Want a finance job with a direct path to owning your own business someday? Consider working for a real estate investment trust.
According to the trade association NAREIT, about 274 thousand people work for a real estate investment trust, earning an average income of almost $72,000. Compensation is even higher for high performers in Sales, Finance, and Marketing, many of whom are paid based on performance. Many of the highest performers leave to start their own real estate business, which can be a path to wealth.
And there are many ways to deliver great results in the real estate business. Real Estate Investment Trusts operate at the intersection of Finance, Investment Banking, Construction, Real Estate Marketing, and Property Management.
From a business perspective, a REIT takes cash from investors and turns it into future cash flow from income producing real estate. Not only do you manage the investment property but you must also operate the investment vehicle. The latter process is similar to managing an mutual fund. A REIT must have a way to raise capital, build an investment portfolio, report income, and pay REIT dividends (to a passive investor).
Working at a REIT creates many opportunities for an ambitious employee. You’ll gain perspective on the commercial real estate business, which comes in many different shapes and sizes. The finance & investing experience of managing a real estate investment fund is very applicable to other investment vehicles. Investor relations is a key role; for a publicly traded REIT, this can be good preparation for roles at other public companies. Investor Relations is equally useful at a non traded REIT (private REITS) since that exposes you to the world of alternative assets investing. An Asset manager is responsible for directing the overall performance of the portfolio. This is good experience for roles in banking or investments.
The property management and sales side of the business have huge workforces. This is a good path if you want to lead a large team or learn how to manage with customers. You’re responsible for getting the building leased up, running efficiently, and keeping tenants happy and paying their rent.
The ultimate exit option is becoming a real estate investor yourself after a few years. You’ll definitely have an edge when it comes to passive real estate investing. But you’ll also have a good perspective on the real estate market, which you can use to build your own real estate company.
Types of Real Estate Investment Trusts
The industry is segmented into verticals by end user building type. This is partially driven by investors wanting to manage their risk, partially due to the differences in property acquisitions and operations between different market segments. Employee experience is transferrable with a modest learning curve; sales people and property acquisition managers will need to build new relationships if they change verticals.
Some common REIT types:
- Residential REIT – apartments (traditional) and single family homes (somewhat new)
- Office REIT – manages office properties, under pressure due to Covid-19
- Healthcare REIT – various healthcare properties; often viewed as recession resistant but highly affected by government policies`
- Retail REIT – leases retail space. Highly sensitive to the consumer business cycle.
- Mortgage REIT – a purely financial REIT that invests in commercial mortgages
- Equity REIT – general term for a reit which invests in the equity of real estate properties vs. various debt financing arrangements
- Timber / Agricultural – specialized REIT’s that invest in land and natural resources
What Types of Jobs Exist?
A large REIT (the industry term) will have teams that manage every phase of the real estate investment lifecycle. There are many different jobs available in this industry. These include property acquisitions, property management, investor relations, development, leasing and capital budgeting.
What Do REIT Investors Want?
REIT investing takes advantage of several tax code provisions that favor taxable income over capital gains. The IRS looks at a REIT as a pass through business. A REIT must distribute 90% of their taxable income to avoid paying corporate tax.
A REIT can generate a capital gain if they sell a piece of property for more than it is carried on their books. Since real estate values generally rise due to inflation, this is another source of value for real estate investment trust investors. REIT investment options allow the individual investor to own pieces of real estate properties which they probably could not buy on their own. This also allows them to diversify their risk.
Another advantage of this asset class: most real estate investment trusts can raise rent rates over time, increasing their rental income. This allows them to keep pace with inflation, although there may be bumps along the way if the inflation triggers a recession. This features makes real estate assets attractive as part of a larger investment portfolio.
Like any income generating asset, the safety of the dividend is a high concern. If the dividend is stopped, often by converting the REIT to another operating structure, the market will react poorly. Shares will be revalued by asset management firms who are forced to sell due their stated mission (either “hold dividend paying stocks” or “invest for capital gain opportunities”).
More Detail About REIT Job Types
Property acquisitions involve buying a piece of land or an existing building at an attractive price. From there, you put together a plan to turn it into a revenue generating asset, ideally with enough rent to repay the loan and fund improvements.
Acquiring these properties requires investors to know where to look, what to look for, and how much to pay. Investors usually have to acquire property through various means. This could include:
- Acquiring raw land and assembling enough of it to develop a new property
- Buying an under-performing asset from another real estate investor or a corporation and refocusing it to create value in new ways
- Buying property from banks and financial institutions, especially after the prior owner defaults on a loan or mortgage
Property managers are responsible for the maintenance and management of properties among others. Property managers are responsible for collecting rents, escrow payments and managing other daily expenses for tenants. A good property manager should be well versed in managing various aspects of the property.
The company that owns the properties hires workers who perform various tasks, such as cleaning, maintenance, landscaping and other types of tasks. They also own the buildings and manage the tenants. Companies that develop properties and provide tenants with rental services may be especially lucrative.
Developing properties includes many tasks. Developers usually hire architects, masons, and builders to help them build the property. Contractors, bankers and real estate investment trusts hire employees to oversee the project. Investors must be able to monitor the progress of each stage of development. In many cases, investors must act as third-party contractors.
Investor relations is a key part of the effort. Investors can contact real estate investment companies directly. Real estate investment companies have representatives who can help a potential investor select from multiple options to participate in a deal.
Are There Jobs Available Now?
How many jobs are available in a specific real estate investment trust can vary depending on the time of year and where the trust is in the process of raising capital and investing it into projects. For large companies, this is an ongoing activity. For smaller real estate groups, this occurs in waves. Be sure to read the annual report and look at their marketing materials to understand their current projects & strategy.
