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5 Steps I Took To Morph From Residential To Commercial. Guest Post Jim Baker.

Five Steps I took to Morph from Residential to Commercial by Jim Baker, CCIM, GRI

1. After selling my interest as a partner and managing broker of a residential real estate company and having worked solely in residential real estate for almost 10 years, I started making the change from residential to commercial by moving my office into the office building of a local real estate investor so that we could work more closely together. We made a few investments as partners together, but mostly I watched what he did and tried to find ways to either represent him in some of his purchases or to find tenants or users for his properties.

2. I was advised by a friend who had recently received his CCIM designation to enroll in CI 101 and to begin working towards the CCIM designation. CI 101 was the most eye-opening course I had ever taken up to that point in my career. I advise anyone who is thinking about making the change from residential to commercial to first take the CI Intro course and CI 101 before deciding to commit to a career in commercial real estate.

3. Soon after I started working towards the CCIM designation, I became an investment partner with another seasoned investor who was also a commercial building contractor. During the next several years he and I purchased several properties together. As an owner of commercial investment properties I learned about the affects of taxes, cash flow, NOI, commercial construction intricacies, site selection, location analysis, demographics and other invaluable lessons that I wouldn’t have learned if I had only been the broker for the transaction.

4. I became active in several regional commercial real estate organizations and frequently networked with other brokers in my MSA. These were groups such as the state’s CCIM chapter, a real estate IRC 1031 exchangers group, the state’s commercial board of Realtors, our regional CIE (Commercial Information Exchange), as well as local economic development organizations such as our area’s chamber of commerce (BTW: it is important to note that unless you are a “commercial only” practitioner, the other CRE brokers may not take you as seriously and sometimes may be a bit contemptuous and/or disrespectful in their attitude towards you).

5. Lastly, until I completely removed myself from residential brokerage, I didn’t truly understand how the business of commercial real estate works. Now you may be wondering why I have put this in bold and underlined this point. This is the most important point I can make to you about making the change from residential to commercial. To become a successful commercial broker, I believe that you have to fully immerse yourself in commercial real estate and leave residential brokerage behind…forever! It has taken me several years to appreciate this fact. I am just now becoming comfortable with how things work in this industry and I am still learning new things every day. It wasn’t until I completely let go of my residential practice that I started understanding how the commercial real estate brokerage business works. It was like going from selling automobiles to selling/leasing airplanes (notice that I also put “leasing” which is something that most residential brokers don’t understand very well or at all).

Please understand that I don’t want to sound arrogant about the change I made. There were many good and worthy things about the work I did and that others now do as residential real estate practitioners. I also believe that there are many hard working and competent people in that industry. I admire them for the professional work they do and sacrifices they make to serve their clients. But residential real estate requires a special dose of patience and perseverance that had run its course with me. It also requires an special expertise, professionalism and ability that most commercial practitioners don’t have or strive to possess.

Commercial real estate brokerage isn’t easy either and requires a lot of focused energy and attention, plus longer time and financial commitments. There are often extended periods between closings and receiving fees. I like tell people that commercial real estate is like growing oak trees. Being a successful commercial real estate broker takes a lot of patience and perseverance too!

Finally, I would like to give you what I see are the major differences between these 2 industries by looking back at my residential career and comparing it to my current commercial real estate career. Here are some major differences I see in comparing the 2 career choices:

Residential Real Estate Brokerage                          versus                Commercial Real Estate Brokerage

1. more frequent, but usually smaller fees                                              less frequent, but usually larger fees

2. more emotional in client decision making                                           more rational “numbers” based decisions

3. more female dominated industry                                                         more males, but that is slowly changing

4. values dependent on client’s income                                                     values based on property’s income

5. 24/7/365 with immediate responses expected                                      business hours with slower responses 

6. requires different expertise: GRI, CRE, ABR, etc.                                  CCIM, SIOR, CPM, etc.

7. primarily focused on 1 product type: res s/f                                        multiple types: retail, office, industrial, etc.

8. different due diligence required                                                             due diligence: environmental, zoning, etc

9. frequent “cross sales” with other brokers                                             most sales do not involve outside broker

10. different listing platforms & marketing                                               CIE’s not MLS’s, signage is VERY important

11. financing: quicker closings, less complex financing:                            usually longer, more complex

12. marketing times and listing periods shorter longer                             listings and marketing times usually

These are definitely not the only differences and I am sure that I have left something out on my list, but this should give you some ideas of what to expect if you are thinking about a career change from residential to commercial.

Make sure to get as much advice as possible from CRE practitioners that you know and trust and also make sure that you are financially ready for the commitment that this change will require. This change could, and most likely will, involve a loss of income to you for an unpredictable period of time while you learn how to navigate and succeed in the CRE industry.

Finally, if I had to do it over again, I would have made the change much sooner and would recommend that you make the change sooner rather than later.

Best wishes in your future career and please let me know if I can ever be of assistance to you in whatever career path you chose.

Jim Baker CCIM,GRI

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  • Don Sebastian, CCIM

    Great advice Jim! Thanks Duke for sharing!

  • James E Pass

    Thanks this excellent start for person who wants to work CRE

  • NWB

    This article is terrible. Please don’t associate real estate investing with this idiot.

    • Wade Turner

      I am curious about your opinion, you references the gentleman as an idiot. Could you please give your soon on the topic.

  • Melanie

    I’m new to residential real estate; have transitioned out of teaching. A friend recently approached me about introducing me to a commercial realtor friend. I wasn’t sure about the difference. I’m now more intrigued. Thanks for the information.

  • Scott Ticknor

    Great advice, commercial has always been an interest of mine. Had opportunity to learn on one sale. This was a great eye opening article.

  • rsky1

    Exactly how I did it…except only 5 yrs of residential, then residential development then commercial. I agree on CI 101 as an eye opener. I also think items #3 & #9 are changing in our marketplace.

  • B

    Nice article. Any advice for someone switching from being a purely residential to a comercial investor (brokerage aside)? What are the best steps to become educated?

  • Great post! Your points are right on. I’m going through the transition as we speak. I took the CCIM intro, now on to the C101. If I knew then, what I know now…

  • Great post! Your points are right on. I’m going through the transition as we speak. I took the CCIM intro, now on to the C101. If I knew then, what I know now…

  • Victor A. Ceja Jr

    If you do decide to do commercial, make sure you have a GOOD mentor to work under, because in this business; especially as a newbie in commercial it will be a lot tougher for you if you don’t have the experience of a Senior Commercial broker/agent helping you at first.

    I am new in the biz and have learned A LOT from my mentor. Eventually you will be able to go off on your own. Do NOT make the mistake of trying to do it on your own at first because clients/brokers will not take you serious and can sniff out a newbie!