a fiancée. So I can’t quit tomorrow and go chasing my own deals…I’d be bankrupt in a month.
I have been told that I will receive “project bonuses†from now on every time a project cashes out. I wish I had an example of how much that will be, but I don’t. One of the minority partners told me his first cash out was $150,000, but that was a big project where he managed it and the firm did well. Not small deals like mine. I’m guessing I’ll receive $5,000 per project on the low end, MAYBE $25-50k on the high end (all before the tax man cometh). But again, we haven’t had a project cash out since I’ve been eligible for this bonus (11 months so far) and although we have a couple that look like something will happen, it may be another 6 to 12 to 24 months before anything comes through. Seems like a long time to wait for $5k. If it is $150k, that is a little better though I suppose.
I am not in a position where I want to or can leave my firm (financially or experience wise)...BUT, I've also realized even though it’s a small firm, I'm still working my way up the ladder. Everyone else in the firm is 50-60 years old (I'm 30), so I'm looked at as the "young guy" who has plenty of time, etc to get to where he wants to be. Although we do fastlane projects, our founders have no passive income, but do have low 8 figure net worths.
And one thing worth noting about my bosses – neither is a mentor to me. I’m not saying they should be or anything, just stating the fact. Both are pretty narcissistic people, not really concerned with other people in our firm. Don’t get me wrong, they are nice guys and good human beings, just not “supportive†bosses, but that’s okay. I have tried many, many times to get them to take an interest in my career and guide me a bit. My annual review is basically, “You’re doing a great job, here’s a small bonus and 15% raise.†Nothing more, even when I push them on stuff. I was taken to an industry event once, and I know that is their way of saying “good job, we want to expose you to more stuff…†Just don’t get much more than that. I know they think I’m doing a GREAT job however.
They both love working and do not have any plans to retire or do anything else. While I respect and admire all they have achieved, I do not want their lives.
My PLAN is different. While I may be working on development projects in my 50s and 60s, I will only be doing so because I WANT TO, not because I need to keep the money coming in. My 10 year goal is to have $50,000/month of passive income each month. WHEN I reach this goal, I may choose to continue to work, but I may not. I can’t tell how I’m going to feel then.
I do not think I have the experience or resources to put together a development deal of my own, although I do think I may be able to put together a $500k - $1M apartment rehab deal. I would have to start in a different part of the country though.
My employer would not be open to doing an apartment rehab in another part of the country, and frankly, I don’t think they’d be happy about me stretching myself thin to do a project of my own. They tend to criticize other people’s “dumb deals†a lot, and I can already hear them making fun of my idea. Granted, I’m not one to care what others think, but these guys have done over a BILLION DOLLARS in real estate deals in their careers, so they know what they are doing.
The issue is this: I feel like I should work hard and continue to excel and my firm, but also look for an apartment deal I can put together. I am, however, a bit nervous that maybe I am looking at my current job all wrong. Maybe this is a fantastic opportunity and I am not being smart about it. I think I’m working for some extremely talented real estate guys, and I’d hate to not get the most out of this situation. I left my last job prematurely and left a good deal of money on the table. There was no way to see that coming, so maybe I am holding myself responsible for something I could have never anticipated and that is clouding my judgement now?
We have a number of projects that may cash out in the next 2-4 years and I would hate to leave and then see I left a million bucks on the table, so I’m thinking the best plan right now is to keep working hard, put together a business plan for apartment investing and try and do a couple of deals on the side. Maybe I can get the company interested? Or maybe I can at least get their blessing to pursue them while continuing my employment?
Any bright ideas? I feel like I'm missing something somewhere in my line of thinking. Any insights would be appreciated.
A question for the great minds here. I appreciate all the knowledge everyone here has and continues to share.
A quick refresher (and update) on my current situation. I've been working for a real estate development and investment firm for the past 3.5 years. It is a small firm run by two executives who used to run a division of one of the big national development firms. Our office works on 6-9 deals at a time and only has 6 people...I'm the lowest on the totem pole other than the admin assistant/office manager.
Our firm focuses on new apartment development; although in the past 2 years we've been doing rehab projects as well (repositionings ala Steve 0). We focus on our market and do all projects within 1 hours drive from our office. We don’t even look at projects outside of our area (mainly because the owners don’t want to travel). We do some small deals ($5-20 million), but most projects are ~$50-200 million, although we have 1 deal right now that is $750 million.
My current position has me managing 2 new development projects (from site planning phase to construction completion). One is a $6 million project; the other is $18 million. I oversee and manage all project consultants (architects, engineers, general contractor, etc) throughout the process. I’m usually the youngest guy in the room by about 10 years. (I’m definitely outside of my comfort zone most days).
We operate in a “supply constrained market†and large scale projects usually take at least 5 years to complete from acquiring an option on the land to delivering the last units. Some can take even longer. We just completed the approval process on a 71 unit project…it took 6 years of City hearings to get approved. Now it will be 2-3 more years to build. In the future, I see it becoming harder and harder to develop projects in my area and these timeframes lengthening. The industry is becoming more specialized, sophisticated and capital intensive and we are one of the few “small†development firms left. Most of our market is dominated by big national firms. I see this becoming more prevalent over time.
While I am 100% aware of what a great experience this is for someone my age, I am also starting to think continuing on this path will not help me reach the goals I've set for myself in the time frame that I want to achieve them.
And I see the future of increased responsibility…and it will lead to salary increases and more hours (until I’m the boss, which could be 10-20 years and I would still be considered “young†in our industry.) While I know it may sound like a good deal to many people, I don’t see the point of working 70 hours a week for only $150k in base salary and maybe a bonus from each project, if they are successful. $150k after taxes is a bit over 6-figures, which barely supports a family where I live. And frankly, I REALLY don’t want to move. I LOVE it here, as does my fiancée.
A good example of this is the time issues is the 6 year project mentioned above. One of the project managers has been working on it as his only project for those years because it was extremely controversial and time intensive. He makes that $150k salary and his bonus was based on this project. He worked 70+ hour weeks waiting for this project to cash in and put up with a lot of shit. The approval process dragged on and we missed the market. Now, no one wants to buy this project at all. If it would have been 3 years ago, this PM would have made $400,000. Now he’s looking at maybe $50,000. For six years of work! Yikes. I’m not naïve, I understand this happens with projects and some work, some don’t. But what I’m saying is unless you are the owner of the firm, how do you get more than 1-2 projects at a time, you just can’t unless you work 168 hours a week? So you could work 12 years on 2 projects and make nothing. Seems like you need more balls in the air than that.
The experience is the upside, the pay is the downside. I make a “decent†salary, but for my area is not that much ($70k). I have $60k in debt ($40k on ccards from my early 20s and $20k in school debt at 3.75%) and live in one of the most expensive cities in the US. I’m also supporting a fiancée. So I can’t quit tomorrow and go chasing my own deals…I’d be bankrupt in a month.
I have been told that I will receive “project bonuses†from now on every time a project cashes out. I wish I had an example of how much that will be, but I don’t. One of the minority partners told me his first cash out was $150,000, but that was a big project where he managed it and the firm did well. Not small deals like mine. I’m guessing I’ll receive $5,000 per project on the low end, MAYBE $25-50k on the high end (all before the tax man cometh). But again, we haven’t had a project cash out since I’ve been eligible for this bonus (11 months so far) and although we have a couple that look like something will happen, it may be another 6 to 12 to 24 months before anything comes through. Seems like a long time to wait for $5k. If it is $150k, that is a little better though I suppose.
I am not in a position where I want to or can leave my firm (financially or experience wise)...BUT, I've also realized even though it’s a small firm, I'm still working my way up the ladder. Everyone else in the firm is 50-60 years old (I'm 30), so I'm looked at as the "young guy" who has plenty of time, etc to get to where he wants to be. Although we do fastlane projects, our founders have no passive income, but do have low 8 figure net worths.
And one thing worth noting about my bosses – neither is a mentor to me. I’m not saying they should be or anything, just stating the fact. Both are pretty narcissistic people, not really concerned with other people in our firm. Don’t get me wrong, they are nice guys and good human beings, just not “supportive†bosses, but that’s okay. I have tried many, many times to get them to take an interest in my career and guide me a bit. My annual review is basically, “You’re doing a great job, here’s a small bonus and 15% raise.†Nothing more, even when I push them on stuff. I was taken to an industry event once, and I know that is their way of saying “good job, we want to expose you to more stuff…†Just don’t get much more than that. I know they think I’m doing a GREAT job however.
They both love working and do not have any plans to retire or do anything else. While I respect and admire all they have achieved, I do not want their lives.
My PLAN is different. While I may be working on development projects in my 50s and 60s, I will only be doing so because I WANT TO, not because I need to keep the money coming in. My 10 year goal is to have $50,000/month of passive income each month. WHEN I reach this goal, I may choose to continue to work, but I may not. I can’t tell how I’m going to feel then.
I do not think I have the experience or resources to put together a development deal of my own, although I do think I may be able to put together a $500k - $1M apartment rehab deal. I would have to start in a different part of the country though.
My employer would not be open to doing an apartment rehab in another part of the country, and frankly, I don’t think they’d be happy about me stretching myself thin to do a project of my own. They tend to criticize other people’s “dumb deals†a lot, and I can already hear them making fun of my idea. Granted, I’m not one to care what others think, but these guys have done over a BILLION DOLLARS in real estate deals in their careers, so they know what they are doing.
The issue is this: I feel like I should work hard and continue to excel and my firm, but also look for an apartment deal I can put together. I am, however, a bit nervous that maybe I am looking at my current job all wrong. Maybe this is a fantastic opportunity and I am not being smart about it. I think I’m working for some extremely talented real estate guys, and I’d hate to not get the most out of this situation. I left my last job prematurely and left a good deal of money on the table. There was no way to see that coming, so maybe I am holding myself responsible for something I could have never anticipated and that is clouding my judgement now?
We have a number of projects that may cash out in the next 2-4 years and I would hate to leave and then see I left a million bucks on the table, so I’m thinking the best plan right now is to keep working hard, put together a business plan for apartment investing and try and do a couple of deals on the side. Maybe I can get the company interested? Or maybe I can at least get their blessing to pursue them while continuing my employment?
Any bright ideas? I feel like I'm missing something somewhere in my line of thinking. Any insights would be appreciated.
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