Becoming a Commercial Real Estate Agent: An Overlooked Opportunity
Specializes in providing actionable insights into the commercial real estate space for investors, brokers, lessors, and lessees. He covers quarterly market data reports, investment strategies, how-to guides, and top-down perspectives on market movements.
While we write about all slices of the real estate pie, we do have a soft spot for commercial real estate agents, out there in the trenches day after day and helping investors find properties to purchase. Of course, we can’t overlook the fact that CRE agents also list properties for sale with our free commercial real estate search engine; we’ve been on the other side of the table watching them take care of business.
Let’s dive in and see how it’s done. In the right hands, becoming a commercial real estate agent is an overlooked opportunity.
The CRE industry is huge, and it has a lot to offer real estate agents. The clients typically can tap higher levels of financing, and they often become repeat customers in a shorter period of time than their residential purchasing counterparts.
What is a commercial real estate agent?
We might be getting ahead of ourselves by assuming that you know what commercial real estate agents do, so let’s back up just a moment. These agents have a big job: they have to handle the leasing, managing, and sale of properties. That sounds straightforward, but the world of commercial real estate is vast. Agents have to know a little bit about a huge amount of things.
Stage fright? Fear of public speaking? Leave it at the door because you’ll do a lot of talking between mortgage lenders, property owners, accountants, lawyers, appraisers, and just about everyone in-between.
How do they get paid?
As you might imagine, the commercial real estate agent is paid on a commission-only basis. The commissions are paid out by the owner at the time of closing. The listing agent gets paid, and the buyer’s agent gets paid. Generally speaking, you will be either the listing agent (helping the property get sold) or the buyer’s agent (helping your buyer pick up the property).
Your commissions will be split between you and the brokerage you’re working with. Real estate agents cannot work "independently" without a broker; part of getting access to the brokerage’s resources includes having to give up some of that commission.
Purchases
When it comes to commercial deals under a million dollars, the percentage typically ranges between 4% and 8%. Everything is disclosed ahead of time, so you know your numbers to make the best decisions possible. When the property prices shoot past the $5 million mark, your commission percentage can go down due to the big price tag on the property.
Leasing
With purchases, it’s fairly easy to see what you have to work with. With leasing, it can get trickier. It’s about the property’s comparable value, not the sales price. So let’s say that you work out an agreement for your client to sign a lease with a tenant. The tenant will pay $10,000 a month for the retail space over the span of five years. Your commission is based on the property’s comparable value of $600,000.
Agent Requirements
Before you can join a brokerage as a full-fledged agent, you have to make sure that you have the licensing under your belt. For most states, this is going to be taking the real estate agent salesperson course and the corresponding exam. You have to be able to truly understand the laws regarding real estate in your state.
Once you pass the exam, you’ll have ongoing fees to consider, including fees paid to the brokerage that will ultimately sponsor you. Every brokerage is different, but every agent has to belong to a brokerage in order to conduct real estate transactions.
Advantages of Becoming an Agent
There are plenty of advantages to becoming a commercial real estate agent. If you’re working out a few of the advantages for yourself, here is a list of the pros to consider:
- Time freedom. Are you tired of punching a clock? This is a great fit for you then, as being an agent is about setting up your own schedule.
- Uncapped income potential. The sky is the limit in commercial real estate, and the more entrenched you get as an expert, the more potential you have to make good money.
- Deep connections to the community. Real estate agents, residential and commercial alike, are deeply connected to their community. If you want to become truly visible in the community, becoming a commercial real estate agent makes that happen.
Of course, everyone will have to consider their own desires behind becoming an agent, but these advantages do make the idea of switching careers quite appealing.
Disadvantages of Becoming an Agent
Just as we encourage you to make a list of advantages, we have to also touch on the disadvantages of becoming a commercial real estate agent. Here’s that list for you below:
- No safety net. You’re paid on commission, but if you don’t close on any purchases or handle any leasing agreements, you’re not making any money.
- Lots of hours. You have to be available to your clients, which means that you don’t have a typical 9-to-5 schedule. If a client needs you to go over things at 11 pm? You’ll have to pick up the phone and handle it.
- High competition. The truth is that everyone wants to be an agent, and hanging up your shingle isn’t enough to turn into a top agent.
Becoming an agent isn’t a decision that you’ll want to make lightly. This is also not a career that is free to start; you’ll have to treat your real estate agent activities like a business, which means putting in your own money to get things moving.
Considerations for the Future
If you’re looking for a career that truly taps into your entrepreneurial spirit, becoming a commercial real estate agent is definitely an option. This career path puts you directly in the driver’s seat, so it’s important to take stock of your talents and your ability to network. An agent is a very visible member of the community, and you’ll have to leverage not only your current network but also expand it in order to build a viable career.
An agent that focuses on commercial real estate is going to have to be incredibly knowledgeable of the commercial market, not just the residential stuff. Thankfully there are multiple publications serving the CRE market that you can use for research, such as Commercial Observer.
Bet on yourself; your next career as an agent may be more in your reach than meets the eye.
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