To MBA or Not to MBA

38 Replies

Hi BP,

I have been an avid consumer of real estate books and podcasts produced by BP. Therefore, I really value the type of thinking common among our community members. This post is asking for general advice and strategy planning as it relates to getting started in real estate investing. 

I currently have one property which I am house hacking in the Denver area (see my previous post). And I am currently setting up a flipping deal with local Denver partners, as well as evaluating some out of state BRRRR out-of-state investing in Kansas City. So I'm not a complete newbie to real estate investing (REI). My plan is to acquire a small portfolio (~10 due to mortgage limitations) of SFR and then 1031 into multi-family to scale up from there. My dream is to be a full time real estate investor and leave the corporate 9-5 behind (in 11 years at the latest). In order to do this, I want to maximize my income from the 9-5 while I build the portfolio; for ease of getting loans (DTI), to scale faster, and have an income cushion for liquidity in case of emergency.

In my current career as a scientist, I am making ~70k per year, and could like get that to 85k with a job change (I'm overdue anyway). I have applied to Cornell (top 15 school) for a 1 year MBA program, and there is a strong potential that I will be accepted as I have been invited to interview. The cost of the program is ~ 130k all in, and starting salaries are around 130k going up to 220k base after 5 years or so. It would likely pay off financially in the long run (5-10+ years), and I really enjoy learning about and running a business. This would be similar to buying a property with leverage to achieve a higher cash flow. At the end of the day my main goal is to be a self-employed real estate investor as soon as possible, rather than grind out time in corporate. 

So my question for the community is, does it make sense to pursue an MBA, get a much higher paying job, and invest the spread to build the portfolio quicker? Or does this seem like an unduly large burden of time (1 year) and money (student loans)? Do you have an MBA, and what would you recommend?

Thank you for reading and for your inputs!!!

Have a great day!

Because you said you want to leave 9-5 behind in 11 years I would advise you to get the MBA for the extra income

As for learning how to run a business from it I am not too aire about that

Personally, based on your goals and timeframe, and the significant investment of time & money, I don’t see a huge benefit in the MBA. That’s an awfully expensive program, especially if you factor in the student loan interest and opportunity cost. Also, are the starting salaries you mentioned above the pay you could expect in your current position if you obtained the MBA? Or just an average for graduates of the program? If so, what kinds of jobs are those, and how much time will they require you to commit? I’ve done the salaried corporate job, and though it pays well, I easily worked 70+ hour weeks on a regular basis. That leaves little time/energy for aggressively building a real estate portfolio. 

On the the other hand...I do have my MBA (which was paid for by that previous employer), and it has given me additional opportunities to bring in extra income while doing something I enjoy (teaching business classes part time at a local college). If that is something that appeals to you, a cheaper program than Cornell will probably suffice.

So, in essence, I think it really comes down to your personal goals...but your time may be better spent cutting your living expenses and investing with your current salary so that you can start building your real estate portfolio sooner. Good luck!

I don't think I would suggest the MBA. It will put you behind years in lost income while you are in school. Once out you will owe six figures in student loan debt. 

Finally there are ZERO guarantees in terms of what you will be paid if you graduate. You might end up not making any more than you do now. Except now you have a lot more debt.

@Timothy Howdeshell I would skip the MBA. The opportunity cost is certain (1 Yr of no Income AND massIve debt) but the pay off is not. There’s no guarantee you will make that income and even if you do, the amount of time and effort to achieve it will leave little for you to pursue Real estate which is what you really want to do. Don’t forget that this economic recovery is not going to last and you may not get the job u want at the pay u want when you finish ur MBA because you may graduate in a recession. If u want to increase your Income, find a better degree at a cheaper price or have your employer pay for it. I paid 30k for my masters, no loans, and got that money back with raises and bonuses in less than two years after finishing. Plus my employer paid for 33% of it.

I wouldn't waste my time with an MBA. If you like RE, then look into DU's RE&CM programs. My friends who went through it loved the program, and it helped launch their RE careers. 

Very interesting dilemma @Timothy Howdeshell . I too was considering the potential MBA, but decided not to make the move. However, you are much further along in your REI. When will you be making your decision? I'd be interested to hear the outcome.

You're going to get a bunch of people saying you don't need an MBA, but let's seriously consider this scenario.

As someone who made a similar and successful transition from science to finance with an MBA, I think you're being a little optimistic with your starting salary expectations. But that being said, let's say you do manage to find a starting salary of $130K, that's only a 2.5 year payback period (+55K per year salary difference). If you plan on being in the workforce for 30 more years, the IRR on that investment is pretty substantial, assuming of course that you successfully make the transition and land that high paying job.

In my experience, people who complete those 1 year programs really weren't all that much stronger than regular workers.  I wouldn't hire someone at $130K+ for a resume with X years as a scientist and just 1 year of MBA as relevant work experience.  The MBA just doesn't command the weight it once did to instantly get that pay bump.  I've seen much more realistically to maybe get a bump from $85K to $95K - $110K, which makes the $130K cost much more burdensome and in that case, the MBA would likely not be worth it.  Just my two cents.

@Timothy Howdeshell Cornell is a top-ranked school with a killer MBA program.

 You have a simple option: If you plan on networking like crazy, getting a real RE job with a investment bank/PE firm/developer than MBA is the only way to go. This assumes that you will be using the Cornell brand name to network. 

Getting the same quality of education (MBA, particularly) in anything less than top-15 school is a waste of time IMO. This is not because of the quality but because the MBA is another work for networking and branding. No matter how good your education but if you've done your MBA from a podunk school in the middle of nowhere, your chances of success go down dramatically. Again, this is not an exercise in which school can provide you a higher quality rather which school provides better marketing/networking opportunities. Plus, the alumni network is killer. 

If you don't plan on "slaving" away for a decade, then save yourself the hassle and learn to become an entrepreneur - real estate or otherwise. But if you want to work at the institutional level, you kinda have to do MBA. 

P.S. The median income states are very misleading for all schools. 

@Timothy Howdeshell I think the best place to research this is Poets & Quants. Since you’re after a salary boost, that’s what you want to see numbers for. My sense is Stanford and HBS lead that pack. Though I know there are lots of good MBA programs, for the tuition to make sense, the out of the gate salary increases really need to spike IMO. I know it seems ludicrous that Cornell might not be “worth it” but just like with REI, this is a numbers game.

I earned my MBA through blood, sweat and tears right before the Lehman shock and my take is that it all depends on the recruiting upon exit. The MBA is much less important than what firms respect your school and want to hire you. And if you are talking about real estate, having research dozens of grad school programs, I will say that finding a RE specialization in grad school and/or MBA focus will be very challenging. The MBA is a general degree that gives one an overview of the functional areas in business incl. but not limited to finance, human resources, IT, operations, etc. It does NOT provide one with a competitive advantage in a particular area of expertise. If you want to become a general manager and have the investment to avoid student loans and can get into a program that good firms are actively recruiting graduates from, I would recommend a MBA.

@Timothy Howdeshell I pretty much echo what @Omar Khan said. I looked at a mba but decided against it for the Extra cost. Now I’m getting a masters in engineering for a fraction of the cost
I’ve struggled with the same question. Eventually a quote from Jim Rohn helped me decide to go all in on real estate investing rather than the MBA. ”Formal education will make you a living; self-education will make you a fortune.” - Jim Rohn

If you really want to get ahead in life at your age in the world we are inheriting, forget every single last traditional white-collar career aspiration you have ever had and get into steamfitting, waste management, janitorial services, maybe shipping maintenance, and of course, real estate. You're going to get paid a hell of a lot more in the long run for knowing how to dig your own sump pit than you are for building up anyone else's fortune.

Disclaimer: I went to Brown for grad school.

@Timothy Howdeshell do you work for a company that provides educational reimbursement? While I was not into REI at the time, when I pursued my MBA my W-2 employer payed about $40k of my $50k program. It was an executive MBA program so was 18 months in a cohort format with leaders from from company and a few others (I work for the major employer in my city but with every career path imaginable...you can guess where :-) ). The cost of the Cornell program is steep.

I agree with @Frank Jiang  that those salary numbers look very high.

@Timothy Howdeshell you indicated that you wanted to be into real estate full time in 11 years or less. Based on that alone, I would think you'd want to focus all your spare time and energy on that goal. If your time horizon to be working a W-2 job was longer, the payoff of an MBA would make more sense to me.

Also, I would not underestimate the amount of effort that a demanding grad program will require. I did my MBA program while I worked full-time and I had pretty much no life during that time. I know people that have almost gotten divorced while pursuing a grad degree due to the drain on family/spousal time. 

Good luck in your decision!

Dave

@Timothy Howdeshell If you want to be a corporate executive, get your MBA. If you want to be an entrepreneur, get going without it and learn on the job. Save the money and apply that money to your venture. 

Onward!

sjw

Wow! Thank you all for your thoughtful responses! You've given me a lot to think about. It seems most individuals are leaning against the idea of the MBA. 

@Michael Plante I'm in agreement with you there. I think that you need to run a business to learn it, and not simply the theory. 

@Jen R. Thank you Jen! As an aside, the cost is astronomically high! In a general sense, the increasing cost of tuition is very concerning. This, coupled with degree inflation, and a stagnant median income, is really putting a strain on America's young people. The student loan debt has surged 50% over the last 7 years....crazy. But I digress. The salaries mentioned for graduates are an overall average for the school, but the range is fairly narrow (depending on industry, function, etc.). The jobs I would be targeting are management consulting and general management jobs in the food industry. Most of these jobs would require 60+ hours/week (more for consulting). 

@Anthony Gayden @Sung Park I agree with both of you that there is a market risk, and no guarantees in income. The employer sponsored programs make a lot of sense. Unfortunately, my employer doesn't offer such a thing. 

@Matt M. Thank you Matt! I will investigate this further. My initial thought is that this idea may suffer the same salary ROI concerns and free cash flow problems brought up by other posters, further delaying property acquisition.

I also looked into MBA’s years ago & primarily OU & SMU here locally. My Dad graduated SMU MBA a couple decades ago & launched & oil & gas startup successfully. However for me with an REI path I couldn’t see the payoff especially with a program that had doubled in cost to $160k. I did a time value calculation on that 160k & 1 year & figure doing REI on my own with 15% annual returns will far exceed the return after w2 tax of the MBA over time. Capital gains are only taxed at a 15% rate & some of my apartment & other deals generate losses on taxes up front which help my wife & i’s taxes since we married this past Spring. Now we are trying to pay off her debt & some joint & other medical & wedding expenses together so we can invest some of her income passively & create even more cash flow & long term wealth building!

Tim, nix the MBA.  Your stated goal: "At the end of the day my main goal is to be a self-employed real estate investor as soon as possible, rather than grind out time in corporate." 

An MBA is not required to achieve this goal. Think of what investments you could make with $130k.  

Even if you were not pursuing the goal you have stated above, I would probably recommend against the MBA.  MBA's are practically a dime-a-dozen on the market right now.  Companies/employers value degrees less and less and value what you can *DO* more and more.  

The fundamentals of your discipline are just so important--whether that is science or investing.  You know that and I don't really have to tell you this, but I say it just as a reminder.  And you just don't need the MBA to learn the fundamentals which is what most people never learn or master.

There is only one reason to pursue the MBA-- because you simply want to.  Maybe it is a challenge that you want to overcome or a mountain you want to climb.  The experience is the only thing that would justify the MBA in my view.  

If your goal is to be a self-employed real estate investor as soon as possible nix the MBA and focus on only things that will get you to this destination.

Good luck!

Jason

Based on your goal (to have a small rental portfolio), I am not sure the MBA would be ideal.

I am an advocate of education, and if you told me you wanted to work in Fortune 500 Company and were looking to kill it in an MAB program, make connections, and start your rise, I may so go for it. 

Even then, I am not a huge fan of the debt, however (sort of going Dave Ramsey there).... So if you could cash flow it, even better.

Also, you may know a traditional business path is to work for a large company a few years and if you are promising then they pay for the executive MBA (though it may be the nearby state school or even be online, maybe not top 20 but usually AACSB accredited). Then the company retains you (win/win) and gets a future mid/upper level manager.

My understanding is that you then often expect or put for a promotion soon after the MBA (some folks may seek other opportunities if there is not upward mobility or don't get he move up).

At any rate, you may be able to find a lateral move to a business (maybe one with science-related operations) work there and utilize their MBA program for new/promising executives.

Or, along the same lines, you could keep your current job and put together your own career plan taking the MBA on the side. Some top 50 ones are low residency now. Some of the executive/online/low residency MBAs may work with a day job.

Finally, perhaps the bad news....Not that much of the major US graduate business curriculum will cover real estate transactions and management. I think Cornell may have some major hotel/hospitality type property management--but buying a 4 plex not so much.

Oddly, the real estate classes at a community college where a 30 year broker, appraiser or long time property manager teach may be more akin to what you seek. Not much prestige--but more applicable.

Finally, you may want to get a school of hard knocks MBA by doing deals, reading books, listening to the podcasts, meet ups with local investors, trying some hands on work (tape and mud to screening tenants!). That costs is about free at the library and no extra charge to be DIY landlord on your next rental!

@Timothy Howdeshell . If it’s not a top 20 mba program it’s generally a waste of time and money. My masters program is ranked 15 (granted not a mba). My dad has an mba. It was worthless to him. Most people it doesn’t provide much substance since it’s all general education.

@Irwing Gama I've already made plans to interview Oct 1st. But for all I know they could say no thanks, and then my dilemma will be solved! I will need to decide before December if accepted. I'll try to remember to follow up on the thread and let people know the outcome.  

@Frank Jiang I completely agree. It is hard to get an accurate assessment of the salaries (put out by the school), as well as the likelihood of landing such jobs. All of the data that I've found strongly suggests that these values are accurate however. As part of my due diligence, I will keep trying to get these numbers more accurately. Do you mind if I ask where you went for your degree? I've found that that makes a massive difference. Also, congrats on your transition! 

@Omar Khan That is where I see the value as well. The brand and the network are really crucial, as most of the information can be found online for free. To be honest, I've never considered working in a real RE job as you put it. I've always been drawn in by the entrepreneurial side/nature of the business. Can you explain more about the median income being misleading?

@Tara Wright P&Q puts the numbers at the same as reported above. That would put me at nearly 100% salary increase. Other posters seem to think that these are misleading figures however. 

@John Acheson Thank you for your input. That seems like a really scary time to have lived through, especially in the MBA market. I agree with you though on the generality of the degree. I am looking at the general management track. There would be substantial loans involved however, which is the main cause of doubt. 

@Caleb Heimsoth Were you in engineering prior to the masters? Those two degrees are quite different. 

@Shaun Brush I do love me some Jim Rohn! Regardless of the decision I ultimately end up making, I don't intent to ever let my schooling interfere with my education (a la Mark Twain). At the end of the day, this formal education would serve as the means to accelerate my self-education. 

@Jim K. Thank you. You've echoed my roommate's, a young construction manager, sentiments! I definitely see this as a viable alternative. 

@Kelly I. Technically yes, however it is only 5k per year with a 2 year indentured servitude. Furthermore, there would be limited to no career growth in those 2 years. So, I'm obviously not considering that option. In your situation, it seems like an awesome opportunity! Congrats!

@Dave G. Thank you! Yes, they are quite demanding from a lifestyle perspective, and the relationship impact is well documented. I'm at a 0% chance of divorce however ;-) And yes 11 years, it is a rather arbitrary timeline (40 years old). ASAP ideally, but I need a bit of non-9-5 income or excess free cash flow so as to not strangle the REI portfolio growth.

@Shawn Ward Thank you. Entrepreneurship is the ultimate goal!

Originally posted by @Timothy Howdeshell :

@Irwing Gama I've already made plans to interview Oct 1st. But for all I know they could say no thanks, and then my dilemma will be solved! I will need to decide before December if accepted. I'll try to remember to follow up on the thread and let people know the outcome.  

@Frank Jiang I completely agree. It is hard to get an accurate assessment of the salaries (put out by the school), as well as the likelihood of landing such jobs. All of the data that I've found strongly suggests that these values are accurate however. As part of my due diligence, I will keep trying to get these numbers more accurately. Do you mind if I ask where you went for your degree? I've found that that makes a massive difference. Also, congrats on your transition! 

@Omar Khan That is where I see the value as well. The brand and the network are really crucial, as most of the information can be found online for free. To be honest, I've never considered working in a real RE job as you put it. I've always been drawn in by the entrepreneurial side/nature of the business. Can you explain more about the median income being misleading?

@Tara Wright P&Q puts the numbers at the same as reported above. That would put me at nearly 100% salary increase. Other posters seem to think that these are misleading figures however. 

@John Acheson Thank you for your input. That seems like a really scary time to have lived through, especially in the MBA market. I agree with you though on the generality of the degree. I am looking at the general management track. There would be substantial loans involved however, which is the main cause of doubt. 

@Caleb Heimsoth Were you in engineering prior to the masters? Those two degrees are quite different. 

@Shaun Brush I do love me some Jim Rohn! Regardless of the decision I ultimately end up making, I don't intent to ever let my schooling interfere with my education (a la Mark Twain). At the end of the day, this formal education would serve as the means to accelerate my self-education. 

@Jim K. Thank you. You've echoed my roommate's, a young construction manager, sentiments! I definitely see this as a viable alternative. 

@Kelly I. Technically yes, however it is only 5k per year with a 2 year indentured servitude. Furthermore, there would be limited to no career growth in those 2 years. So, I'm obviously not considering that option. In your situation, it seems like an awesome opportunity! Congrats!

@Dave G. Thank you! Yes, they are quite demanding from a lifestyle perspective, and the relationship impact is well documented. I'm at a 0% chance of divorce however ;-) And yes 11 years, it is a rather arbitrary timeline (40 years old). ASAP ideally, but I need a bit of non-9-5 income or excess free cash flow so as to not strangle the REI portfolio growth.

@Shawn Ward Thank you. Entrepreneurship is the ultimate goal!

Yes both degrees are engineering 

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