All Forum Posts by: Christopher Telles

Search the topic as there are many questions/answers concerning getting into commercial real estate. Here's the most recent thread I know of on the topic, "Commercial RE Apprentice/Training Programs".

As for the land question, call the interested party and see what they want to do. If it sounds interesting then say you'll have to think about it. If you really do need to think about it then this will provide you the time to make an informed decision. If you find you have questions or need advice on structuring an advantageous deal then talk to whomever it is you have in your network that can help you or come back in here and seek advice through a separate question.

In addition to the CCIM courses @Joel Owens mentions you should consider approaching several medium to small CRE brokerages.

The DC area is a major metropolitan marketplace. You should be able to find a brokerage who has the resources and is willing to train a committed new agent. How you present yourself is also important so be prepared when making contact with the brokerages sales managers.

I cannot tell you how many calls I've fielded over the years where the prospective agent said "I've been thinking of getting into commercial real estate". That's a deal killer for me. I will spend time and money on people who have made strides to work in the industry. They don't have to have experience, but they need to show some level of commitment beyond "I want".

That's where the CCIm courses, Urban Land Institute courses, and a slew of courses available at community colleges and through extension programs at major universities become valuable resources for prospective new agents in CRE.

When it comes to earnings my best suggestion is to never assume anything. Have you heard the Texas term "Big Hat No Cattle"?. There is quite a bit of that in CRE. The britches are bigger than the wallets they carry.

If you want to know how much your VP friend is earning you simply need to ask. Ask him how much he earned last year, and the year before that too. If he's recruiting you he should not have a problem sharing that information with you. 

If there is a problem with sharing then its likely he doesn't want you to know how much he earned. I would be leery of a recruiting broker not wanting to verifiably share earnings information on what type of commission business they did in the prior 2-3 years. In addition, the person recruiting you needs to be a trustworthy individual you can fallback on and confide in as you move through the early stages of a CRE career.

NAR reported for 2015 the average "gross" commission earnings for CRE brokers with 3-5 years experience is $123,000 That's before the split with the house so if its a 50/50 split that's $61,500 per year earnings before taxes.

Having owned small, medium, and large brokerages I can say that's about right. Getting to 60% of that level earnings in year 1 would be a good accomplishment. To reach this level of earnings the salesperson should have good access to some great training. Being handed a phone book and a phone does not qualify as good training. 

The time required to reach that level of earnings would be about 60-75 hours per week. There are however residual benefits that come along with working those hours in the early years. Those residual benefits are realized in later years from the contacts made, information obtained, and relationships built from the work during the early part of a CRE career. Many never realize these residual benefits either because they never put in the heavy hours, or they felt the business didn't offer them enough earnings opportunity and left the business before the residual benefits started paying dividends.

Its the guys/gals that try to short cut the process and work less hours that tend to fall on hard times as they turn the corner from being a novice and hit their journeyman stride.

CRE is a great career. Its also a whole hell of a lot of work. Don't let anyone try to tell you otherwise. As for the suit comment, I think that's great. The day will come when I or someone like me will be competing with you for a listing and we will win, if for no other reason than we appeared to be more professional.

 Hope this helps. All the best in your decision.

Good point. With less experienced investors buying CRE a good way to insure not only the above due diligence timeline is followed, but also for all the other items a Buyer should have access to or should review is to use an American Industrial Real Estate Association (AIR) purchase contract. The timeline protections are built into the contract. They are easily obtainable from the AIR if the agent/broker you work with don't use these contracts.

I'v been investing for 30+ years, been a CRE professional for 25+ years, but have never heard of a building structure called an "alf".

Its a good thing you came here to ask this question. Your agent has misinformed you.

First, I am a 25+ year brokerage veteran of the commercial real estate business here in Southern California. The due diligence period is the time you have to investigate the property to insure its physical, environmental, and title aspects are to the Buyers satisfaction.

The lender will not do any work on your behalf. Any due diligence work conducted on the property is contracted for and paid for by the Buyer.  As the Buyer that's the way you want it. You need to actively lead any due diligence conducted on the property and then review any findings.

Typically the only involvement the lender will have in the due diligence process is ensuring you are using an environmental company that is on their approved environmental contractor list to prepare a Phase I environmental report.

During due diligence you should consider hiring a qualified contractor to inspect the physical premises. This inspection should be all inclusive of foundation, walls, roof, interior improvements, plumbing, and electrical.

You will also need to review the preliminary title report to insure marketable title will be conveyed, and no derogatory liens, easements or conditions exist that would impact the properties current or future value and or marketability.

A Phase I environmental report will need to be ordered from a qualified, and lender approved, environmental company.

There may be other due diligence items applicable to the specific property but without know much about the property or negotiated transaction its impossible to say what other due diligence items need to be addressed.

Best of luck, and send me a message should you have any questions or wish to discuss the property or the lease/sale of the property.

 The landlord is acting as a principal. The mere fact you know about his/her professional capacity acknowledges a disclosure has been made as to licensing.

Acting in the capacity of a principal the landlord can communicate with the prospective tenant without a requirement to communicate with either his/her broker or the tenants broker.

However, the landlord is subject to conforming to listing and commission agreements. Simply, just because the landlord and tenant are speaking directly does not receive the landlord from paying a commission. 

The landlord is choosing to communicate with the tenant. If the tenant if fine with this then let them make their deal offering advise and guidance to you client as they desire. This situation in no way shape or form relieves the landlord of the contractual obligations to his/her broker and any commissions due cooperating brokers vis a vie the commission agreement.

Assuming the landlord complied with statutory disclosures, this is not a licensing issue. If cooperating broker circumvention comes into play then it becomes a legal issue that would be subject to interpretation by a court of law.

If construction on the Master Planned Development, and specifically the center you reference, has not begun then do not close on the property. 

Since it sounds like you've already negotiated price and terms, you'll need to attempt to renegotiate the closing terms, and if possible the conditions present to trigger a closing. 

If your use of the land is dependent upon the performance of the master developer completing X, Y & Z before you can freely and readily utilize your land then X, Y & Z should be a condition precedent to trigger your close of escrow.

As the buyer in a master planned development, you want your PSA with a reasonable deposit to act as an option to purchase that is conditioned on future events being met. You will have the condition to close if the terms of the PSA are met by the seller, and then also have the option to cancel the PSA if they are not. The Seller has performance conditions they need to meet to trigger the closing. They do not have the option of canceling the PSA. 

Many Master Planned developments sit vacant and unbuilt by developers who have great plans but not the resources, or access to the resources, that are required to begin, sustain, or complete the development. When discussing master planned developments its important to keep in ming every service and societal benefit we all normally take for granted, streets, lights, gas, water, toilets, rain runoff, etc., must be 'built' into the master planned development. Any master planned development is a huge commitment for its developer.

The only exception would be if the developer was a local 'billionaire' type developer operating a gigantic development organization. 

My suggestion is you seek out the assistance of a good real estate attorney to help you draft or alter the PSA to include terms that help you reduce monetary loss and your development position.

Avoid letting easy or convenient sale terms dictate your decision. After all, a great 'deal' where you can lose all your capital will never be a good deal. Risk mitigation is more important, particularly in cases such as this where so much is dependent upon an others performance.

If the market for the primary product type e.g. residential or commercial is so shallow you can't assemble valuation information then its probably not something that's going to be of great interest to commercial investors.

Funky one-off type structures usually come in the form of a mixed use. When this is combined with a work/live situation I've found they've either carefully cared for, albeit sometime with wacky taste, or have substantial deferred maintenance.

CRE investors, in general, don't have an appetite for investments like those described by you and above. Even when the returns are higher CRE investors atypically can't be enticed by returns alone.

This property very well maybe a tear down. Every building only has some many years in its useful life. This life is shortened when ownership doesn't maintain the improvements.

My suggestion is to first determine if this is in fact a tear down. If it is let the owner know that it is. Then if the owner agrees look for a developer buyer.

If its not then share with them what it would take to bring the property into a state where it would be desirable to a buyer. This cost, in many cases, if extensive will help the owner reach the conclusion the property is indeed a tear down.