Commercial Real Estate investing requires working with the right Commercial Broker to reach your investment goals.
The following Five Key considerations will determine if a broker will
bring you a stream of quality properties you are looking for and makes
your business their priority.
Key consideration number one: Do your due diligence.
Start
by doing the same kind of Due Diligence on your Broker Candidates as
you would on properties themselves. This will increase the probability
that the broker you choose will be the right broker. Make sure you
create a guideline containing your specific goals and needs to qualify
your broker candidates. I research the agents that I will potentially
be working with. I read their brochures, promotional literature,
websites, past closings, etc so I can cross reference credentials and
history with other brokers in the marketplace. Remember, choosing the
right Commercial Real Estate broker can potentially net you millions of
dollars worth of time and money.
Key consideration number two: How long has the broker been in the business?
There
are many brokers who cross over from Residential Real Estate into
Commercial Real Estate in an effort to "make big money". What they fail
to realize is that Commercial Real Estate is more than just selling or
buying real estate. It requires an ability to understand and interpret
profit and loss statements, rent rolls, third party contracts, and many
more specific documents that are involved with each transaction. It's
more than just writing up a contract. If your potential broker can not
figure out the Net Operating Income of a building or can not tell you
what the debt service coverage ratio is, then you need to keep looking.
Key consideration number three: Have they kept current with changes in their profession along with market changes?
Ask
the commercial real estate broker about his or her credentials,
certification and education in terms of selling commercial properties.
Your Commercial Real Estate broker may have years of experience but they
also need to be able to adjust to new selling or buying methods. If
your broker is not in the loop about the newest trends of investors
buying pools or how new technology is affecting the market trends, you
may potentially lose out on a property. I never deal with brokers who
have some commercial experience, it is important to know who you are
working with in terms of their familiarity with the type of investment
you are considering.
Key consideration number four: Make it a point to get to know the broker's staff.
It
is important to ascertain the competency of their staff to see if your
deal will be handled with professionalism and efficiency. The right
broker will have key employees that have a wealth of knowledge about an
area and the ability to make a transaction smooth. Things to consider
are: Who do they know that will help me build my team? What type of
relationships do they have in the industry? Do they maintain broad
relationships that can assist me in developing market contacts?
Key
consideration number five: Most of all, make sure the broker is loyal
to your needs as an investor and is not in a conflict of interest.
A
broker with a fiduciary interest in a property is incapable of putting
my needs first. I am very careful to deal with business ambiguity up
front in all contractual relationships and will work with someone based
on their their loyalty to me being their first priority. Pay particular
attention to how fast they return telephone calls after meeting. This
may sound insignificant, but it says something about their
professionalism and the way they do business. First, a broker will have
information about the market that you will not, especially if they have
worked in the area for an extended period of time. I have worked with
brokers that have sold the exact same properties a number of times. They
were able to give me history about building conditions and ownership
that I was unable to get from other sources.
Interview as many
brokers as needed to make sure they are a good match to do business. The
right broker will find commercial properties that meet your investment
and business criteria. In the long run this is a business relationship
that grows over time, so make it a point to nurture this relationship.
Clarity about your investment criteria will help reduce problems finding
the right broker. Some resources that can help you begin your process
would be The National Association of Realtors, recommendations from
other investors, checking professional periodicals online and off,
investment associations, and word of mouth from trusted allies.
SUMMARY:
-Choose your Broker carefully - do your due diligence here too
-Make sure they have specific Commercial education and experience
-Know the way they work and the times needed from contract to close
-Be clear on the properties you are looking for
-Make sure the Broker is always working in your best interest
-Evaluate their staff in the same way you do the Broker
-Close when you say you will - so they get paid
-Take good care of your relationship - it will get more and more valuable over time
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