Hi BP Community! I am new to commercial investing and would love to hear how you found your trust worthy commercial real estate broker in your area and how you were able to establish win-win relationship.
A great way to find a trustworthy broker is to just cold-call a few in your local area. You will connect with some people, while others you will not want to work with. That's alright! Just find one you look and you two have a good connection...BUT make sure he does still work hard for you!
You can also mention that you are and investor so he can receive a double commission for buying and selling with you. You may also be aiming to purchase multiple properties!
Great advice from @Etienne Martel . I will add that the commercial world can be highly fragmented and dependent on product type (office, industrial, retail, multi-family and capital markets).
You will find most success if you have a strong idea of your goals and find the broker who operates in that space. For example "I want to buy a 100 unit apartment complex" couldn't be more different than "I want to buy a medical office building". Both are commercial but would be vastly different brokerage communities; you will also want to consider geography. For example my local industrial market in Seattle is split generally into three distinct submarkets: Seattle, Kent Valley and Northern Submarkets (Everett, Arlington etc.) and brokers will generally specialize in one area. Finding the right commercial broker who knows the product type, landlords, investors and tenants in your desired area will boost your probability of success greatly.
You could call any major (or minor) commercial brokerage shop and ask to be connected to an "industrial broker who works the Kent valley" and the receptionist would know what to do.
@April Chim , there are some commercial firms that are known to be litigious and aggressive towards even their past clients. I would go with a smaller boutique brokerage with a broker that wants your business.
April it says you are a real estate agent in your heading. Are you trying to become a commercial agent only, invest in commercial, or BOTH?
That might have some bearing on how you might want to proceed.
Thank you everyone for your feedback!
@Dan Bernstein, I am not sure where to find boutique commercial broker in my area aside from going to a lot of REI meetups.
@Joel Owens, I am trying to invest in commercial property. I keep my real estate license simply for investing purpose at this time.
Lee & Associates is a really strong boutique firm with a strong presence in California.
April, decide what you're buying first, then find a Broker who specializes in that particular product. Figuring out who you "click" with most will come second.
Get laser focused on what asset class of commercial you are buying. People contact me frequently and say I am looking at ( Hotels, Industrial, Retail, Office, Multifamily, etc.) They are essentially all over the place.
I am not going to work with a buyer who is not focused and doesn't take action. It can ruin my reputation with a seller and other brokers that I brought them a flaky buyer who didn't close. It's fine for a call as I generally tell people about each asset class and positives and negatives. Buyers have to stay away from the (next shiny object syndrome) and get down to the WHY of buying something to narrow down and go a specific asset class direction.
These days I mainly focus on retail properties all day long STNL and MTNL. So freestanding single retail buildings and strip centers. I also sell larger apartment buildings.
One thing to remember about large firms. They often only push their inventory to sell. They usually do not search all the available inventory from other firms and owners. Since I mainly work with my buyers my strategy is to look though my vast network over the last 14 years to find the best available properties for purchase.
The larger brokerages tend to have teams of 3 people or more. They tend to take reduced commissions to list larger portfolio's at a time. Their name of the game is typically to close tons of volume with their inventory to whoever will buy it. It might be a great property, mediocre property, or a dog but unless you have the experience to know what you are looking at that is where a good commercial specialist broker comes into play.
Not all larger brokerages work that way but many do. Half their commissions tends to go to the back end of the company. So if 100k commission to listing broker side with 3 people 50k as an example goes to brokerage. The other 50k the senior guy might get 25k the middle agent 16k, and the junior agent 9k.
As you can see they have to close a ton of business to keep the machine going. I like staying lean and efficient.
Tustin, CA is in Orange County (for those who don't know). There are hundreds of commercial brokers in Orange County & LA County (they often bleed together).
As Joel mentioned, you need to share what asset type you want to focus on before a recommendation can be made.
Hello April. I am a commercial broker in the Bay Area. What type of property are you interested in? I would recommend reaching out to a broker that specializes in the asset type that you are investing in. The asset types typically fall under the retail, office, industrial, apartments, and land categories.
Howdy neighbor. I believe I have a great referral for you.
I am looking for either a 5-20 multi-units in B and C class or a triple net retail building and strip center with at least 8 % cap rate, all under $2M. I am open to location as I havent found my niche yet. At this time, its all about the number (cash flow, ROI and potential appreciation last).
Strip center 8 cap under 2 million will either be in a bad area typically or all mom and pop tenants.
California I have clients getting 3 or 4% there with trapped equity so will buy in other states. They go for 6 to 7 caps because with down payment cash on cash can go to 7 to 8 before mortgage interest deduction, tax depreciation, any rental increases, and principal pay down.
Under 2 million is cap rate compressed because of so many buyers at that level. Everyone has 500k or 600k down these days. You get up into 3,4,5 million then cap rate tends to get better and loan interest rate and term get better.
Example 2 million dollar center for 6.5 cap and maybe loan is 5% whereas a 4 million property might be 7.25 cap and 25 basis points cheaper on interest rate for loan so 100 basis point swing.
Good luck with finding an 8 cap on a quality retail center. That was about 3 years ago in the cycle. Hope you find it.
@Joel Owens : Thank you for your candid response. I have not analyzed a lot of retail/strip centers but I am seeing that it's really hard to find any cap rate or even be able to have some good cash on cash return if I am going to finance. Maybe I will stick with multi-unit for my first deal.
I agree with @Tony Nguyen . I would pick an apartment specialist for apartments and a retail specialist for retail. If you go to a big company they might have both specialists.
If you locate a particular area you might go there and see who the big players are.
I look at between 500 to 1,000 retail properties a week across the country in various states for clients. Different states are cycling at various times for cap rate but they also have different growth drivers.
If you do not have the experience rather than buying a 2 million apartment building that is overvalued you might want to invest with sponsor on larger projects. The larger projects vale add might have more long term equity upside and you get to see how they turn around a larger property. The larger properties when exiting you can usually resale for lower cap rates as loans are competitive for the buyers purchasing them. I am talking about 10 to 20 million or higher type properties.
Unless you are buying really high end apartments for say 12 brand new for 150k a door class A then not really passive. At 2 million there is just not enough doors to find something really high cap rate but more hands off. You need scale in MF for that. If you invest with sponsors then you are passive and they do the work etc.
Great thread, quick question, if I live in South Florida and am looking at commercial multifamilies in North Florida, what would be the best way to find a commercial broker since its out of area? Look up brokers with good reviews in the area of potential purchase?
I like the approach @Etienne Martel recommends. I have done this before and it works well. I cold call 10 or 20 people and chat with them or leave a message. Usually about 3-5 people will follow up with you and 1 or 2 become good contacts for you to build relationships with. Good luck.
@Joel Owens I know this is an old thread, but it's relevant to me, and probably others at this time.
I want to move into CRE, and want to take your advice about getting very specific about class and criteria, but I'm not sure where to start. I (actually we, a buddy and I) own a couple single family rentals, so I'm familiar with that market and the numbers associated with it. I need to learn, but I haven't seen anything yet in the searches I've run that looks like it's where I should start learning.
Can you suggest any resources, such as books, podcasts, etc. that will help me get oriented?
Initially I know I need to learn how to:
- determine the asset type
- find a good broker
- find deals
- analyze deals
- find stellar renters
Thanks for being a resource as well
Ray Alcorn has an older general book on commercial. For sub types within commercial Amazon has some. There are designations and publications as well such as CCIM, ICSC, SIOR, NREI,NAIOP, etc.
@Adam Ulm check out Break into CRE with @Justin Kivel. He has great courses there. I have been taking 3 courses there the last couple weeks.
@Adam Ulm I enjoyed reading Confessions of a Real Estate Entrepreneur, main focus is commercial with lots of compelling examples. I am also launching a podcast on the topic: The Commercial Real Estate podcast. Some episodes are available on YouTube. This one is on industrial: https://youtu.be/g_WNLF7M3rU