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Updated about 7 years ago, 11/08/2017
Focus on Being Agent or Investor
The Background:
I have personal contacts in the commercial development space in Massachusetts / Rhode Island who have tried to nudge me into the business. I can't give up my full-time job, as I am the provider for the family, so the chance for exposure seemed to be as a part-time agent. Since passing the exam, I now have young children as additions to the family. Given that chaos, I never actually followed through with finding a sponsoring broker.
I have sporadically tried to leverage this site for information and search for the right kind of broker for my situation. My opportunity falls within the commercial space but commercial brokers are "full time only" given most calls I've fielded with various brokers.
The Problem:
Given some recent developments, my connection started flipping commercial to a real estate investment fund that will take on "free standing ground leases with national tenants". Needless to say, in the past 6 weeks, I've missed out on roughly $100k in commissions. Those deals came out of nowhere but I want to be prepared the next time it happens! I've always been focused on making $ through commissions but the opportunity now seems to be helping with the projects/deals and really learning on the investment side.
I'm not an industry pro and, of course, I now wish I followed through and have been doing this for 3-4 years already. While working a full-time job, what's the best use of my time in this situation? Agent/commissions vs. facilitator/investor.
I understand that my issue might be an outlier in this section. I'm open to a message or offline chat if you feel its not appropriate in this space. Apologies for the long post.
Eric
Bottom line you have to commit full time to commercial real estate.
I hear this frankly all the time. People want to succeed but then have high debt or cost of living and say they cannot go full time.
Maybe you could do another kind of work in commercial that pays similar to what you are doing now. That way at least you start learning and getting paid for it.
To give you an idea I get asked frequently to learn about commercial. I usually tell them 25,000 non-refundable upfront with a 50/50 split. This way they make 50,000 commission then they get it all that first time as they have already paid 25,000.
Just like rehabbing a house with a hard money loan people want others to have skin in the game. I average thousands per hour for my time. So If I took 20 hours training someone and they do not complete the steps I am out 20,000 worth of production time for myself.
I have to know if they do not follow the steps they stand to lose 25,000.
There are some firms that will allow you to work as a junior agent full time. Generally you do not make much at all. Example 100k commission and 50 goes to brokerage. 3 person team 50k left. Top person gets 25k, middle person gets 16k, you as an example get 9k.
Just keeping it real. Hope it helps. You have to take away the crutch of a job and go for it all the way. If you do not close the bills do not get paid and you do not eat. That is super motivation to make it happen every hour and work smart and hard.
If you have a full to part time job and do real estate on the side that is a (hobby) or a (dabbler). When clients are investing millions of dollars in a transaction they want a full time expert and not a dabbler.
- Joel Owens
- Podcast Guest on Show #47
@Joel Owens, I appreciate your response and had already thought to message you in the past given the experience you have and guidance you provide here. However, as you mentioned happens, I didn't want to steal your time when you already provide such value here.
When you mentioned finding some work in commercial that pays and is a chance to learn, that is what I'm looking to accomplish. If I were coming at this from an agent side, my personal contact doesn't use buying brokers so I'd be in the position to get commission on any properties with a listing broker IF I finally find myself a sponsor. However, I'd prefer to learn and provide value than to be given free rides. That's why I'm trying to determine the best use of time for mine and their benefit.
My response could simply be my genuine lack of familiarity of what's truly entailed in what you do. Or maybe I'm only referencing a subset of what you do.
To help my contact grow their business, I was considering sourcing properties/tenants or helping facilitate aspects of the projects. That contact is the money, developer, flipper, and one with the tenant contacts. I'm really not needed in any part of the equation by find myself in the situation that I can be.
Thank you again for your quick response.
In most commercial transactions RESPA does not apply so unlike residential people can have various fees on the HUD one like consulting fee, finders fee, etc. instead of saying commission.
You would need to get an agreement signed with your contact and any assigns etc. to protect yourself. You should consult with a commercial attorney to draft the language and run by what you are going to call the fee.
Situations vary by state and transactions so legal counsel is needed.
No legal advice given.
- Joel Owens
- Podcast Guest on Show #47
@Joel Owens, I certainly appreciate that response. Something I certainly did not consider.
Suggest you hang your license with a brokerage with a no monthly fee as a referral agent. You are not skilled and have the time checking out every lead so when the opportunity comes jump on the opportunity to the listing agent asking for a referral fee.
Most commercial may not even want to coop with a buyer agent unless he is also a well established commercial agent so a referral fee (~25%) seems to be reasonable. Do you have a CCIM, MBA and commercial association membership? They may only have a broker license but they are truly a class by itself. Many refuse to accept offer from State realtor association on contracts used by most other realtors. Many will not return your call unless you are with a re law firm. On hot deals they often imply they do not need your leads.
If you have a FT job and family you got your plate full. A few get a few transactions in their RE career or do their own purchase/sell.
@Sam Shueh, that's also a valid consideration. What is the reasoning for not coop with buying agent? I've heard of listing agents asking for buyer to cover buying agent fee but not refusing outright.
Certain hot deals there are enough buyers they can find. Some listings sellers only pay all to listing agent. I have also seen 1% to buyer realtor if he is a member of blah blah commercial association.
@Eric Stafford I'm a residential RE agent and know Commercial sales are a different animal. The chances are much higher to screw up deals and closings take so much longer to close.
@Corey Melkonian I don't disagree but I feel there's substantial value to be made in commercial that's worth the risk/effort. My full time job is making processes more efficient. I was drawn to commercial real estate because I felt there's money to be made in its obvious inefficiencies.
Here's a deal I'm experiencing now:
Lot + vacant building marketed for $n. Buyer at $n already has another lined up once the project (development and planned tenant) is complete. 2nd buyer has agreed to pay 2 * $n for the same location. Why couldn't the original seller do the same thing and not lose out on doubling his money? All the extra $ just due to a contact the original seller didn't have?
I might be naive but that's my frame of reference since that's what I am seeing.
@Eric Stafford I think you might want to partner up with a commercial broker, I can refer you to a couple and you can speak with them to see who's a better fit for you. I'm a firm believer in a smaller pie is better than no pie.
@Corey Melkonian, I'd appreciate the chance to speak with them. At the very least, it might add some clarity to some of the issues people mentioned above or help down the path of one of the avenues I was considering. Thanks.
I'll email you once I get the chance today.
Sounds good Eric, you have my contact info. Thanks
