(continuing our post on three real estate axioms...) A second real estate axiom simply goes, “it’s a people business” (referring to the real estate industry). Personally, I have heard this notion in some form from numerous developers, brokers, appraisers, investors, lenders, and government officials in both my professional and academic career. This short statement is profound, but you might be thinking why is “…a people business” used to describe an industry dealing with tangible features such as dirt, brick, and sticks?
Experience and relationships!
First, the real estate industry is a relationship driven industry and therefore a “people business.” Although one aspect of real estate is physical (dirt, bricks, and sticks), people make the decisions to develop the dirt, change the zoning, lease or sell the building, value the property, or fund the project. Furthermore, personal relationships developed over time are usually principal factors in these decisions.
This little insight explains why students starting fresh out of school may find it difficult breaking into the real estate industry, as compared to some other business disciplines. Let’s use accounting as an example. Accounting majors can be taught and learn enough accounting theory in an academic environment to be useful to an employer immediately after graduation. An accounting graduate can quickly contribute to auditing functions, financial statement development, tax preparation, and bookkeeping functions and therefore earn an impressive entry-level salary.
On the other hand, a new real estate hire, with no or few relationships with important people in the local market, is of relatively limited use to an employer. It will take months or years to develop an understanding of the local market and to develop relationships with important market participants. Therefore, entry-level positions in the real estate industry are often difficult work with modest pay due to the time and training necessary to develop expertise within the local market and develop relationships with the local participants. This also might explain why many real estate service businesses are family owned and operated. A family member in the business, who is willing to train and introduce you to people, can be a convenience for breaking into the business.
As a result, you might find that starting salaries in many real estate fields to be significantly less than what is found in the accounting profession. For a first hand example, just ask any broker, appraiser, or lender about their first few years in their chosen career. You will likely hear war stories about tough work with modest pay. However, when someone obtains education, experience, and a network of relationships, the real estate job opportunities can be quite lucrative with impressive upside potential.
What can someone with little or no experience do to help them get a foot in the door?
One of the barriers to entry to any industry is the industry specific vocabulary and jargon. To understand computer science, law, medicine, and accounting you need to have a basic command of the vocabulary. Real estate is certainly no different. A goal of this and any real estate program to make sure you have the vocabulary and understanding of basic concepts to understand and communicate with the participants in the real estate industry. This is an important first step in developing relationships within the real estate business. You need to speak and understand the language of real estate lawyers, developers, investors, appraisers, brokers, tenants, and planners. How can you join the club if you don’t speak the language?
Also note, an understanding of real estate concepts and vocabulary is important even if you do not intend to pursue a career in this field. Do you anticipate that you will ever buy, sell, or lease property? Will you apply for a mortgage? Do you think we may have avoided some of the subprime mortgage and foreclosure problems hurting our national economy if people better understood mortgage related concepts?
If you are on this planet, a real estate course or degree should be relevant to you. I won’t guarantee that you will use Calculus in your daily life but I promise that you will use the vocabulary and concepts covered in REAE 5311 Real Estate Analysis or, for undergraduates, REAE 3325 Real Estate Fundamentals. In fact, you can get course credit for information that will directly benefit you in your business and personal life, guaranteed.
No comments:
Post a Comment