Expert: Dennis Herman - 3/20/2009

Question
Hello.  My name is Rashad and I'm actively pursuing a career in commercial real estate.  I’m in the process of getting my real estate license and I wanted to go to commercial.  I'm seeking any advice / direction on what to expect, what I should get a jump on, who I should talk to, etc.  I want to sell and then eventually invest in, then eventually develop and build commercial and residential real estate.  For now though, I want to be successful in selling commercial real estate to start.  Please, any advice and direction would be extremely appreciated.  Thank you.

Answer
Good question Rashad but I am in Residential Real Estate.  I have some experience in dealing on the commercial end of things.  But 70% of my business is in the residential market.  I suppose you can take what I have learned and apply it to the commercial end of the aspect.  In residential you are also trained to sell commercial.  

Look for the company with the best training.  This is very important.  You can not afford to learn from your mistakes.

This company may not have the best commission split.  This is the pay agreement with the broker.  The first company I worked for took 50% or more from each and every sale.  OUCH!!!!  This is why I changed companies.  But the company or broker I work for only hires experienced agents.  So you are in a situation where you have to pay your dues so to speak.

I am paid straight commission.  If I don't make a sale I don't get paid.   You have to have a lot of faith.  

Sit down and write out a budget.  You will be surprised how fast the money goes.  Here is my projected budget for 2009.

Total Projected Income =       $69,800
Closing expenses =            $4200
Office expenses =       $5400
Advertising =               $1500
Postage =          $250
Phone =          $450
Transportation =       $1200
Taxes =          $20,000
Misc. =          $2000

Net income =              $34,800

Remember you have to pay the 15.9% SS tax, the fed and state taxes.  So figure 40% of your income goes to pay for the bail out.  

Getting in on commercial may have its good points.  They are way behind on the use of the Internet. But it takes a year before your web sites will get noticed.  They need to updated on a regular basis.  But when you start a new carrier you will have plenty of free time.  You will also have to spend a lot of time trying to create buyers and trace down sellers.  In residential it takes at least 6 to 8 buyers to create a sale.  At this moment I am working with 36 customers, I have 3 accepted offers and 8 customers are actively viewing properties.  

If I had another 8 hours I could make a list of the things that could go wrong.  Like a depression or some bubble that burst.  There are financing issues.  Buyers that are not qualified.  Buyers that only want make it appear like they are looking when they couldn't put the funds together for a down payment.  Properties fail inspections.  Buyers and sellers occasionally want to do battle. I see more problems on the commercial end of business than the residential.  It seem commercial buyers and sellers take a sale much more personally.  You would think it should be the other way around, but this has been my experience.  

In commercial I have seen more buyers and sellers attempting to renegotiate the contract after it is signed.  This creates a real mess.  You just spent weeks coming up with an agreement, and one party wants to change it.  Now you have to get the other party to agree to the change.  This type of problem should not occur, but it happens much more in commercial that in residential.  You have to be much more prepared with a plan B, C and D in commercial.   

The golden rule should be, learn from others mistakes and not your own.