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312 Part V:Kicking Your Investing into High Gear
These are the only real advantages of having a broker’s license over a salesper-son license. Having one or the other doesn’t give you more skills, credibility, or increase your business volumes.
Getting your foot in the door
If you think commercial real estate sales is for you, take a minute to do some honest-to-goodness self-examination. This potentially lucrative business is at-heart, entrepreneurial. Therefore, ask yourself the following questions:
U Am I a self-starter and self-disciplined? Every morning, you have a choice to go out there and make things happen or to pull the covers over your head and go back to sleep.
U Am I competent and trustworthy? These are traits of a successful and prosperous salesperson. Are you willing to put in the hours of study time to be a walking encyclopedia of your market? Can people rely on you? Do you show up on time for meetings?
U Am I a competitor? Do you thrive or just try to survive when business gets tough? This industry is very competitive by nature because of what’s at stake — big dollars. You have to be a go-getter.
If you answered “yes” to all of the above, you’re ready to get your real estate sales agent license (or in some states you can jump right into getting your broker’s license). To get your licensing, go to your state’s department of real estate and check out the requirements to take the license exam.
After you’ve passed the licensing exam, it’s time to find a commercial real estate brokerage firm to work for. First, decide your area of expertise: office, retail, multifamily, or industrial. If you love dealing in apartments, you don’t want to work for a company that’s known for downtown office investments. After you select your field, locate those companies that handle the properties you’d like to focus on. The best way to get started on finding them is by word of mouth. Big-name firms can be just as good as the smaller local firms.
Next up, you need to interview the firms. You’ll find that even though the firms you’ve chosen may sell the same product, the inner workings of each firm can be dramatically different. The following are some tidbits to consider and ask about when interviewing firms:
U Commission splits: Understand what the commission splits are with your broker. Usually, new agents start off with a 50-50 split. When your income reaches a certain level, the split should decrease in your favor.
U Training program: Ask if a training program is available. Some of the larger national firms offer structured training. We know of one firm that offers boot camps for new agents. Or the firm may let you “hang out” with an experienced agent.
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U Management structure: As you know, a company’s success starts from the top. Ask about the top management’s visions, its experience, and its street reputation. See if the answers line up with the management’s actions.
U Office support: This will differ from large national firms to smaller local firms. But make sure that critical forms and agreements are readily avail-able. Ask what type of technological support is available and whether you have to pay to use it. And last, find out whether someone who’s more experienced than you is available to answer simple questions.
Living the life of a commercial sales agent
Attending your kid’s basketball games and karate tournaments. Having a lunch date with your loved one on a whim. Taking off on a mountain bike ride mid-week to escape for a few hours. Flexibility and freedom. Potentially, these are all possible after you make it as a commercial sales agent.
But in the beginning, life as a commission-only salesperson can be quite stressful. It can take up to four months just for a deal, from start to finish, to close and get paid. Therefore, having a lot of deals in the works at once is how life goes. Having several months of savings for living expenses and living on
a budget are important for the beginning agent.
Here are a couple of tips that can help in your early days:
U Get a mentor. Having a mentor at this stage of your career is all about exchange. In exchange for your mentor’s time and knowledge, what are you offering? Of course, you don’t have much to offer right now, correct? We recommend putting on your “servant” hat and volunteering to take care of any small tasks that bog him or her down. You can discover a great deal about the inner workings of the business this way. But most important, be a good student. Show up on time. Have a grateful attitude. Be present. Be respectful.
U Get a good grasp of the nuts and bolts of the profession. You should study and become familiar with the fundamentals of real estate law, taxa-tion (including 1031 exchanges), contracts and agency, title, surveys, property analysis, appraisals, financing, zoning and land use, environmen-tal issues, and property management. Knowing the basics of at least these things should give you a little credibility in the field, especially when first starting out.
Most newbies start out by representing buyers or investors. Buyers are easy to come by. Finding properties that fit their criteria will be your challenge, but you can do it. This is how most new commercial agents close their first deals while working on building their client database and planning marketing efforts in the meantime.
314 Part V:Kicking Your Investing into High Gear
After you’re engrossed in the “everydayness” of your new career, you’ll dis-cover that the most successful and highly paid sales agents put a lot of focus, energy, and dollars into two things: leads and listings. These two things keep the commission checks rolling in and enable you to run your business instead of the business running you.
Getting leads and listings
Getting leads and listings are at the roots of success in this business. Of course, the two are related. You can have the greatest sales skills this side of the Mississippi. You can also have the keenest knowledge of real estate negoti-ations (see Chapter 5) and be a master of your market. But if you have no one to talk to (leads, that is), all that skill and knowledge is for naught. The key to generating leads is to go out and capture an audience of interested potential clients who own property and know of others who own. You can’t get listings if you don’t generate leads.
Getting leads and listings starts with studying your brains out to get industry-specific knowledge. Your goal is to attain laser-like knowledge of your area of expertise. If you’re going to work in multifamily properties, you should know the most recent closed sales transactions, whether you closed them or not, and you should also know the going cap rates for your area (see Chapter 3 for more on cap rates). If your area of specialty is in retail, you should know locations, specific demographics, and price per square foot. Market your expertise and know-how to generate leads. You want your leads turned into potential clients, and then into clients, so they need to feel confident in your competence as their advisor and agent.
Focus on becoming an expert in one field. Today, generalists are few and far between because the markets are huge and have a lot of moving pieces. You’ll find that the most successful sales agents are known for one type of asset. This is where they make their names and reputations known. Being a “jack-of-all trades” doesn’t work effectively in this business. Being a specialist does.
After you have your knowledge quotient up, it’s time to focus on a certain geographic territory. In the commercial real estate sales business, this is called farming an area. The theory behind farming is to market your expertise to clients in a particular territory, with the hope that the better you know the territory, you’ll become the territory’s expert, and more leads will come in. Effective farming gets your face known in the territory.
Farming involves sending out strategic and interesting marketing materials such as postcards and market info sheets with your name and contact infor-mation. It is a well-known fact that when a mail campaign is taken on, only
2 percent of the mailings actually result in a lead. Therefore, if you send out 1,000 pieces of mail, you’ll get maybe 20 responses on average. Another part of farming is the dreaded cold call; calling someone you don’t know personally. Cold-calling is a very effective way to generate leads as well as pick up new
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and interesting tidbits of data on your market. The easiest way to generate a cold-call list is to get a list of property owners from a title company.
The National Do Not Call Registry prohibits telemarketers from selling goods and services through interstate phone calls to those consumers who register their phone numbers. This means that you can’t cold-call someone who’s regis-tered on the National Do Not Call List. We urge you to go online to retrieve a list of registered callers, cross-check it against your list, and mark any names that appear on both lists as “do not call.” A consumer who receives a telemarketing call despite being on the registry can file a complaint with the Federal Trade Commission. Violators can be fined up to $11,000 per incident. Go to www.donotcall.gov for details.
Taking your new listing to payday
Hooray! You got your first listing! Here are ten easy steps that can help you take it to closing and get paid:
1. Prepare your marketing blasts for the new listing.
Get your marketing repertoire in full swing — e-mails, mailings, call lists, and subscription listing services.
2. Market-blast your new listing to everyone every which way you can all at the same time to give it maximum exposure.
The more exposure you give the listing, the higher the value you’ll get in return. It’s proven. The more money your seller makes, the happier he’ll be, and the more likely the next listing — or at least some referrals — will come your way.
3. Follow up on all inquiries.
4. Show the property to the interested and potential buyers.
5. The buyer submits a sales and purchase contract. You and the seller negotiate with the buyer and his agents.
6. When everyone has agreed on the terms of the deal, finalize the contract.
7. The buyers go through their due diligence and check out the property thoroughly. Your role as the agent is to make sure that the buyer and seller deliver to each other what the purchase contract calls for.
8. The buyers get approved for their new loan on the property. You should confirm that everything else is on track, such as the title work and contract contingency removals.
9. Closing the transaction is on schedule and will take place in 15 days. Again, your job as the agent should be to make sure that your client has everything he needs at this point.
316 Part V:Kicking Your Investing into High Gear
10. Closing day is here. The closing goes smoothly. Clients are happy. You receive your commission check from the title or escrow company. You’re happy.
Congratulations! Now, do it again!
We know, we know. Selling property doesn’t happen this smoothly all the time, but every once in a while, you’ll get to enjoy a transaction like this.
Being a successful independent broker
At some point in your successful career, you may want to make a go of it on your own and start your own company. You’ll be required to obtain your real estate broker’s license as you venture out on your own. There are obvious pros and cons in becoming an independent broker.
The pros, the way we see them, are
U You’ll have no one to answer to — you get to be your own boss. You’ll have more freedom and leeway in your listings, and you’ll have more control over the quality of your work.
U You won’t have to split any commission fees. That’s huge dollars earned and saved. Say you have a 3 percent commission on a $2 million deal coming to you. That equals $60,000. As an independent broker, 100 per-cent of that comes to you. If you work for a firm, you’d have to give up maybe 10 percent to the firm, and then 50 percent for your broker’s split. So you’d end up with $27,000.
U You probably won’t have to transact as many deals because you won’t have to split commissions.
U As an independent broker, you’ll tend to form relationships with other independent brokers. That’s a good thing because the camaraderie devel-oped favors doing future deals together. After you develop a reputation for smooth closings, other brokers want to do business with you.
But wait, we see a few cons as well:
U You’ll be a business owner with business-owner responsibilities, such
as possibly hiring and overseeing employees, paying for overhead costs, carrying liability insurance, and finding office space to lease or setting up a home office.
U Start-up costs will include office furniture, office equipment, phones, and stationery.
U You may lose a few clients who are loyal to your old firm.
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