Why aren't there any commercial real estate wholesalers?

[Scott E.]

I've been trying to get heavier into commercial real estate for ~2 years now. To date I have done 2 commercial deals (1 office and 1 medical) but both came from commercial brokers, and in both cases I was competing with other buyers. I've learned that commercial opportunities are few and far between, because hardly anything worthwhile actually hits the open market.

Why aren't there wholesalers out there who are locking up off-market commercial deals?

Unlike residential, nearly every commercial real estate buyer is an investor. So building a buyers list as a "commercial wholesaler" would be a piece of cake.

Do you have any commercial wholesalers in your area? Is this an untapped business opportunity?

[Caleb Brown]

In my area it is untapped. I can imagine wholesaling commercial takes longer, is more expensive and you actually need to be legit with your funds. A lot of wholesalers are new and looking for the low hanging fruit. Residential is overall way easier to close and find a buyer for.  Occasionally I see wholesalers with 10-50 unit multi family. 

[Jacob St. Martin]

I don't see a lot of people doing this either. I think part of this is that when it comes to bigger properties and businesses people tend to be more business savvy and competent to get the most out of selling their their property. That being said I am wholsaling a big land/STR deal right now that is in the range of 4 mil. It is not commercial but is definitely not residential. Definitely a longer amount of time between lead generation and closing and more resistance from sellers to go under contract with a wholesaler but it is definitely possible.

[Scott Wolf]

@Scott E., while I agree it is definitely not as prevalent, I think it is happening.  But the wholesalers are people that can legitimately close on the deal, and typically will should it not pan out.  They also probably know the handful of buyers they will go to when they find a deal.  Additionally, the funds they deposit might be significantly higher, and harder to recoup, hence they have the ability to close on a deal the lock up if they need to.

[Scott E.]

Quote from @Scott Wolf:

@Scott E., while I agree it is definitely not as prevalent, I think it is happening.  But the wholesalers are people that can legitimately close on the deal, and typically will should it not pan out.  They also probably know the handful of buyers they will go to when they find a deal.  Additionally, the funds they deposit might be significantly higher, and harder to recoup, hence they have the ability to close on a deal the lock up if they need to.

Thats a good point. In residential you can get away with a $5k earnest deposit and very loose proof of funds. In commercial it's an elevated experience all around. Higher stakes. Higher expectations.

[Henry Clark]

When you say commercial what offerings are you referring to?  Bowling alleys, warehouses, self storage, medical centers, retail centers,   That will probably help answer your question. 

[Joel Owens]

Because most owners of commercial properties are highly seasoned and have net worth of 8 or 9 figures and the ones who DO NOT often have counsel from very experienced people in the business to guide them properly when they want to sell.

Commercial is more relationship driven dealing with higher numbers millions to tens of millions or more.

Wholesalers might occasionally get a smaller commercial property but often at inflated prices.

Experienced sellers can see through the wholesalers GAMES. I have had hundreds contact me over the decades pitching properties at crazy prices. It's easier to tell other brokers what I want and they go find it for me. I buy value add NNN for cash typically and reposition.

[John McKee]

If you have enough relationships with brokers you can find a deal.  A lot of young brokers want to get into the game of ownership so they often will say hey I've got this value add deal over here, but I would like to be a minority partner in it.  Connect with as many brokers as you can is my recommendation.  I would be cautious on the value add opportunities as the capex can be very expensive, but since you are developer you may might have an edge with figuring out these kinds of costs in your due dilligence.

[Terrell Garren]

Quote from @Scott E.:

I've been trying to get heavier into commercial real estate for ~2 years now. To date I have done 2 commercial deals (1 office and 1 medical) but both came from commercial brokers, and in both cases I was competing with other buyers. I've learned that commercial opportunities are few and far between, because hardly anything worthwhile actually hits the open market.

Why aren't there wholesalers out there who are locking up off-market commercial deals?

Unlike residential, nearly every commercial real estate buyer is an investor. So building a buyers list as a "commercial wholesaler" would be a piece of cake.

Do you have any commercial wholesalers in your area? Is this an untapped business opportunity?

You answered your own question with "Unlike residential, nearly every commercial real estate buyer is an investor"
Likewise, nearly every commercial seller is an investor.  Investors have little tolerance for the shenanigans of wholesalers. Wholesalers generally need someone willing to be fleeced.  It's hard to fleece investors. It is untapped because there is little opportunity there. 

[Scott Allen]

Most issues that I've heard investors will run into is when they are trying to obtain commercial lending but can't because they are out of state

[Mike Dymski]

Commercial brokers function similar to wholesalers regarding property solicitation.  They have full time staff dedicated to seller/owner outreach and relationships...dialing all day every day.

Seems like there would be lots of opportunity in SFR and apartment space in your market with interest rates nearly double caps rates.

[Eliott Elias]

Commercial real estate is very much a good ole boys club. Does not appeal to the masses and the world is small. Most deals are done behind closed doors and a lot of them sell to those who know can close. Reputation is huge.  

[Chris Seveney]

@Scott E.

Several reasons.

1. Wholesaling is typically illegal in most states by the letter of the law

2. Commercial brokers as part of a sale have a lot more documentation they need to gather and the transaction has a lot more players and is complex

3. It would be like using a non lawyer for drafting legal docs. Commercial brokers no the process, also know the players in finding buyers

It’s a completely different ballgame.

[Tom Gimer]

I've seen regional homebuilders knock assignment fees down from $100k+ to less than $20k under threat of litigation and/or reporting unlicensed brokerage activities. Most wholesalers do not have the ability to play that game.

[Joseph Gozlan]

Quote from @Joel Owens:

Because most owners of commercial properties are highly seasoned and have net worth of 8 or 9 figures and the ones who DO NOT often have counsel from very experienced people in the business to guide them properly when they want to sell.

Commercial is more relationship driven dealing with higher numbers millions to tens of millions or more.

Wholesalers might occasionally get a smaller commercial property but often at inflated prices.

Experienced sellers can see through the wholesalers GAMES. I have had hundreds contact me over the decades pitching properties at crazy prices. It's easier to tell other brokers what I want and they go find it for me. I buy value add NNN for cash typically and reposition.

 This ^^^

Now, are there people TRYING to wholesale commercial? Sure! But 99% of the time they are so unknowledgeable I can smell it from a mile.

It's worse in the Multifamily world, they are getting bold (and rude) by taking a broker's package, stripping the logos and contact details and passing it along to potential buyer. The sad part is that they have no clue what they are doing and the length of the daisy chains is getting stupid. 

Talking about bold, I once received MY OWN broker's package sent to me as an "off market opportunity" from a "wholesaler" which turned out to be a realtor from Florida that has no clue what he's doing...

Long story short, I hope the commercial world stays clear out of unprofessional wholesalers... 

[Mohit Asthana]

Probably a lot more tire-kickers and buyers want to make sure someone can close. 

There are some wholesalers that I know that are shifting to commercial. 

[Henry Clark]

@Scott E.

Re reading your OP post you are a realtor wanting to do more commercial deals.  Asking the question why not more wholesalers to find more deals. 

Another angle that is different about commercial or industrial there are businesses tied to the properties. We have several Business brokers in our area that specialize in selling businesses and their assets.  Some are in secrecy because the owners don’t want it publicly known since it could devalue the business.  

You could get into that field but it takes a lot more resources and legal knowledge and support. 

If you want to just stay in the lane of the real estate only just make a list of all properties you are interested in and engage with the owners.  Most should be aging out.  For example both of our electricians are aging out but their sons/daughters are buying them out, same for our sign company, same for our Real Estate company. Our concrete company is closing shop and selling assets since he couldn’t find a buyer for his business.  Local florist closed their shop after they tried for a year to sell their business.  

Join your local chamber of commerce and other organizations and establish relationships. 

Another angle is to look at old Loopnet and Crexi listings.  Figure out a repurpose for them, then find a buyer.  That only gives you the buyers portion of the commission though.  

[Lucia Rushton]

@Scott E. Ultimately because the commercial broker looks after the seller, that is their fiduciary responsibility. As a commercial broker they are working with the seller the buyer, lawyers and the lender to name a few.

A wholesaler doesn’t have that capacity ( in my opinion) so I imagine most sellers would not consider putting their millions of dollars asset in the hands of a wholesaler.

As always just my opinion.

[Ronald Rohde]

I get a frequent request for commercial wholesaling. It certainly can be done, but it will kill your reputation in a small asset class/market, if you go under contract, but don't close. Gotta be prepared or 90% sure you can close the deal. I posted a Youtube video on this if anyone wants to know actual procedures and costs.

Gotta order and pay for Phase I, ALTA survey, EM deposit, review PSA, etc.

[James Hamling]

There is TON's of them out there. There called "Agent" or "Broker". 

I don't know why there seems to be this misconception that a wholesaler is anything but an UN-licensed R.E. agent, but that's the reality of it, Wholesalers are just a different kind of R.E. Agent. And in VAST majority, a kind of agent MUCH less beneficial for the seller. 

once upon a time, not long ago, "wholesalers" were those who were master of the lead generation. They would dig things up an investor would say "well how in the heck did you get this one?". AND a wholesaler would walk the investor through the mechanics of the deal, because they had all the contracts set, every detail wrapped up and packaged with a nice little bow on top. 

Today, "wholesaler" is dominated by clueless persons doing nothing special, often regurgitating another "wholesalers" deal who regurgitated another's and another and another, and not a 1 of them with any kind of deal construct, and each expecting a $20k+ payday, disregarding the deal being $100k over-priced. 

"Wholesaler" has been ruined by the masses. And thus, intelligent persons knowing this, they have no interest dealing with a low quality, poor performance, "wholesaler". They have a ready made resource called "Commercial Agent" who does, literally, EVERYTHING a wholesaler says they can do BUT they are (a) licensed, (b) insured, (c)get's MORE for the seller, and (d) does all this for LESS. 

There is simply no marketable interest in commercial for "wholesalers" which, the REALITY of "wholesalers" as a definition today is "Really poor quality, performance, results NON-licensed agent who does way less for a LOT more". 

More and more good "wholesalers" are getting licensed, making a full business out of it. AND good agents are getting into the "wholesaler" aspects. Put yourself in a sellers shoes, why on earth would they ever choose some no-name "wholesaler" vs the licensed pro who is KNOWN, delivers everything that other promised and more, for less? 

"wholesalers" still work to some extent in residential solely because of consumer education. In short, they buy the BS, there mor easily influenced. A Commercial owner, there education level is way higher, there commercial holdings are proof of such. And thus, not so easily "corn-swageled". 

I get it, I know many chasing there "golden ticket" via "wholesaling" will reply saying how mean and nasty I am, there book/Guru program told them ___. I don't care, I-DON'T-CARE, this is REALITY talk. There is very literally nothing a "wholesaler" can offer a seller today that agent's do not, nothing. Sell as-is, happens every day now, nothing new. Complicated deal, yup we call that a Tuesday. Cash buyer, ok, how many you want, we got em in spades. This is not '09', the world has changed. R.E. agents/brokers now have ALL tools, options, networks readily available. 

What your really asking is why isn't there anyone sending you a daily e-mail blast of commercial property deals at 70% of market value. Because there isn't that many idiots who own commercial real estate. 

[Scott E.]

Quote from @Joel Owens:

Because most owners of commercial properties are highly seasoned and have net worth of 8 or 9 figures and the ones who DO NOT often have counsel from very experienced people in the business to guide them properly when they want to sell.

Commercial is more relationship driven dealing with higher numbers millions to tens of millions or more.

Wholesalers might occasionally get a smaller commercial property but often at inflated prices.

Experienced sellers can see through the wholesalers GAMES. I have had hundreds contact me over the decades pitching properties at crazy prices. It's easier to tell other brokers what I want and they go find it for me. I buy value add NNN for cash typically and reposition.

 That makes sense. Thanks for offering your perspective Joel. I always enjoy reading your posts.

[Scott E.]

Quote from @John McKee:

If you have enough relationships with brokers you can find a deal.  A lot of young brokers want to get into the game of ownership so they often will say hey I've got this value add deal over here, but I would like to be a minority partner in it.  Connect with as many brokers as you can is my recommendation.  I would be cautious on the value add opportunities as the capex can be very expensive, but since you are developer you may might have an edge with figuring out these kinds of costs in your due dilligence.

I've been working on building relationships with brokers. I think I just need to give it more time and continue to prove myself that I am able to perform. What I've experienced so far is that most brokers out there already have relationships with buyers that they have worked with for decades. So if a good deal in a good location comes up, the broker is calling that buyer that they know very well versus rolling the dice on a "newbie" like me. I have over a decade of residential investing and development under my belt, but that doesn't mean much to commercial brokers.

[Scott E.]

Quote from @Joseph Gozlan:

Quote from @Joel Owens:

Because most owners of commercial properties are highly seasoned and have net worth of 8 or 9 figures and the ones who DO NOT often have counsel from very experienced people in the business to guide them properly when they want to sell.

Commercial is more relationship driven dealing with higher numbers millions to tens of millions or more.

Wholesalers might occasionally get a smaller commercial property but often at inflated prices.

Experienced sellers can see through the wholesalers GAMES. I have had hundreds contact me over the decades pitching properties at crazy prices. It's easier to tell other brokers what I want and they go find it for me. I buy value add NNN for cash typically and reposition.

 This ^^^

Now, are there people TRYING to wholesale commercial? Sure! But 99% of the time they are so unknowledgeable I can smell it from a mile.

It's worse in the Multifamily world, they are getting bold (and rude) by taking a broker's package, stripping the logos and contact details and passing it along to potential buyer. The sad part is that they have no clue what they are doing and the length of the daisy chains is getting stupid. 

Talking about bold, I once received MY OWN broker's package sent to me as an "off market opportunity" from a "wholesaler" which turned out to be a realtor from Florida that has no clue what he's doing...

Long story short, I hope the commercial world stays clear out of unprofessional wholesalers... 

Thats crazy that people will flat out rip off your marketing package! I guess I'm not surprised, but how disrespectful.

What I picture in a commercial wholesaling business is an individual who spends years building relationships with actually owners. Walking into shops, getting to know the owner, building rapport. Then when that owner is ready to sell or do a sale-leaseback, they call up the wholesaler.

In reality, this thread has opened my eyes as to why this isn't happening. Commercial brokers are building these relationships with owners already. And they have a license which gives them real credibility. Compare that to a wholesaler who has no proof that they do have buyers or can actually perform.

[Scott E.]

Quote from @Henry Clark:

@Scott E.

Re reading your OP post you are a realtor wanting to do more commercial deals.  Asking the question why not more wholesalers to find more deals. 

Another angle that is different about commercial or industrial there are businesses tied to the properties. We have several Business brokers in our area that specialize in selling businesses and their assets.  Some are in secrecy because the owners don’t want it publicly known since it could devalue the business.  

You could get into that field but it takes a lot more resources and legal knowledge and support. 

If you want to just stay in the lane of the real estate only just make a list of all properties you are interested in and engage with the owners.  Most should be aging out.  For example both of our electricians are aging out but their sons/daughters are buying them out, same for our sign company, same for our Real Estate company. Our concrete company is closing shop and selling assets since he couldn’t find a buyer for his business.  Local florist closed their shop after they tried for a year to sell their business.  

Join your local chamber of commerce and other organizations and establish relationships. 

Another angle is to look at old Loopnet and Crexi listings.  Figure out a repurpose for them, then find a buyer.  That only gives you the buyers portion of the commission though.  

I'm not a realtor. Didn't mean to insinuate that in my post.

I did actually write up a list of properties I'd like to buy around town and provide it to a commercial real estate broker. A good mix too. Shops, office, bars, restaurants. Almost all rented to small local mom & pop companies. I figure regardless of where they are in their lease, I want to own the building based on the location alone. I'm patient, and long term know that it will perform.

She (the broker) has been targeting that list for me for months now. But most aren't interested in selling (yet). Or if they are interested in selling, they have unrealistic price expectations.

[Scott E.]

Quote from @James Hamling:

There is TON's of them out there. There called "Agent" or "Broker". 

I don't know why there seems to be this misconception that a wholesaler is anything but an UN-licensed R.E. agent, but that's the reality of it, Wholesalers are just a different kind of R.E. Agent. And in VAST majority, a kind of agent MUCH less beneficial for the seller. 

once upon a time, not long ago, "wholesalers" were those who were master of the lead generation. They would dig things up an investor would say "well how in the heck did you get this one?". AND a wholesaler would walk the investor through the mechanics of the deal, because they had all the contracts set, every detail wrapped up and packaged with a nice little bow on top. 

Today, "wholesaler" is dominated by clueless persons doing nothing special, often regurgitating another "wholesalers" deal who regurgitated another's and another and another, and not a 1 of them with any kind of deal construct, and each expecting a $20k+ payday, disregarding the deal being $100k over-priced. 

"Wholesaler" has been ruined by the masses. And thus, intelligent persons knowing this, they have no interest dealing with a low quality, poor performance, "wholesaler". They have a ready made resource called "Commercial Agent" who does, literally, EVERYTHING a wholesaler says they can do BUT they are (a) licensed, (b) insured, (c)get's MORE for the seller, and (d) does all this for LESS. 

There is simply no marketable interest in commercial for "wholesalers" which, the REALITY of "wholesalers" as a definition today is "Really poor quality, performance, results NON-licensed agent who does way less for a LOT more". 

More and more good "wholesalers" are getting licensed, making a full business out of it. AND good agents are getting into the "wholesaler" aspects. Put yourself in a sellers shoes, why on earth would they ever choose some no-name "wholesaler" vs the licensed pro who is KNOWN, delivers everything that other promised and more, for less? 

"wholesalers" still work to some extent in residential solely because of consumer education. In short, they buy the BS, there mor easily influenced. A Commercial owner, there education level is way higher, there commercial holdings are proof of such. And thus, not so easily "corn-swageled". 

I get it, I know many chasing there "golden ticket" via "wholesaling" will reply saying how mean and nasty I am, there book/Guru program told them ___. I don't care, I-DON'T-CARE, this is REALITY talk. There is very literally nothing a "wholesaler" can offer a seller today that agent's do not, nothing. Sell as-is, happens every day now, nothing new. Complicated deal, yup we call that a Tuesday. Cash buyer, ok, how many you want, we got em in spades. This is not '09', the world has changed. R.E. agents/brokers now have ALL tools, options, networks readily available. 

What your really asking is why isn't there anyone sending you a daily e-mail blast of commercial property deals at 70% of market value. Because there isn't that many idiots who own commercial real estate. 

Great reply. Thank you for your perspective. I've bought a few residential deals from wholesalers over the years but generally I agree... 99% of what I receive from them is absolutely garbage. Probably more like 99.5%.

I acknowledge that the commercial real estate scene is a group of business people who are much more polished, sophisticated, and high net worth (compared to residential). Which I think is largely why it has been so hard for me to break into this circle. The 2 deals that I mentioned in my original post, I bought through the same broker out of Tempe. This broker now sends me "deals" pretty often, because I have performed for him twice now. Unfortunately though, his brokerage primarily focuses on a part of town that I'm not interested in buying.

I'm actually not looking for a daily e-mail blast of commercial deals at 70% of market value. I'm willing to pay retail or close to retail for properties in 'A' locations. What I'm trying to figure out is how to be the person who is sent those deals. Because as I've learned, the good ones don't seem to ever make it to the open market (loopnet, crexi, etc)

[Mohammed Rahman]

Hey @Scott E. - My best guess is that it's a different ballgame altogether. I'm a realtor and investor, and have worked on a couple of commercial deals. Wholesaling commercial property is possible, but it depends on each scenario. It's not similar to residential where you can place an assignment fee on the contract and then start looking for a buyer. 

Most commercial landlords are a lot savvier and aren't going to just "sell" their property to a wholesaler without doing their own due diligence on the investor/buyer beforehand. There are just more considerations to be made, my $0.02.