Residential real estate is where the vast majority of realtors will choose to hang their hats and focus on generating clients and building their real estate business. However, commercial real estate can be an equally lucrative field, but the first thing a realtor considering expanding to commercial real estate should understand is that it’s quite a demanding area of the profession. Any belief that it equals fast money and minimal work hours should be discarded right off the hop. There are certain skills, considerations, and duties anyone should evaluate for themselves before becoming a commercial real estate agent. For some realtors it’s a natural transition, but for others it’s overwhelming.
Here at Real Estate Leads, our online real estate lead generation system is an excellent way for realtors to harness the power of the Internet to allow them to get even more out of their prospecting and new client generation efforts. It’s ideal for realtors selling and placing homebuyers in residential properties, but it can also be effective for anyone who’s expanding the scope of their business to include commercial real estate as well.
So today let’s have a look at the ins and outs of working as a commercial real estate agent, and then you’ll be better informed to decide if it’s something you might like to consider further.
Income
An agent’s salary is based on commission in commercial real estate. Some bigger firms may offer a small supplemental salary, and others may let you draw against future commissions, but commissions will be the primary source of your income. Similar to a residential agent, a commercial agent usually retains a 3% fee on all sales and leasing transactions. The brokerage firm will likely take 35% to 40% of that fee, which is typically paid 30 to 60 days after completion of a deal.
Understand that commercial deals can be extremely complex and time-consuming. It can take up to six months to a calendar year for the parties to agree on a sales price, secure funding, sign the paperwork, close escrow, and then assume their ownership of the commercial property. Leasing transactions usually take less time, but you still need to wait for the lessee to assume tenancy before you’ll receive the full commission.
Another consideration is that commission payments may come quite sporadically, and you are best to go into every deal knowing you may not be paid for your work for quite some time, and that’s if the deal closes at all. It is highly advisable to have a backup fund with six months’ to a year’s worth of expenses when working as a commercial real estate professional. This fund is especially important at the beginning of your career, but also for when activity in the market drops and there’s slim pickings to be had.
Personal Qualities
Successful agents are successful salesmen. The top among them know all the big players in their markets, and that includes real knowledge of the competition as well as what potential clients want. The best commercial agents seek out leads proactively and aren’t reserved at all about introducing themselves at a networking event or on the phone with a cold call. Most agents are social, confident, trustworthy, patient, and persistent when it’s time to persist. They must work hard to gain every listing and client and must move fast when opportunities arise to prevent their valued clients from missing out on any locations which will suit them best.
Commercial agents spend a great deal of time convincing total strangers to jump into the market with the agent as their representative. Maintaining relationships with current and past clients is also essential and even more important than it is for residential real estate given the more transitory nature of business locations and resources. If you’re relationship maintenance skills are lacking, this is going to put you at a disadvantage if you work in commercial real estate in Canada.
Making and maintaining all these connections is going to take up a good bit of your time. Long days, late nights and weekend appointments are going to happen, and you need to be okay with accommodating them. Many clients will also have extremely full schedules, and missed meetings and constant rescheduling are part of the business too for that reason. Your professional and personal life will need to remain flexible to accommodate clients.
Education
Every Province requires you to be licensed to sell commercial real estate. Like residential real estate, you must pass a written test that is administered after relevant coursework is completed. The time can vary, but expect to spend the same time and budget that you did for your residential real estate license. Often the coursework can be completed online or through classes at a community college or university.
Individually, you should also read relevant trade publications and news websites, as well as remain active in your community to build your name and reputation for expertise. Clients are typically educated, well-informed, successful individuals and companies who will expect an agent to be armed with the latest news and market analyses to assist them with making the best decisions about where they’re going to be operating from. In addition, a thorough understanding of economics, finance, and tax law will also benefit you big time.
Work Environment
Most commercial real estate agents in Canada work for large firms in metropolitan and urban areas, or in small to mid-sized firms in suburban areas. Some of the largest brokerage firms will have 20 or more agents in one office and all will have their eyes of the same types of deals. It’s quite common when you’re new to this to have to walk a fine line between socializing with others and keeping your clients leads to yourself. Are you good with withholding information and knowing when it’s best to be reserved with the information you’re volunteering?
In addition, a commercial real estate office can be just as high-paced, hectic, and stressful as the profession itself. It’s not uncommon to have little more than a desk and landline to conduct business when you’re in the office. Cubicles, noise, and a general lack of privacy are common in these offices. Being able to tune out outside influences and distractions is important for a commercial real estate agent.
You can also expect to spend a significant amount of time outside the office. Leads and clients require a lot of face time and follow up, and your understanding of the listings must be extensive. A diligent agent will also survey the competition, taking note of what other companies and investors are attracted to based on local market dynamics. Lastly, A clean car, polished appearance, and knowledge of building and neighborhood layouts are other hallmarks of the successful commercial real estate agent.
Commercial real estate isn’t for everyone, but if you’ve had success building your residential real estate business and you’d like to switch paths or expand your professional horizons then you may want to look into it further.
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