Why aren't there any commercial real estate wholesalers?
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Real Estate Broker · Canton, GA · Member since 2010 · 15k+ posts · 11k+ votes
3yBecause most owners of commercial properties are highly seasoned and have net worth of 8 or 9 figures and the ones who DO NOT often have counsel from very experienced people in the business to guide them properly when they want to sell.
Commercial is more relationship driven dealing with higher numbers millions to tens of millions or more.
Wholesalers might occasionally get a smaller commercial property but often at inflated prices.
Experienced sellers can see through the wholesalers GAMES. I have had hundreds contact me over the decades pitching properties at crazy prices. It's easier to tell other brokers what I want and they go find it for me. I buy value add NNN for cash typically and reposition.
39 Replies
- Real Estate Broker · Minneapolis, MN · Member since 2011 · 5k+ posts · 6k+ votes3y
Quote from @Scott E.:
Quote from @James Hamling:
In my experience on all sides of the table I can confirm this is a very true axiom, that opportunities first get filtered through a Brokers internal buyer/sellers, and then through internal agents networks, and after that, hit the open market, most often.
While it can be hard to "get-in" with these Brokers, one idea could be to connect with a most junior agent on a commercial brokers team. This may seem counterintuitive but, they are an "insider" to that group and gain a bit of empathy-points. They will have less of an established network and thus your business and connection is of higher value points.
Next would be specific to having acquisition interests. I would go into a "big brand" brokerage who does "dueling banjos" such as KW that has a retail and commercial division. Very literally walk-in. Strike up that your looking to do some purchases of ___ in ___ area but, struggling and need that leverage to make it happen, and who can you talk to about this right then and there today. Answer should be of some certain names "but" there not in, that's what you want to hear because follow-up is who CAN you talk to then and there. Ideally this is part of the Brokerage Executive staff, such as Brokerage recruiter. Because here is the thing, that person knows everyone, intimately, and has some "juice". You just want opportunity to talk and connect on a human level, gain some rapport. And ask for there assistance, explain your struggles, trying to "break-in" and get a seat at the table. The goal is that this person will go to those and argue your plight. Sympathy works, it does.
Lastly would be finding an agent who is newer, green, but full of pizz and vinegar, who is ready to overcome lack of experience with super-human level effort. Again this is acquisition based. A person who is going to be "on-it" knocking doors, calling, just on it non-stop to dig up opportunities BUT is under some kind of team or brokerage where when he does land something and it's beyond his capabilities on contract side, he has those Broker resources to lean on to help hand-hold him through it all.
Maybe consider a "Your Price, My Terms" approach. Just to kick open some doors, to get conversations going. This telegraphs your more then liquid and not just looking to bottom-feed, and when review potentials and kick back what is realistic and viable, it shows your serious and savvy. Remember, NEVER say "NO" to any deal, that's a huge mistake. Take "no" out of your vocabulary, replace it with "This is how YES". Someone asks a crazy price, counter offer with how it become a yes. Always be offering, that's how it's really done.
I get asked how I do what I do, this is one of my commandments, I don't have a "no", "no" = yes by other means. You have to always be seeking for how "yes" is achieved. It's a treasure hunt.
@James Hamling Great advice. It's funny you mention finding a junior broker or one that is more "green" because the one team that I do have looking for commercial deals for me actually delegated all of the "grunt work" like door knocking to one of the newest brokers in their office. He's a real go-getter so I was never bothered or offended. But now I have a new perspective on building the relationship with him, and others like him at other brokerages in town.
One thing is for sure, the investors and developers in town who have been buying deals for 3-4 decades are eventually going to want to slow down. Or they will be forced to slow down due to old age. So the relationships that I build today as a 36 year old will help me to become one of these developers that I aspire to be when I'm up there in my 50s and 60s.
Thanks for the perspective. I still have a lot going on in my residential business but 2023 is going to be a shifting year for me. I'm going to be walking into a lot of commercial brokerages and building rapport! And will be saying yes a lot more too!
- 3yAdam BartomeoBusiness MemberReal Estate Broker · Cape Coral, FL · Member since 2015 · 2k+ posts · 1k+ votes
In most states wholesaling is considered illegal because in order to broker real estate you need to be licensed. There are some gray areas. In Florida, one of those gray areas is having the "means" to purchase the property that you are wholesaling. Most wholesalers do not have the means to pay their credit card bills not to mention purchase a multimillion-dollar real estate investment. They could be found guilty of a 3rd degree felony. Why take the risk???
I have said in so many REA Meetings... just get your license and wholesaling becomes legal. So, commercial brokers are wholesaling... LEGALLY.
Also, as the owner of a multimillion-dollar property do you think that I would be willing to have some boob wholesaler go under contract with me without verifying that they have the means to close? Absolutely, not... You are not dealing with an uneducated homeowner that knows nothing about real estate. You are normally dealing with an individual who knows a good bit about how the industry works.
Bartomeo Property Management4.7156 Reviews - 3yJay ThomasPro MemberReal Estate Agent · Houston, TX · Member since 2021 · 1k+ posts · 715 votes
Wholesalers may try to sell commercial properties at inflated prices, but experienced sellers can easily see through their games. I have had hundreds of wholesalers contact me over the decades with pitches for crazy prices. It's much easier to trust a seasoned seller that has been in business for many years and knows how to properly guide owners when they want to sell their property. Commercial real estate deals involve larger sums of money and require a deeper understanding of the industry, so it's important to work with someone who has expertise and experience in this space. Working with a seasoned seller will ensure that you get the best deal possible and have a smooth transaction.
Working in commercial real estate can be rewarding, but it's important to understand the nuances of the industry before making any deals. Doing your research and finding an experienced seller to guide you is key to ensuring successful commercial transactions. With the right guidance, you'll have peace of mind knowing that you are getting the most out of your investment.
Quote from @Scott E.:
Quote from @James Hamling:
There is TON's of them out there. There called "Agent" or "Broker".
I don't know why there seems to be this misconception that a wholesaler is anything but an UN-licensed R.E. agent, but that's the reality of it, Wholesalers are just a different kind of R.E. Agent. And in VAST majority, a kind of agent MUCH less beneficial for the seller.
once upon a time, not long ago, "wholesalers" were those who were master of the lead generation. They would dig things up an investor would say "well how in the heck did you get this one?". AND a wholesaler would walk the investor through the mechanics of the deal, because they had all the contracts set, every detail wrapped up and packaged with a nice little bow on top.
Today, "wholesaler" is dominated by clueless persons doing nothing special, often regurgitating another "wholesalers" deal who regurgitated another's and another and another, and not a 1 of them with any kind of deal construct, and each expecting a $20k+ payday, disregarding the deal being $100k over-priced.
"Wholesaler" has been ruined by the masses. And thus, intelligent persons knowing this, they have no interest dealing with a low quality, poor performance, "wholesaler". They have a ready made resource called "Commercial Agent" who does, literally, EVERYTHING a wholesaler says they can do BUT they are (a) licensed, (b) insured, (c)get's MORE for the seller, and (d) does all this for LESS.
There is simply no marketable interest in commercial for "wholesalers" which, the REALITY of "wholesalers" as a definition today is "Really poor quality, performance, results NON-licensed agent who does way less for a LOT more".
More and more good "wholesalers" are getting licensed, making a full business out of it. AND good agents are getting into the "wholesaler" aspects. Put yourself in a sellers shoes, why on earth would they ever choose some no-name "wholesaler" vs the licensed pro who is KNOWN, delivers everything that other promised and more, for less?
"wholesalers" still work to some extent in residential solely because of consumer education. In short, they buy the BS, there mor easily influenced. A Commercial owner, there education level is way higher, there commercial holdings are proof of such. And thus, not so easily "corn-swageled".
I get it, I know many chasing there "golden ticket" via "wholesaling" will reply saying how mean and nasty I am, there book/Guru program told them ___. I don't care, I-DON'T-CARE, this is REALITY talk. There is very literally nothing a "wholesaler" can offer a seller today that agent's do not, nothing. Sell as-is, happens every day now, nothing new. Complicated deal, yup we call that a Tuesday. Cash buyer, ok, how many you want, we got em in spades. This is not '09', the world has changed. R.E. agents/brokers now have ALL tools, options, networks readily available.
What your really asking is why isn't there anyone sending you a daily e-mail blast of commercial property deals at 70% of market value. Because there isn't that many idiots who own commercial real estate.
Great reply. Thank you for your perspective. I've bought a few residential deals from wholesalers over the years but generally I agree... 99% of what I receive from them is absolutely garbage. Probably more like 99.5%.
I acknowledge that the commercial real estate scene is a group of business people who are much more polished, sophisticated, and high net worth (compared to residential). Which I think is largely why it has been so hard for me to break into this circle. The 2 deals that I mentioned in my original post, I bought through the same broker out of Tempe. This broker now sends me "deals" pretty often, because I have performed for him twice now. Unfortunately though, his brokerage primarily focuses on a part of town that I'm not interested in buying.
I'm actually not looking for a daily e-mail blast of commercial deals at 70% of market value. I'm willing to pay retail or close to retail for properties in 'A' locations. What I'm trying to figure out is how to be the person who is sent those deals. Because as I've learned, the good ones don't seem to ever make it to the open market (loopnet, crexi, etc)
Scott,
You have enough experience already to have credibility. The problem with most brokers is that they are focused on listings and not so much the buyer. It's just human nature to take the easy road and market the heck out of the listing. Now to be fair brokers deal with a lot of tire kickers so It's hard for them to take every buyer serious. The really good ones will work both sides of the fence. Out of 20 brokers you talk to you might find one that is a true buyer's broker meaning they actually spend the time following up with you. Like you I am an investor in Retail A locations. I would say that I have closed 1/2 of my deals with brokers that found me what I was looking for and the others I found online by myself. The other option for value add is to do it yourself by approaching potential sellers directly via the phone, snail mail, or knocking on doors on main street USA.
- Rental Property Investor · Boston, Massachusetts (MA) · Member since 2016 · 2k+ posts · 2k+ votes3y
agree with above and...math. Lots of residential real estate is sold on hope. When the numbers get bigger and the whole thing gets more professional the numbers simply have to work.
- 3yRonald RohdePro MemberAttorney · Dallas, TX · Member since 2016 · 5k+ posts · 2k+ votes
Quote from @Jonathan R McLaughlin:
agree with above and...math. Lots of residential real estate is sold on hope. When the numbers get bigger and the whole thing gets more professional the numbers simply have to work.
and you also can't waste time while under contract. You need to be shelling out money, ordering reports, reviewing documents, etc. 60 day DD goes fast if you're not the end buyer.
- 3yPaul MoorePro MemberCommercial Real Estate Fund Manager · Lynchburg, VA · Member since 2015 · 1k+ posts · 1k+ votes
Hi @Scott E.! Great question and you stirred up a lot of comments here. Great job!
This is certainly something that can be done. About a decade ago, my multifamily mentor partnered with a number of his students who essentially wholesaled apartment deals to their firm. It worked like this: the student found a deal and did initial due diligence. The student brought the mentor in to conduct formal due diligence and the partnered together to make an offer on the property. If the property was successfully acquired, the mentor would keep the student in on the deal with a pre determined ownership slice. Rather than getting a wholesale fee or commission, the student got his name on the deal with no debt. The student also got great experience and was able to stay in the deal over the long haul.
I know this isn't exactly wholesaling. It's more of a deal finder path to commercial real estate ownership. I talked about this in some detail in my BiggerPockets book Storing Up Profits on self storage. I spent the last 1/3 of the book in fact discussing 7 different paths to get into commercial real estate investing and this was one of them.
That said, I did wholesale a $4 million mobile home park once and it went very well. So it can be done!
Quote from @Paul Moore:
Hi @Scott E.! Great question and you stirred up a lot of comments here. Great job!
This is certainly something that can be done. About a decade ago, my multifamily mentor partnered with a number of his students who essentially wholesaled apartment deals to their firm. It worked like this: the student found a deal and did initial due diligence. The student brought the mentor in to conduct formal due diligence and the partnered together to make an offer on the property. If the property was successfully acquired, the mentor would keep the student in on the deal with a pre determined ownership slice. Rather than getting a wholesale fee or commission, the student got his name on the deal with no debt. The student also got great experience and was able to stay in the deal over the long haul.
I know this isn't exactly wholesaling. It's more of a deal finder path to commercial real estate ownership. I talked about this in some detail in my BiggerPockets book Storing Up Profits on self storage. I spent the last 1/3 of the book in fact discussing 7 different paths to get into commercial real estate investing and this was one of them.
That said, I did wholesale a $4 million mobile home park once and it went very well. So it can be done!
Thanks for chiming in Paul! You've given me a last minute Christmas gift idea (for myself LOL). Texting the link to my wife, something tells me I'll have a copy in my stocking.
I love the structure that your mentor had with his students. This seems like a much more practical way of "wholesaling" commercial. As you said it's not exactly wholesaling but it's the same concept of finding off market deals and then being given a "finders fee" if you find one that fits your investors criteria.
There's a young guy in town who wholesales a lot of residential, he's good at it. I should have a conversation with him to see if he'd be open to pursuing commercial with a similar structure where I give him a slice of the deal if he brings me something worthwhile.
- Investor · New York City · Member since 2020 · 164 posts · 75 votes3y
There are some commercial wholesalers. We closed a self-storage deal through a wholesaler earlier this year, and we've negotiated with several others on commercial properties.
But, I agree with others in this thread that broker relationships are more important in commercial real estate than residential real estate. Brokers are the gatekeepers of commercial deals!
- Investor · Cincinnati, OH · Member since 2018 · 136 posts · 87 votes3y
This is a great topic of discussion as I've been wondering the same thing myself.
I definitely think it's an untapped area, but there's definitely challenges and different nuances in commercial versus residential. From a residential perspective, it's certainly a easier point of entry (ie. less EMD, simple marketing, less sophisticated, less time). With that being said, when we're looking at commercial properties there's a LOT more due diligence that goes on that many 'wholesalers' lack and a lot more moving pieces (ie. capital, lending, etc.).
@Scott E. Hi Scott, My husband and I are investors in the Valley and I recently became a commercial agent. We have a few properties that we are thinking to sell so perhaps you or potential buyers would be interested... please send contact me if interested. thanks!
I have a different answer to this; I started my real estate business in 2004, residential of course. I was a "wholesaler" but back then, wholesalers took title and had to be GOOD at getting an off market deal, bargain priced. I bought all the courses that taught you how to do this with no cash of your own, trying to do simultaneous closings, double closings, finder fees and of course the infamous contract assignments.
Those all work, but I always ran into credibility issues with even resi sellers. They wanted to see the cash in a bank account or statement. So I did what most serious new investors eventually do and learned how to get private money debt partners and equity partners. That changed everything and my business grew very fast.
NOw I could confidently pay cash for a property, take title, and then wholesale it as the owner, and this is how I ended up propsering in real estate. I became good at finding deals through off market channels and marketing, but I was a real buyer with money now. So was I a wholesaler? Thats what we called ourselves back then.
This stuff today with these tricks and paper shuffling to me is not wholesaling, you might as well follow others' advice and get your realty licence because that's essentially what you are doing, why beat around the bush? Nothing wrong with being an agent, but like others have said..an agent will have way more resources, credibility, for commercial real estate.
If you raised money and portrayed yourself as a professional investment firm, kind of like a mini hedge fund, and networked with owners and professionals, and end up getting a deal because now you're a real buyer with money, and you flip that property to another outfit or individual at a large mark-up..that's what I always considered wholesaling.
The problem with all of this is, commercial owners are smart, commercial buyers are smart, very smart and will see through BS immediately.
So a buyer may see what you're doing, but, if you got a really good deal, and it has re-positioning opportunity, value-adds, then they will buy.
What I want to say in short is; you can't fake it in commercial, you got to have the cash, and if you don't own any cash, become a syndicator for wholesaling, if you can make it rain by finding off-market properties, there's money looking for that, including an end -user.
But like Joel Owens said; this isn't 2009 anymore, I was in it and remember it all, it was a unique time, that's not really happening now, and I don't see it happening again. I ignore the gurus claiming the CMBS is about to explode again and all these commercial deals will flood the market, that's not how it works in our current reality, banks are not stupid, nor are the owners; the banks will work with owners that have those loans and modify them to stabalize the asset.
Last note; I will say this, Wholesaling small commercial properties can work. small apartments, retail, 5-15 units, etc is abundant out there, lots of mom and pop owners.
But once again, when I say wholesale, I mean taking title at $200,000 and re-selling to a cash investor (end-user or rehabber) for $235,000. Way easier than trying to shuffle paper and pretending you have the cash to close.
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