To MBA or Not to MBA

Starting Out
8yFollow

To MBA or Not to MBA

Timothy Howdeshell
Investor · Fresno, CA · Member since 2016 · 222 posts · 237 votes

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!

2Reply
225 views

Most Popular Reply

Frank Jiang
Investor · San Diego, CA · Member since 2014 · 592 posts · 765 votes
8y

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.

4Reply
See this reply in the discussion

39 Replies

Jump to latestLatest
  • Omar Khan
    Rental Property Investor · Dallas, TX · Member since 2017 · 1k+ posts · 1k+ votes
    8y
    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 Iannone 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!

    Median income is misleading because data is cherry-picked and self-reported i.e. no school has incentive to report lower #s. Like grade inflation, there is salary inflation as well due to the flawed nature of the rankings (i.e. how the ranking system works).  

    If you're looking to be an entrepreneur, you don't need an MBA. But to develop credibility, generate a sizable pool of investable capital and to create more credibility in front of clients an MBA with a i-bank/PE shop/developer would greatly help. That mostly, not always, happens either if you're in operations or investments. Both of which heavily tend to recruit out of top MBA schools. 

    2Reply
  • Chuks Erinne
    Rental Property Investor · Atlanta, GA · Member since 2017 · 221 posts · 188 votes
    8y
    @Timothy Howdeshell You dont need an MBA to make 130k or more. I think however, you should get a Masters degree on a technical subject that will help you enhance your career. An MBA from Cornell is good but its too expensive. Also, i would look at what certifications you can get that would help. For example you can go for the PMP - Project Management Professional certification or something specific to your industry. I wouldn't say dont get a higer education but 130k is simply ridUNculous. Education is always important. If you can get finding, scholarships etc then sure go for it but on student loan...thats a bad decision. Find a cheaper school but dont get an MBA from there...it needs to be more specific than an MBA...which is too general in my opinion. Its almost a scam.
    0Reply
  • Matt K.
    Walnut Creek, CA · Member since 2015 · 3k+ posts · 2k+ votes
    8y

    Where you getting these numbers for new job? Last thing I'd ever want to do is go get more formal education (huge time/money investment) for something that "might" need it. Chances are... if you're in a job the requires this you can get the employer to pay for it or at least a portion of it. 

    You may or may not get to a point where your job experience needs a masters degree to back it up... but the job market is flooded w/ people w/ a masters from schools all over.... EXPERIENCE is going to be the key thing here.

    1Reply
  • Matt K.
    Walnut Creek, CA · Member since 2015 · 3k+ posts · 2k+ votes
    8y
    Originally posted by @Caleb Heimsoth:
    @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.

     The biggest thing I've noticed about my MPA (yes I know not a MBA, but close enough) is/was that people have been more impressed about working full time and school more so then the degree. Maybe the degree gets me the interview not sure, but it hasn't been a big talking point.... 

    2Reply
  • Jonas Helbert
    Real Estate Broker · Dayton, OH · Member since 2016 · 22 posts · 17 votes
    8y
    @Timothy Howdeshell instead of spending money on another degree... invest it into real estate... it will grow your income and speed up the goals you have. (Notice I don’t consider the MBA an investment... just my personal opinion)
    0Reply
  • Patrick Jung
    Rental Property Investor · Lakewood, OH · Member since 2015 · 27 posts · 5 votes
    8y
    @Timothy Howdeshell I would skip the mba. Get your realtors license instead. If real estate is what you want to be vested in, it would give you an upper hand by having dorect access to the mls. Be able to see properties when you want. And save alot in commissions. Sell some houses here and there to supplement your income.
    0Reply
  • Account Closed
    Real Estate Agent · Arlington · Member since 2016 · 162 posts · 100 votes
    8y

    MBAs are of little value. As mentioned earlier in responses, they’re okay for networking but it’s a largely superficial credential (“My MBA degree makes me a business person!”). 

    What about a different masters degree - perhaps in applied economics like here?  I would argue that would be more valuable. Typically these degrees have great scholarship options (you can often get tutition remission) and will also develop the practical ability of interpreting contemporary trends and movements in the economy - some university faculty will even work with you to help you explore your particular interest (ie, real estate).

    MBA degrees will just have you do pointless group projects and case studies and you will pay the equivalent of a mortgage for it (but with no house!). Universities champion them because they’re cash cows for business schools - how do you think they paid for that marble flooring and Starbucks vending machine?  Good luck!

    0Reply
  • Frances Buerkens
    Rental Property Investor · Lexington, KY · Member since 2018 · 40 posts · 26 votes
    8y
    @Timothy Howdeshell I have my MBA In OperatIons Management from a no-name institution and spent $20K all-in. I knew I would be self employed (eventually) so didn’t see the value in spending $100-200K on a piece of paper to qualify myself. My school isn’t sexy and my experience at school wasn’t “FUN”, but since my intent in pursuing my business degree was to maximize ROI (minimize financial input and maximize financial gain in the short and long term), I know I made the right choice for myself. After graduating I tripled my income and have been able to spend that extra income on buying property since I don’t have school debt. That is ROI. If you want a degree to teach you how to think like a business person, then think about how much that $100K degree is really going to cost you. And... you don’t need an MBA to take some classes in finance. :)
    1Reply
  • Matt M.
    Realtor · Denver, CO · Member since 2013 · 2k+ posts · 1k+ votes
    8y

     DU's program can offer focused RE knowledge on the investment and construction side. DU's network in this town is very well known and the alumni are VERY supportive of each other from what I've heard. 

    1Reply
  • Tran Chau
    Member since 2018 · 6 posts · 2 votes
    8y
    @Timothy Howdeshell I graduated from the Johnson School. PM me and we can schedule a time to chat if you'd like.
    2Reply
  • Dan Krupa
    Real Estate Broker · Phoenix, AZ · Member since 2013 · 749 posts · 399 votes
    8y

    @Timothy Howdeshell I am against it and I have a Masters degree. Huge opportunity cost loss in both time and money.  Yes, you should be focused on generating a lot more income but do that through flipping, wholesaling etc...

    Leverage your W2 job to get into houses cheaply and easily. Your focus should be on REI. I left the military after 13 years and am now a full-time REI. I wish I had left after 8 years but such is life. There is a ton of money to be made don't believe that it can only be made through an advanced degree.

    0Reply
  • Account Closed
    Developer · San Francisco, CA · Member since 2009 · 37 posts · 22 votes
    8y

    I got my MBA while working fulltime. It was brutal. I went to Cal Berkeley and tried to focus as much as possible on Real Estate. I still had to take a ton of "general ed" MBA courses such as econ, marketing, etc. These were tough to translate into the RE world. In the end, I paid $125k and got a lot out of the program. To be honest, I don't think that my investment has paid-off yet. You may want to consider some real estate programs. USC has a Masters in Real Estate. A closer school may have something comprable.

    1Reply
  • Jeffrey Almonte
    Rental Property Investor · Los Angeles, CA · Member since 2011 · 122 posts · 67 votes
    8y

    Hi @Timothy Howdeshell

    I was in a similar situation and decided to pass on the MBA. I have an Engineering background and thought an MBA would help transition into entrepreneurship. 

    There is so much free knowledge online on blogs, websites, and forums. There are also great MOOCs like Coursera and EdX. You can learn anything from economics, financial engineering, game theory, or finance from top-notch universities.

    What made the final decision for me was the opportunity cost from a time perspective. I can always make money back, but you'll never get the time back. Committing three full years to a Fully-Employed MBA program (FEMBA) was tough for me. I could have built a successful business in that same amount of time and probably would learn more than I would at school.

    My coworker is taking Real Estate courses at USC in his MBA program and asks me for help on homework or to explain real estate concepts. Experience is a great teacher.

    0Reply
Join the conversationCreate a free account to reply, vote on answers and follow this thread.
Log InJoin for Free