Commercial real estate is where the BIG money is made. It is estimated that in the United States alone, during a normal market, over $400 billion dollars in commercial real estate transactions occur annually. Top producers in the industry can easily earn millions of dollars every single year.
There are 2 steps to adding commercial real estate to your services:
Learn about Commercial Real Estate
First, you need to learn how commercial real estate works as a product type and how it differs from residential. For example, if you went to work in sales for a software company, the first thing they would do is train you on the software itself. You would need to know the terminology as well as the in’s and out’s of how the software works before ever going to speak to clients about it.
The same holds true for commercial real estate. The first things you need to know are the terminology and how it all works.
I suggest taking an affordable online course to see if commercial real estate is right for you. You can register for a suite of real estate investing courses. To learn more, go to http://InvestorDreamTeam.com
Learn about Being a Commercial Real Estate Agent
The second step in your transition is to learn how the activities of a commercial agent differ from those of residential. Again, using our software example, once you learned how the software functioned, the next thing you would do is learn all about your customers, their motivations, problems, how to find them and how to sell to them.
Prospecting and marketing to commercial clients is very different from the methods used for residential business. So, the next thing you need to do is learn how to be a commercial agent and the systems used to generate commercial business.
You probably already have clients who need commercial services. Many residential clients own businesses and rent or own office or retail space. Many of your existing clients may have money to invest but don’t know how to get started in commercial real estate.
Many people believe that it takes a long time to become successful in commercial real estat,e but nothing could be further from the truth. The problem is that many agents don’t take the time to learn how the business works and don’t employ systems that lead to success.
Why Commercial Real Estate?
Additionally, YOU have the opportunity to own commercial property and position yourself in the middle of some very lucrative deals. As a commercial agent, you will get to know the wealthiest and most active commercial investors in your area. You will also learn about deals before the general public. Imagine finding that perfect deal and knowing exactly who to approach as equity partners.
Benefits to Being a Commercial Agent:
Bigger deals = bigger commissions
Clients less emotional; more logical
No weekends or evenings
No driving clients around
More sophisticated, able buyers & sellers
Less hand holding
Fewer agents than in residential
More likely to double-end deals
Create wealth for yourself
Commercial real estate clients are more logical and less emotional. Either the numbers work, or they don’t. You’re often dealing with business people and established property owners who make decisions on sound logic and who know more about local market conditions than you. Because many are already property owners, they are not afraid to pull the trigger as they already understand the process and the associated risks. Additionally, many have established networks of lenders, contractors, etc. so the process goes more smoothly.
Not only is commercial highly profitable for investors, commercial real estate is also highly lucrative for you, the real estate agent. According to Salary.com, commercial agents make significantly more money than the average residential agent.
“The average commercial deal ranges between $3 million and $4 million.”
~Sandra Sellani, Vice President of Marketing, Sperry Van Ness~
The national commercial firm, Sperry Van Ness, reports that the average commercial deal ranges between $3 million and $4 million making the average single-sided, sales commission $90,000 - $120,000 (3%). Additionally, because of the lack of a central MLS for commercial listings, most commercial deals are double-ended making the average commercial commission $180,000 - $240,000 (3%).
Additionally, the lines between residential agents and commercial agents is becoming blurred as the “resimercial” trend gains traction. And you’re getting in at the beginning of this trend. It is common knowledge that those who get in on trends early make the most money. You are going to be uniquely positioned to capitalize on this huge market.
You’ve seen it. Traditional residential firms have spent millions of dollars on research and have added commercial divisions as the result of their findings. They know that there is huge money to be made in commercial and they are positioning themselves to grab a piece of the commercial pie. We can benefit from this insider knowledge knowing that “resimercial” is a trend that’s here to stay.
Big commissions can also be made by representing landlords and tenants in office, retail and industrial leasing transactions. As these leases are typically multiple years in length and encompass large physical spaces, leasing commissions can be substantial.
Below is an example of a 1700 sq. ft. office space lease in Boston which was an actual listing on LoopNet in 2013. This is not a large space, but the commissions are indeed large!
1700sf x $38.82/sf/year = $65,200/yr
$65,200 x 5 year lease = $326,000
$326,000 x .03 commission = $9,780
$9,780 x 10 leases/year = $97,800
Because of the vast differences among property types it is almost impossible for one agent to track transactions, market conditions, etc. for every type in a given market. Therefore, most agents specialize in one or more property types and markets. Deciding which property type in which you will specialize will be one of the first and most important decisions you will make.
Additionally, most agents focus on either sales OR leasing. While you can certainly transact both from time to time as opportunities arise, this course will demonstrate why it is important to specialize and become an expert. Remember the old adage, “jack of all trades, master of none.” To succeed in commercial real estate and become a top producer you must become a master.
Now I know you may be a little hesitant. After all, most of us didn’t learn a lot about commercial real estate when we were studying for our real estate licenses. Additionally, many of you probably think commercial real estate is difficult and that there’s going to be a lot of math. The good news is that most of the math is the kind we all learned in the 3rd grade. And for the rest, there’s software.
6 areas in which you must become an expert:
ü Property types and their unique characteristics
ü Financing techniques
ü Due diligence
ü Tools of the trade (software, mapping tools, etc.)
ü Generating business
ü Listing and marketing commercial property
Skills Needed
ü Sales Skills
ü Marketing Skills
ü Negotiating Skills
ü Research Skills
ü Writing Skills
ü Analysis Skills
If you think you have what it takes to become a commercial real estate agent, you can make the transition slowly while continuing to work in residential. My advice is to work for a resimercial brokerage so you can work with a mentor as you make your transition into the world of commercial real estate.
