WEA Reads: Probing paychecks
TRD surveyed an array of jobs across the L.A. real estate industry to find out who’s raking in the big bucks and whose salaries are waning in today’s market
Like most reality shows, Bravo’s “Million Dollar Listing Los Angeles” tends to airbrush a less glamorous reality. By showcasing the schmoozing over lunches, Rolls-Royces and fancy open-house cocktails, the show paints a very posh picture of what working in real estate is like — and gives the perception that most people in the industry operate at that level of play.
But as interviews with brokers, appraisers, property managers and others in the field have shown, that’s far from the truth for the majority of those working in real estate. And that’s particularly true when it comes to the kind of cash being thrown around.
“When you look at the cold, hard money, it’s a lot less than what people think because we spend so much on our business,” said Jonathan London, an agent at Compass’ Beverly Hills office.
An analysis by The Real Deal shows compensation for real estate-related jobs run the gamut, from $30,000 for a broker’s assistant all the way up to $12 million and higher for a successful developer. Even within specific sectors, salaries can vary by the hundreds of thousands based on factors like experience, firms, location and connections. And just like a property on the market, much of it is negotiable.
Yet in recent years, there’s been a widening gulf between what the majority of those in the industry make and what the lucky few at the top of the heap take in.
When it comes to brokers, new companies setting up shop in L.A. are increasingly offering top producers more enticing splits, competitive salaries, signing bonuses and other benefits to lure them in, experts said.
“In order to gain traction and gross commission, they’re offering outrageous splits to agents that smaller companies like mine can’t match,” Stephen Shapiro, co-founder of Westside Estate Agency, said.
Less established brokers see much smaller commissions and, in some cases, have to fork over part of their cut to a seller just to represent a listing. And with inventory shrinking at the low and highest ends of the market, maintaining a deal volume that’s consistent with previous years has been a struggle, brokers said.
On the commercial side too, brokers are seeing deals dry up as big spenders anticipate a market correction and take fewer risks.
Using data from the Bureau of Labor Statistics, dozens of interviews and additional research, TRD broke down the salaries of a broad array of jobs in the real estate industry.
Residential real estate broker/agent
Holding jobs with a well-earned reputation as a career path for outspoken personalities and inflated egos, brokers in L.A. might be some of the most eccentric folks in real estate. And just as wide-ranging as the personalities are their yearly payouts.
According to the most recent Bureau of Labor Statistics report, a real estate agent — working with both rentals and sales — in California earns an average of $66,000 yearly. A real estate broker takes in about $88,000. (Despite the broker-agent distinction in those statistics, professionals TRD spoke to in the field refer to agents and brokers interchangeably.) But the very high-end brokers, as sources pointed out, take home as much as $5 million each year.
The average broker will typically earn a 2.5 to 3 percent commission when working on one side of a sale and 6 percent when representing both sides. They then have to share that commission with their brokerage, in accordance with a predetermined split.
In both scenarios, the deal’s commission rate gets lower as the price of a property increases. Agents will often take a 2 percent commission on homes in the high-end luxury market, or even as low as 1 percent on megadeals.
Newcomers at a firm like Hilton & Hyland will often split a commission 60-40 between agent and brokerage, the firm’s Executive Vice President Charles Black said. The rule of thumb, however, tends to be at an 80-20 split, with very senior agents earning as high as 85 percent on a deal.
But the industry norm regarding agent-to-brokerage splits is changing every day, Shapiro said. New companies settling in L.A. are offering “outrageous” splits that often clock in at 90 percent, with some firms even offering up tons of money to cover marketing costs, he said.
At Shapiro’s firm, Westside Estate Agency, brokers can expect to hit an 85 percent split once they’ve hit a certain sales threshold. Reaching that point often requires “a bank of clients that you’ve worked with and refer you, or you have years of experience,” Shapiro said.
For example, if a broker sells a $5 million home, a typical 2.5 percent commission generates $125,000 on the deal. At an 80-20 split, the broker would keep $100,000, with the other $25,000 going to the firm. If a broker sells five of those homes in a year, that would put their yearly gross commissions at $500,000.
On average, most sales brokers will start off earning roughly $50,000 a year, Shapiro said. Only about 30 brokers in Los Angeles will make over $5 million a year, he added. “It’s like the Screen Actors Guild; there’s an average and then there’s Jennifer Lawrence,” Shapiro said. “It’s the same with residential real estate.”
London of Compass agreed that an annual multimillion-dollar income is hardly ever the take-home scenario. “People think we earn so much more than we really do,” London said.
Brokers often have to pay for marketing, transaction coordinators, assistants and, of course, taxes, reducing the final payout by a hefty chunk of change. On a $5 million property, a broker might spend as much as $20,000 on marketing, London said. Another $5,000 might go to hiring transaction coordinators who deal with paperwork, or to paying some of the closing fees.
On other occasions, as several brokers pointed out, they will earn less on a deal because they’ll offer a percentage of their own commission to the seller in exchange for securing the listing in the first place.
“Many agents don’t talk about the credits they give back to their clients,” Brandon Assanti, an agent at Rodeo Realty, said. “But there’s a lot of agents who will take less percentage on a listing just to get the listing.”
In the rental world, the profits tend to be much less attractive, though the commission rates are the same. Rental agents typically earn a 6 percent commission on a one-year lease, which is then split between the listing agent and the renter’s agent. There are many instances in which a rental agent will “double-end” and represent both sides, gaining the full 6 percent on a deal.
As it is on the sales side, that commission is then split with an agent’s brokerage, often at an 80-20 split for an agent with five years of experience. Depending on experience, though, that split could be as low as 50-50.
That means that at a typical 3 percent commission split 80-20, a leasing broker will earn roughly $864 in commission on a $3,000 per month — $36,000 annual — lease. To hit $100,000, that broker would have to rent over 115 properties in a single year, or nearly 10 a month.
“They’re not the most lucrative, and they are very time-consuming,” Assanti said of rentals.
Commercial sales/leasing broker
Though they can still land huge windfalls — some of the biggest around — when deals close, sales brokers are now seeing downward pressure on their pay as the market slows and the industry becomes more competitive.
In 2017, roughly $244.2 billion in properties valued over $25 million traded across the country, according to Real Estate Alert. That represents a 10 percent drop from $271.2 billion in 2016, and deals in the $100 million-plus market decreased 16 percent year over year. For a broker depending on these $25 million-plus trades, that can translate to a substantial pay cut.
And since commercial brokerages are increasingly bidding for business from sellers, they often offer to take a competitively low commission to land a listing, translating to brokers getting paid out less once a big sale closes.
But no matter what the market conditions, it remains true that the compensation for commercial sales and leasing brokers might be the hardest to pinpoint of any real estate-related profession. The commission rates vary wildly due to factors like neighborhood, firm and experience.
Commission splits between broker and brokerage usually depend on the firm’s size and the perceived value of what it can offer to support the broker. Typically, larger companies like CBRE or JLL will offer 50-50 splits while smaller firms offer more favorable cuts to the individuals, like a 70-30 split.
Bigger shops have “more systems, faster market research and a lot of support,” giving them reason to take half a broker’s commission, a top-producing broker at one of the larger firms said. Smaller firms might not offer as much, placing more of the burden on the individual broker.
“If someone is at a big firm for more than two years and they’re not making at least $100,000, [he or she] is wasting their time,” Universe Holdings’ Samuel Landman, who previously worked at Marcus & Millichap, said. “Someone in those big brokerages like CBRE, JLL or Cushman & Wakefield works nonstop.”
Sales brokers have the potential to earn some of the biggest bucks in real estate, but much of it depends on the market. As deals have slowed, commercial sales teams have gotten bigger in order to compete with other brokerage teams, which means less commission for each person who worked on the sale.
Since leasing activity remains brisk, a leasing broker’s income could easily eclipse that of a sales broker these days. “Sometimes a broker doing a full-floor, 10-year lease will make as much money as one of the brokers involved in the sale of an entire building,” a source said.
For example, a firm might bid a 1 percent commission on a $50 million property. If that property sells, each individual broker on a five-person team might only earn around $50,000 on the deal, assuming a $500,000 gross commission split 50-50 with the firm. That’s also pretax, and does not take into account other transactional costs.
Still, brokers in commercial sales that close a high volume of deals can make anywhere from $300,000 to $2 million, according to Jason Illoulian, CEO of Faring Capital.
On the other hand, a leasing broker with five years of experience earning a 50-50 split with a firm will often take home anywhere from $150,000 to $200,000 yearly, sources said. A typical 10-year broker might see yearly compensation ranging up to $300,000.
“Splits in CBRE are lowest in the market — everybody starts out at 50/50,” said a top commercial broker who wished to remain anonymous. “It will go up faster at smaller firms, and then splits start to go more favorable to the agent.”
The source added that the struggle to earn a consistent salary makes in-house leasing more attractive to some. “Someone who works for a developer doing in-house leasing might make $100,000 a year and the occasional bonus each year depending on if they hit certain goals,” the broker said. “If you’re five years into [commercial brokerage leasing] and struggling to make $150,000, then in-house looks pretty good.”
And then there are the superstars, who consistently make above $3 million yearly. Similarly to residential, that tends to be a “small crowd” comprised of roughly 25 individuals, a source said.
Commercial mortgage broker
Unlike many real estate fields, years of experience tend not to matter much for mortgage brokers.
“There are people in their late 20s who are making over $500,000 a year,” said Bryan Shaffer, principal and director at George Smith Partners, which specializes in arranging financing for commercial and multifamily properties. “People will come out of school with two or three years of experience and make much more than someone else in that age range if they do well.”
Most, however, will make around $100,000 to $175,000 in their first few years and build their way up to $250,000 after five years. Top producers will make “well over a million” a year, with one or two people in each firm earning as much as $3 million yearly, Shaffer said.
The average commissions on a deal are 1 percent on debt and 2 to 3 percent on equity deals.
Much like investment sales brokering, compensation in this field depends on where the market is and what transactions are happening. When the market is hot, “there’s really unlimited amounts of money” one can earn in the market, Shaffer said.
At George Smith Partners, there are two routes employees can take. A recent grad will often join a more experienced team and make a small salary plus a percentage of what the team does. That allows newbies the chance to earn a good chunk of change while also providing them with the opportunity to learn quickly.
Others who join the firm with more experience, and perhaps from an institutional organization such as a bank, will start as brokers and earn solely on commission. They still might join a team, which can range from two people to as many as 10.
“It’s an industry where connections and working hard can really make a difference,” Shaffer said.
Developer
L.A.’s biggest builders are in a good spot these days. “The high-end developers have been making huge returns on their investments — much more than [finance] people can expect to make,” Westside Estate Agency’s Shapiro said.
But as land and labor costs, as well as property taxes, grow, he’s not as optimistic that the profit margins will stay on the same trajectory, forecasting a “downward spiral.” The new tax code might push some luxury buyers away from the $20 to $30 million market, given the elimination of the deduction for state and local taxes, Shapiro said.
Much like luxury brokers, developers have earned a reputation for living a lavish lifestyle by selling the sizzle of L.A. real estate. But what many don’t see is the high amount of risk — and capital — that is needed to become the next Nile Niami.
Developers, particularly the self-employed type, might start off making zero profit in the first few years. However, conversations with insiders and public records reveal that the profits can become quite hefty once they start building a name for themselves.
For those working in the high-end luxury residential market, the salary can range as high as the tens of millions, Hilton & Hyland’s Black said.
About 10 years ago, “most of the developers used to look for a 30 percent return after all expenses,” a source said. “The frenzy was so great that people became hogs, and now I don’t know any developer today that is happy at 30 percent. They want to double their money.”
While there is no set formula for profit when developing in the high-end market, a developer building at the lower end might aim for a 30 to 50 percent return, Black said. That means if a developer purchases land for $1 million and then spends $4 million building — meaning he’s $5 million in — he’ll want to sell the property for about $7.5 million to achieve a 50 percent return.
Ray Nosrati, founder of developer Huntington Estates Properties, said that in today’s market, investors are seeing anywhere from 35 to 65 percent returns. But it’s becoming increasingly difficult to be a developer in L.A., he noted. “It’s definitely not what it used to be. You can’t find land anymore,” Nosrati said.
Developers who own their own firm won’t usually take a set salary, Illoulian said. Rather, they might take a percentage of the company’s revenue at year’s end or retain a percentage of each project. Larger, institutional developers working on multifamily projects could earn a base salary of $400,000 but cash out through equity in a company.
Top executives at development firms like Hudson Pacific Properties can earn a lot more. In 2017, HPP CEO and Chairman Victor Coleman earned a base salary of $725,000, according to Securities and Exchange Commission filings. With equity, a bonus and other compensation, Coleman’s total adjusted salary clocked in at a cool $6 million.
Those in the C-suite at other REITS, like Macerich Company and Equity Residential, had salaries ranging from $8 million to $13 million, records show.
Home appraiser
Real estate appraisers are often hired to offer a third-party view on what a property is worth. They’re sometimes called into court to provide testimony during a divorce proceeding, or recruited by lenders trying to appropriately calculate a mortgage.
In recent years, appraisal firms started gaining popularity as a means to insulate the individual appraisers from any undue influence. “After the financial meltdown, appraisers’ relationships changed from working with mortgage brokers or lenders [directly] to working with appraisal management companies to essentially create a firewall with lenders,” Jason Fischman of Los Angeles-based Appraisal Evaluations said. These firms will often command a 50-50 split of an appraiser’s fee.
Most appraisers will earn compensation on a per-assignment basis, meaning their fees are set when they are first hired for a project. Fischman said appraisers might also bill on an hourly basis for litigation support like expert testimony, charging roughly $400 per hour.
The cost of an appraisal will vary based on the complexity of the case, Fischman said. A beachfront home in a neighborhood with few comps might require a $1,000-plus appraisal, while a cookie-cutter home in a gated neighborhood might only cost $300.
With most costing somewhere in the middle, a typical licensed appraiser might earn somewhere between $100,000 and $120,000. Few make in the $200,000 range, although Fischman said he has seen it happen with appraisers who work in the extremely high-end market.
Architect
Despite the fact that a license will help an architect earn more money, few young professionals these days are taking the time to go through that process, said Lisa Pendleton, principal at GMP Architects. “It takes about eight years of education and working in a firm under a licensed architect, but it improves your hireability in a tight market,” Pendleton said. “It’s a long-term commitment.”
Even with a license, architects are traditionally an underpaid sector in real estate, sources concurred.
A new hire at a firm who has yet to receive a license earns anywhere from $40,000 to $50,000 in the first few years. It takes about four or five years for that person to jump to “job captain,” where they can run a project and earn upwards of $70,000 a year. Still, a licensed architect with 10 years of experience might never see upwards of $120,000, Pendleton said.
A principal of an architecture firm will usually earn the most, with salaries ranging from $200,000 to $600,000 yearly, sources said. According to job employment site Indeed.com, a designer at Gensler — one of the most widely used architecture firms for commercial projects in L.A. — might earn around $50,000 per year. A senior technical designer role, which requires 15 years of experience, will make over $90,000 a year, while a project manager might make around $86,000.
Residential branch manager
A branch manager’s compensation varies with the company, but most will earn a base salary plus a bonus. Some managers might also be “working managers,” meaning they are selling property in addition to managing a branch. Those will often earn a percentage of the firm’s profits — usually 5 percent — in addition to any deals closed.
“The ones that can ‘talk the talk,’ or have been there before, are going to be more successful,” Black said. “It takes a person that enjoys the analytics and legalese, but is also service-oriented.”
A basic salary could fall anywhere between $100,000 and $250,000 a year, sources said. A bonus could add $25,000 to $100,000 to that.
As for luxury residential real estate, Black said it’s not uncommon to see managers earning in the $500,000 range. Managers in this realm are also sometimes tasked with recruiting top agents and building the team, providing them with certain financial incentives.
Residential executive/broker assistants
An assistant to a chief executive at a real estate firm wears many hats. Aside from traditional administrative duties, they might handle paperwork on closed transactions, organize escrow closings and even serve as a legal secretary if they have proper credentials.
This role earns anywhere from $75,000 to $100,000, according to Hilton & Hyland’s Black. Some will earn over $100,000, depending on capacities.
Some firms, like Westside Estate Agency, will offer a bonus to the executive assistant on every sale, which varies according to the deal size.
Then there are assistants to brokers, who are sometimes called buyer’s agents. Unlike most assistants, this position is traditionally made up of young individuals wanting to gain years of experience to eventually become a broker. They will often take clients on showings, find new listings and assist the lead broker with transaction paperwork.
“A broker’s assistant [salary] depends largely on who they are working for,” said Aaron Kirman, luxury broker at Pacific Union. “I know some that have made $30,000 and I know of others who have made upwards of $500,000. It’s a really wide range.”
There are different ways broker’s assistants will get paid, but most will earn a low base salary plus commission on closed deals. Others won’t earn any salary at all, instead opting for a higher commission.
At Hilton & Hyland, Black said the larger teams will have one to three buyer’s agents. Their compensation is based on the lead agent’s commission.
“Everyone needs a right hand,” Kirman said. “It could be invaluable.”
