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.