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Buying and Selling Commercial Real Estate

Commercial real estate can be a very lucrative business; unlike some smaller-scale residential transactions, you will be closing major deals at high price points. Commercial real estate is also more intricate than residential real estate, with more options for investment and more people involved in the process of purchasing or leasing the property.

Commercial Real Estate vs. Residential Real Estate

Commercial real estate centers on business use or investment in real estate (such as offices or factories), while residential real estate is focused on personal use (such as houses or condos).

The other primary difference between commercial and residential real estate is the client. When you’re working in residential real estate, you are dealing with individuals or families who are looking for a home. They probably have a long list of desired features they’re looking for, but in the end may end up choosing a house for a variety of other reasons, such as look and feel, school districts, commute times, etc.

Commercial real estate clients are normally businesspeople with very set ideas about the type of building, amenities and features they need. There are precise requirements that must be met in order for their business to run properly. Also, businesspeople are more likely to be conscious of budgeting and expenses; therefore, most commercial real estate deals will involve more back and forth, more negotiation and more patience on the part of the seller or real estate agent.

The sales cycle for commercial real estate transactions is also longer, so the time between commission checks may be longer as well. However, commercial real estate commissions are typically higher because properties are larger and more expensive.

Commercial Real Estate Options

Commercial real estate agents are critical for most commercial transactions, and they will typically specialize in one of the following areas:

  • Representing Tenants or Lessees: Agents help people find, select and negotiate a new space for their businesses.
  • Representing Building Owners or Lessors: They negotiate leases on behalf of their clients for the highest possible price and the most favorable terms. Often, a commercial real estate agent represents one owner or one building exclusively until the building is leased to capacity.
  • Representing Investors: They find opportunities for clients that offer the lowest risk and the highest return on investment as well as the best capitalization rate.

Getting Started in Commercial Real Estate

If you are looking to begin your career as a commercial real estate agent, there are some initial steps you must take that will set you up for success.

  1. Get Your License: All agents need a real estate license. Some states require commercial real estate agents to have a specific license, while other states allow one license to cover all types of real estate transactions. An online search should help you determine what specific state requirements you may need to meet. NOTE: Before you can take the test for your license, you will be required to attend classes. Certification requirements vary by state, so check with your state’s National Association of Realtors (NAR) chapter or your state’s licensing board.
  2. Research and Choose a Brokerage: A brokerage firm is the office from which an agent does business. You’ll want to research commercial real estate brokerage firms in your area and find out some pertinent information, such as: how long they’ve been in business, how long it takes to get commission checks, and if there are opportunities to partner with other agents within the brokerage to gain experience and exposure to clients.
  3. Determine if You Want to Be a Realtor or a Real Estate Agent: In order to use the title Realtor, you must join the National Association of Realtors. This will require you to affiliate yourself with a brokerage that has ties to NAR and to attend a certain number of NAR meetings as designated by your local chapter. NOTE: Membership with NAR comes with many benefits that might be worth exploring. It’s a good idea to fully explore all of your options before making a decision.
  4. Decide if You Want to Get Your Broker License: As a commercial real estate agent, you may also want to get licensed as a broker. A broker is able to work for him or herself or for a brokerage firm. A real estate agent works for a broker. If you want more control over your career and your commissions, it might be worth investigating how to become a broker. The National Association of Real Estate Brokers (NAREB) is a great resource for finding out more.

Keep in mind that commercial real estate jobs are harder to come by, and typically brokerages have strict hiring standards. You may need to start at the bottom of the sales ladder in order to gain the experience you need to have a successful commercial real estate career.

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