“Do I have what it takes to be a commercial real estate agent?”
It seems as if the number one question I get from other real estate agents is, “How do I get started in commercial real estate?” The answer is, “just wait.” Any real estate agent who is doing what they need to do everyday to locate sellers and buyers will come across an opportunity to participate in a commercial property. The average commercial real estate agent will try to convince you that commercial properties are too complicated for you and that you need to hand over that lead. Email me at email@example.com if this is you. If you are not easily swayed into hearing what you are capable of, then commercial real estate might be for you. If you genuinely enjoy inviting yourself to someone else’s party, then it’s definitely for you.
The question you should really be asking yourself: do I have the time, resources (finances) and personality to deal with the very long commercial real estate sales cycle or is this something I can do here and there as it comes up? For most people the answer is the latter. The folks who are already entrenched in commercial real estate have either been born into it or they have been given the opportunity the same way I was given; a generous mentor. A long time ago a trustee of a large family real estate portfolio, Michael Jordan (not the basketball player), gave me my start as a commercial real estate agent. He was a generous teacher, a wonderful mentor, and a kind soul I will never forget. I am sure there is someone who randomly got into commercial with no help or guidance, I just haven’t met them. This only means that you can’t start this process alone; this doesn’t mean it’s too complicated for you to be successful.
Commercial real estate is dominated by what they call “the good ole boy” network. If you’re even taking the time to read this, you’re not in it. The hardest part is that every moment you are working a commercial real estate deal, someone in that network will be reminding you of what you already know; you’re not in it. Even if you survive the daily grind of being told what you will never be, it also takes about $75,000 in your bank account to pay bills for about 18 months before a single deal goes through. Almost every single person who owns a large piece of commercial real estate most likely considers themselves a very capable person. It’s very hard to accumulate enough wealth to invest in a large commercial property without having the mindset that you can do anything. When you meet with these folks, they will quickly remind you how capable they are at everything; it’s very similar to speaking to a lawyer. I don’t even want to talk about the folks who inherit their parents commercial assets who believe they are more qualified than everyone at whatever they do; this is where I will acknowledge my snarkiness and move on.
What makes the difference in trying to make your way into commercial deals is the ability to believe in your skills to sell and market unique properties. In the mind of someone who owns a commercial property in an area of high demand, the less likely they’ll think they’ll need you. Of course this is untrue but if you want to find traction early, the best opportunities will be in properties that no one wants. You can easily identify these situations because the owner will say something similar to, “this is a unique property!” What they mean is, “”It’s not selling.” Another favorite is, “I don’t need to sell.” What they mean is, “I don’t need to sell, but I’d really like to.” If you are someone who thinks that marketing a property is listing it on the MLS or Loopnet and waiting around for someone to call you, commercial real estate is not for you. Commercial real estate means cold calling, asking questions, and then asking someone to point you in the right direction that you just met 10 seconds ago.
Marketing a commercial property is more involved than residential but that doesn’t mean you can’t do it. Most of your successful residential agents have a process that works great: put it on MLS, take pictures, have an open house, or make really cool flyer. Successfully marketing a commercial property involves research, networking, and the dreaded cold calling. Like i said earlier, you might find that the property is in an area of high demand and the higher the demand the less likely the owner will think they need you; again, I can’t stress how untrue this is. The higher the property is in demand the more they need you and your ability to articulate why is what will lead to a successful listing.
Ironically, the large commercial brokerages leverage their size by telling their clients that just listing with them means they are going to have access to quality buyers: the inescapable fact is that there is more investment money than deals and everyone knows someone who will buy at 50 cents on the dollar. If you want to be successful in commercial real estate, you’ll have to find ways to locate the end user who is ultimately going to pay the highest and best price for a commercial property.
If all you want to do is administrative work where you sit behind the computer and make flyers and market analysis, you’re reducing your chance of return on your time investment. This is the most dangerous aspect of commercial real estate; going broke quickly. It takes the kind of thankless work that only someone with an unwavering constitution for cold calling who also understands it takes 1 out of 500 calls to yield progress towards the goal of finding the highest and best price for a commercial opportunity. If you don’t have the time, budget, finances, or cold calling strategy to work 6-12 months on the phone per deal, then commercial real estate is not for you.
Unless you have close personal, lifelong ties to a large legacy of real estate, a commercial landowner who wants to cash out is not going to hand over the keys. Even if they know they need someone to work on their commercial assets, they will probably hand it over to a lawyer. The problem with this decision is lawyers get paid to bill time, not cold call. Probate lawyers, asset management companies, and family trusts tend to be fantastic at administration but they are generally not very good at marketing. Effectively promoting a commercial property requires you to be humble, asking for help every step of the way. Lawyers are generally way too cool for that. And if you’re not already living your commercial real estate dreams, then you’re definitely not too cool to pick up the phone and build a network from the ground up. I will be covering this in later posts.
People who are too close to the asset such as family trusts, will always have a hard time being humble enough to go through this process to entice a buyer to make an offer. Not to mention that there are all sorts of family drama that will occur at anytime. When you mix in a recent death into the equation, all bets are off if anything will ever be accomplished. It’s not that surprising that when the heirs are gifted with commercial property, much like winning the lottery, greed and bad blood between members creates a devastating fire that really the agent pays the highest price: going broke quickly. There is a giant misconception that commercial deals are void of emotion; there is probably no greater myth. We will cover that in later posts, in the meantime, having a detailed marketing strategy is the best way to find the guy that knows the guy, that knows a guy who might buy your listing.
Your ability to show them a plan of action will help them see a difference in their own administrative ability versus your leveraged position of negotiating from a place of sincere advocacy. When promoting and selling a large commercial property, no buyer cares about what the landowner thinks; only what can be proved through neighborhood sales and leasing data. In fact, the larger their ego the less likely they are to do what it takes to effectively market and negotiate a large commercial contract; this is your chance to sell your vision. The paradox is that the larger the ego, the less likely they are to understand why they need you; yet the larger their ego the more likely they need you. If you don’t believe this yourself, how are you ever going to convince them? I will be covering how to execute this strategy in future posts.
Remember, listings for the sake of listings is the achilles heel of someone wanting to make money on a commercial deal. You’ll go broke just trying to put up a sign. Most of the battle is knowing when and how much time and money to spend on marketing a large commercial property. The higher the price, the more likely you are to be deluded by a possible return. There are no shortages of tire kickers wanting to pretend be the real deal and there’s no shortage of landowners who want a price that the market will never bear. Knowing that you don’t know what you don’t know about commercial real estate will only bring your financial ruin quicker and more efficient. This is when talking to someone who deals in commercial real estate might be helpful; the problem is that most are so insecure about what they do that they will convince you that you need to hand this completely over. If you aren’t willing to hand these potential deals over, someone like me can help you game plan to determine if this is something you can actually make money on or if this is going to be a liability and waste your productive time.
If you have a good residential background then you have the foundation to attempt to pull a deal together in the commercial sector; you just might need a little bit of guidance. If you still don’t believe you are capable, or if you have a question about how to market a commercial property you can always contact me at firstname.lastname@example.org. I am passionate about commercial real estate and I am glad to be of help.
I look forward to hearing your story.