|Just the Peaks
This newsletter, at a glance
For most Americans, a dream salary involves at least seven figures
Learn how to leverage CRE on your path toward prosperity
Are you looking to jumpstart a successful career in commercial real estate? Maybe you’ve been in the game for some time, but you’re ready for a much-needed change of pace. No matter your situation, there’s one universal truth: money rules the roost.
For decades, real estate investment has been considered a rock-solid method for building wealth—and for good reason. Many industry professionals report annual starting salaries in excess of $80k, while some investors pull off $250k a year on the regular.
But while these earnings appear promising, they’re not enough for America’s most ambitious real estate professionals. According to Forbes contributor Lee Kiser, there are a number of ways you can earn $1M+ working in the commercial sector. But depending on your approach, the investment risk could outweigh the eventual reward.
Three ways to pay
“There’s a lot of money to be made in commercial real estate,” says Kiser. “But when you’re talking about going into seven figures in commercial real estate, there are only three tried-and-true roles where you can create wealth: investor, developer and broker.”
As a member of Forbes Real Estate Council, Kiser offers his opinion on which role he thinks has the most lucrative potential for helping you reach the million-dollar mark (more on that later). Before we break down the three ways to amass your commercial real estate fortune, let’s take a look at some related earnings statistics:
‘Real’ing in the dough
$147,131 National average salary for CRE developers
$123,937 National average salary for CRE investors
$108,800 Median gross annual income for CRE agents
20% Reported CRE agent income growth in last 3 years
4x Higher salary reported by agents working 25+ years
Making your CRE million
In Kiser’s approach to realizing CRE wealth, players face a number of unique risks and challenges related to their transactional roles. Explore the pros and cons associated with each moneymaking path below.
Path #1: Investor
The first road may be a long one, but at least it’s paved in gold.
By acquiring multiple properties over a lifetime, successful commercial real estate investors can absolutely make a million (and then some). However, quite a bit of strategy goes into the process—not to mention, a whole lot of patience.
“An individual can save up enough money for a down payment on, say, a six-unit apartment building. The income generated from that property will help the investor save up for a down payment on another building,” says Kiser. “Adding value to the building also drives the net operating income. The property can then be refinanced, and a portion of the proceeds can be used to purchase another property.”
Growing a portfolio in this manner is not only feasible, but also highly lucrative. That is, assuming you are willing to put your own money at risk and can find ways to nurture and build your investments despite market fluctuation.
- Cash flow from one investment finances another
- Portfolio grows gradually, giving you greater control
- Rental income keeps you afloat in case of downturn
- Could take an entire career to reach $1M
- Equity and capital are perpetually at risk
- Market threats and ongoing property maintenance
Path #2: Developer
Of all three options, development appears the most profitable on the surface.
Developers spearheading ground-up projects see significant paydays once the properties are eventually sold. They also handle millions and millions of dollars in transactions on the regular. But what’s going on in their personal bank accounts?
According to Kiser, “Most people do not understand cultivating capital partnerships and having strategies to weather economic downturns. Developers are most sensitive to changes in the economy. Most have to survive years waiting for projects to come to fruition before realizing the fruits of the labor and risk.”
So, while such high risk yields great reward, developers are definitely under stress on the road to seven-figure earnings.
- Potential for immense profit over a career
- Can make millions with the right capital partnerships
- Earn huge sums with the sale of a single property
- Highest risk position of all those in CRE
- Possess lots of debt at any given moment
- Need to work your way up to owning a firm
Path #3: Broker
As evidenced in the research above, it’s difficult to find an average annual income for commercial real estate brokers. Median salaries tend to skew low, even while some stats seem surprisingly high. Of course, there’s a reason for the confusion.
For one, national statistics tend to gear toward residential real estate. Also, a broker who has just started out does not have the earning power of someone with decades of CRE experience. That is, the advantage of a larger team, industry connections and community repute. Still, Kiser says the broker’s path to prosperity is most desirable.
“The major difference between brokerage and investment or development is that high incomes can be achieved without the risk of capital. In brokerage, the capital is time and effort,” he says. “I am unaware of any other position in commercial real estate that has such high potential income relative to risk.”
Kiser also attributes brokers’ value to their sound advice on investment, finance and business—insight that is priceless to every other major player in the CRE game.
- Very little risk for relatively high reward
- Leverage persistence and strategy—not cash
- Start earning more money sooner than others
- Requires great skill and industry education
- Must continue to work to make money
- Demands significant investment of time
For more money motivation, visit Kiser’s full millionaire’s guide at Forbes.com.
Everest says: pick the path that suits you best