Years ago, I spent several years working for a prestigious commercial real estate firm while researching for my Dummies book. What I discovered is that commercial real estate agents are a different breed. They're a different breed of people. They're highly skilled but well-respected. Getting to know how they work and function in their jobs is critical in choosing the right one to work with. Don't you agree?
Well, many people like yourself are intimidated by commercial real estate agents. I know I was intimidated. They didn't look as friendly as residential agents. They wore suits always. Their suits were in big buildings, and they seemed so professional, especially the way they spoke. Sometimes the words that came out of their mouth just went completely over my head. Like everything else in life, I just have to jump in. I called them. If I messed up, I messed up. I get a second chance, I get a third chance, and so on, but they had something I wanted: deals. Eventually, I learned how to relate to them, and I prospered. Today I can thankfully say that I have fantastic working relationships with commercial real estate brokers all across the country.
What You Will Learn in This Blog
- Two things I learned in over 20 years of working with commercial real estate brokers
- What you want from commercial real estate brokers
- How to find commercial real estate brokers
- 5 qualifications of brokers that you need.
- Next, how to start working with one, where to begin.
- Why would a commercial real estate broker choose to work with you?
- The two no-nos when working with commercial real estate brokers.
Two Things I Learned About Commercial Real Estate Agents
- They are regular people.
They are no different than the guys at my gym, at my church, and the guys that I ride my bike with on Saturdays. They are regular people with the typical issues of life. They worry about their jobs, their wife and their kids, their health, their finances, and many of them have told me, "Peter, I need to do what you do. I need to have investments so I don't have to rely so much on closing a deal to pay my bills." You see, they're like normal people. The lesson here is don't be intimidated.
2. There's a big difference between commercial real estate agents and residential real estate agents.
Here's the difference, a commercial real estate agent is business-focused. He's business. He's focused on business. A residential real estate agent, their job revolves around the wants and needs of a homeowner and his or her family. You want to know what that means? That means that commercial real estate agents rely less on emotions than residential agents do. They rely more on facts and figures than school districts and cozy streets. You must really understand that if you don't already.
What You Want From Commercial Real Estate Brokers
It makes sense to first understand what your goals are. Why are you looking for a commercial real estate agent, and what do you want from him or her? That's the question.
Here are your goals. Here's what you want.
- You want pocket listings or off-market deals.
That's what we ultimately want. There's deals all over LoopNet and CoStar and other things online. We want the deals that are not online, that are not on an MLS, that are not on LoopNet. We want their pocket deals because those are the best deals. Those deals are going to make you the most money. Those deals don't have the competition that you have with deals that are online. Let's face it, the deals that are online, they've been picked over, and those are basically the left-overs. You want the pocket listings, the off-market deals.
2. We want them to return our calls.
The number one complaint I get from my students is that the agents don't return their calls. We want to work with someone that will return our calls.
3. We want them to provide us information on the current listings.
4. We want enough market data concerning whatever asset type you're looking for, whatever commercial type you're looking for, to make buy and sell decisions.
We rely on them to get us that data. It could be sales comparables, rent comps, demographics information, all of the above. We rely on them to get that information to us.
5. We want to have a sound and professional business relationship.
That's what we want, and that's what they want as well.
6. We want referrals from them to key personnel in the industry, such as property managers, lenders, attorneys, inspectors, surveyors, other investors, things like that.
It's really important because they are in the industry, and the best source of a property manager, lender, attorney, and inspector is by referral. We want to work with someone who is happy with theirs. What you want, pocket listings, returned phone calls, providing information on current listings, enough market data to make buy and sell decisions, sound and professional relationships, and key personnel referrals.
How to Choose a Commercial Real Estate Broker
Here's what I want you to do. Find someone who is happy with their broker, their commercial broker, and ask them these questions about their broker:
"What were their broker's strong points?"
"What were the broker's weak points?"
"Would you use the same broker again?"
After you gain the strong points and weak points from the person who's going to give you a referral, ask the question, "Would you use the same broker again?" If their answer is yes, then proceed to working with them. If not, move on. That simple. Okay, so that was method number one, by referral.
2. Online resources
Just the top 3
Broker's Area of Expertise
Now, here's something that applies to both referrals and online resources. The question is, is the broker's area of focus the same as yours. What I mean by that is most brokers focus on an asset type. For example, I work with an awesome team of commercial real estate brokers here in my area, and if I'm acquiring multi-family appointments, I go to Brian. If I'm acquiring an office building, I go to Bill. Their expertise are in their niches. Brian's is with multi-family, and Bill's is with office buildings. You need to work with an expert. The best thing to do with that is if you are looking for an office building, then you need to focus and ask questions about the person's ability and understanding of office buildings.
Something That's Not Important When Finding Brokers
The thing that's not important is the size of their office. Some of the best firms I work with are called boutique firms. There are 3 guys in the office, and they are the best in that area of the country, 3 guys in the office, and they rule. They rule that city. Just because the firm has 100 brokers or has this amazing marketing and software system, doesn't mean that they're good or they're going to work for you. This is an individual business. It's all about the individual broker. This is a relationship business.
The 5 Qualifications You Need From a Commercial Real Estate Broker
1. The first qualification is you want them to be experts in their niche, in their asset type, and in their location.
2. Excellent communication.
Again, you want to know the biggest complaint I get from my clients and students concerning an agent: "The agent doesn't return phone calls."
3. You need them to be well-connected in their market so they can connect you with other valuable industry professionals.
I can't tell you how many times that I had a great relationship with a broker and he connected me to other sellers, so I can produce commission, he connected me with other investors so I can do more deals, he connected me with lenders that were having problems with their properties I can go and buy. You want someone that's well-connected in his or her market.
4. You want your broker to be full time employed in the business of commercial real estate brokerage.
We want no part timers. We want full-time employment in commercial real estate brokerage. Not in single families but in commercial real estate brokerage.
5. They need to understand your needs
The fifth qualification is really important. I want you to see if they ask you any questions because if a commercial advisor does not understand your needs and objectives first, then it may not be a good fit. I don't know what's more important, having an expertise in a niche and location, or this one, to see if they understand what you need first. Okay, it's a toss-up between the two.
How to Start Working With a Commercial Real Estate Broker
1. First define what exactly you want them to send you.
Let's define that first. I'm going to define it for you. If you are in the apartment business, I'm going to tailor this for the apartment investors out there. Here's what you want. When you first start working out with a commercial real estate broker, this is the first phone call, and you introduce yourself, and they ask you, "What is it that you're looking for?" Here's what you say, "Mr. Broker, I am looking for B and C class commercial properties," or you can say, "I'm looking for B and C class multi-family or apartments within a price range of $500,000-$2 million, and I want it to be in the downtown market."
That's it. You gave them 4 things. You gave them the class, classification of properties, the type of properties, you gave them the price range, and you gave them the location. That's it. Give them no more information. Don't talk cap rate or ROI initially because both of those are pretty subjective. I want you to resist talking about cap rate and ROI. If you tell them you're looking for an 8 cap deal and they're located in a 5 cap market, guess what they would do. They would never contact you again. Do not talk cap rate or ROI.
2. Jump in.
That's right, I want you to jump in feet-first. Stop over-analyzing and start analyzing deals. You know who you are. Stop procrastinating. Give the agent feedback after you analyze the deal. That's how they're going to get educated from you, is by you giving them feedback in what you like and what you don't like. How to begin working with them? Make the call, jump in feet-first, and stop over-analyzing. You don't need to know everything or be the expert. You don't have to read my book 7 times to call him. Read it once or twice, make the call.
Why Would a Commercial Real Estate Broker Choose to Work With You
I know that this is about you choosing to work with a broker, but it goes both ways. Why should he or she work with you? The question is, "How can you position yourself so commercial real estate agents want to work with you?" What I did was I asked one of my broker buddies who's one of the best in his market, and he's very successful, does transaction after transaction. He is so well-known, and here's what he told me when I asked him. I asked him this question, "Hey, could you give me a few attributes that you look for when choosing to work with a client?"
He told me 4 things.
- He said he wants you to be responsive when he calls you.
Aha. Interesting, huh? Interesting that that came out of his mouth first because remember the biggest complaint that we get from brokers is the brokers don't call back. He's asking you to be responsive when he calls you. I wonder if those two are connected. That's the first thing he wants you to do. He wants you to be responsive.
- He wants you to make a commitment to work with him.
If he's going to put in the work and bust his butt and get in there and fight and bringing you deals, he wants you aboard. He wants you committed to working with him and not just treating him like 1 of 10 brokers.
- He wants chemistry.
He wants chemistry, and what he means by that is he wants a productive relationship with you. He wants to work with people he likes, so you need to be enjoyable. You need to say what you do and say what you do, and return his phone call.
- Here's one thing he didn't say and it may surprise you. He didn't say he wants a client with deep pockets and lots of cash
He didn't say that. He didn't say he wants a super-wealthy client. In our conversation, that wasn't even mentioned. What's most important to him is for you to be responsive, committed, and relationship-focused. That's why a broker would choose to work with you, being responsive, you committing to him, and being relationship-focused. Got it? All right.
Two No-Nos When Working With Commercial Real Estate Brokers
- If you are a beginner, and I'm emphasizing beginner, do not sign exclusive representation agreements
Again, I emphasize beginner. These agreements mean that you are signing a piece of paper that's going to lock you in working with that broker in that area. If you signed a document and the broker is a horrible broker who brings you no deals, you are locked in for that time period. If you buy anything in that market, you have to pay him whether he helped you or not. Me, as an experienced person, I can sign these all day long because I'm experienced enough to know if I want to jump into this relationship with them. I can get a feel for their track record, the type of transactions, I can get a quick feel for if we have chemistry because I've been doing this a long time, but if you're a beginner, my advice to you is do not sign any exclusive representation agreement because in my experience as a beginner, it does not work. You're just going to get trapped in there.
2. Stop Procrastinating.
Call a commercial real estate broker today, right now, right after reading this. Call him. You don't have to have all your ducks in a row. You don't have to have all your financing ready to go. You don't have to have perfect credit. You don't have to have a down-payment ready to go. No beginner does. Yes, you make mistakes, and that's okay. You get a second chance.
Let me end with this. In the end, we only regret the chances we didn't take. Isn't that the truth? Get out there today and get busy created relationships because they have what you want, and choosing the right commercial real estate broker is what it's all about, choosing the right one.