Commercial Real Estate Investing

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Vincent Dang
  • San Jose, CA
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Do I need a real estate agent for commercial deal?

Vincent Dang
  • San Jose, CA
Posted Jan 24 2018, 17:14

Hi all,

I'm looking to purchase my first commercial real estate property.  I have found a few deals online with current tenant paying rents for the property.

Should I contact the listing agent and have him do the deal on my behalf?

Or should I get my own buyer agent to facilitate this deal?

If I do need a buyer agent, where do I go about to find a trust worthy agent in my area that don't give the deals to some of his other clients?


Thanks.

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John Warren#1 Contractors Contributor
  • Real Estate Broker
  • Chicago
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John Warren#1 Contractors Contributor
  • Real Estate Broker
  • Chicago
Replied Jan 25 2018, 06:49

@Vincent Dang if you feel comfortable working through the deal without a buyer's agent, I would recommend going through the listing agent. The LA can handle all of the paperwork, but you will have to make sure you are on guard and do your own due diligence. You are incentivizing the agent to make your deal work by giving him both sides of the commission, but you are also not going to have a true "agent" who is in your corner. I have done this both ways. On my South Bend 20 unit I went through the listing agent (with great success). On my nine unit in Berwyn, I represented myself and took the commission (perks of being an agent!) .

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Ash Patel
  • Full time investor
  • Cincinnati, OH
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Ash Patel
  • Full time investor
  • Cincinnati, OH
Replied Jan 25 2018, 07:56

John's advice is spot on.  My very first deal was a mixed use where I got $100k off the purchase price.  I used the LA who was also personal friends with the seller.  A few days later while I was still learning about Real Estate investing, I asked the LA if I would be getting the deposits that the renters had given the previous landlord.  She laughed as if she had won something and went on to tell me that I didn't ask for it in the contract.  I made sure to knit pick extra heavy after the inspection.  I almost always use the LA and it has paid off YUGE in several deals.

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John Thedford
  • Real Estate Broker
  • Naples, FL
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John Thedford
  • Real Estate Broker
  • Naples, FL
Replied Jan 25 2018, 08:02

An agent can bring a level of expertise that you may not have. As an example, I would never buy a large project without help. I don't know enough about them generally. I buy SFR all day long..but those are easy! When you talk about getting on the hook for hundreds of thousands, etc...that takes a LOT more experience and guidance.

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Sharisma Sawyer
  • Real Estate Agent
  • Tampa, FL
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Sharisma Sawyer
  • Real Estate Agent
  • Tampa, FL
Replied Jan 26 2018, 12:51

I agree with John, it is much easier to purchase an SFH without the help of an agent but commercial real estate is much more complicated. I recommend having an expert on your side, especially if it is your first commercial transaction. I also recommend having an agent that represents you because the listing agent represents the seller and will most likely work in their favor. I've seen buyers purchase overpriced properties at asking price because they went through the listing agent. If you need help finding a trustworthy agent in your area I'll be happy to help.

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Joel Owens
  • Real Estate Broker
  • Canton, GA
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Joel Owens
  • Real Estate Broker
  • Canton, GA
ModeratorReplied Jan 28 2018, 08:36

Vincent it depends on what you are talking about with commercial.

Commercial is the big dog pond. Go through the listing broker without experience and they take your lunch everyday of the week.

Whether you use a local real estate broker or not depends on what you are buying. If you are buying small commercial like under 1 million mom and pop type stuff then more of a local hand is needed. If you are buying STNL or MTNL quality assets in the millions of dollars and up then a specialist commercial buyers broker can help nationally. I review 500 to 1,000 properties a week for my clients and have clients nationally.

Main difference with larger brokerages is they tend to put teams into place. Those teams are generally interested in selling their own inventory whether that property is a bad,average,great deal. If they have 3 people on a team then let's say commission is 100k. 50k tends to go their brokerage and then remaining 50k is split between 3 people on the team. So senior agent might get 25k, middle person 15k, and junior agent 10k.

So as you can see they have to (churn and burn) listings and sell the heck out of everything just to make a decent living. Since I own my own company I get all of it except what I might choose to share with some of my employees. So I do not have to do the crazy volume they do for making a very nice living transacting. Additionally I have a deep database of thousands of companies nationally segmented by state. We check our whole network looking for the best property match for our client. The listing brokerages tend to be too busy to sell anything or search for other resources outside of their company. Not all are like that but most as they have to keep selling volume for the seller to make any substantial commissions.

I choose to work more with the buyers and find the best property. Again if you are buying smaller stuff I do not have the network for those properties. If you are buying property in the millions then that is different. Especially if you have a 1031 exchange and have a short time to do something you need guidance. If you have bought commercial properties many,many,many times over and have legal counsel then that is different but you still need a good broker with a deep network to find the property.

If you call around trying to talk to everyone and commit to nobody then the brokers will usually give you the same level of commitment you give them (not much). Brokers like dealing with other brokers with a track record then dealing with a buyer for the first time directly and not knowing if they will be a flake or follow proper steps.

Good luck. 

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Dave Foster#1 1031 Exchanges Contributor
  • Qualified Intermediary for 1031 Exchanges
  • St. Petersburg, FL
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Dave Foster#1 1031 Exchanges Contributor
  • Qualified Intermediary for 1031 Exchanges
  • St. Petersburg, FL
Replied Jan 28 2018, 14:21

@Vincent Dang, The old proverb of the attorney who hired himself as a client comes to mind.  Doesn't have to be a realtor I suppose but professional representation of your interests is a huge key.  

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Karen Schimpf
  • Lender
  • Nat'l Commercial Mtg Lender - Round Rock, TX
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Karen Schimpf
  • Lender
  • Nat'l Commercial Mtg Lender - Round Rock, TX
Replied Jan 29 2018, 13:03

@Vincent Dang       Commercial Real Estate is much more complex and a longer transaction process than a residential deal.  I suggest you use your own Commercial Realtor to represent your interest.  A trusted advisors plays an important role. A broker will often help bring in third parties -- engineers, appraisers, environmental analysts -- to help verify the condition of the property, its prior use, and any potential liability issues, whether structural soundness, zoning, environmental to necessary upgrades like electrical wiring. 

If you find any problems, you may have the opportunity to renegotiate with the seller or sometimes to walk away from the deal.

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Michael Huck
  • Westlake Village , CA
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Michael Huck
  • Westlake Village , CA
Replied Feb 15 2018, 14:21

Whether it is residential or commercial you will ALWAYS want your own Agent. The seller's agent has a FIDUCIARY duty to the seller and must take the sellers best interests into account, at least ethically. That means you will be doing yourself a disservice at the time of negotiation, inspections, etc. Find an experienced realtor to fight for your best interest!! Being your first deal you do not have a lot of room for error, lean on their experience. 

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Jameson Sullivan
  • Real Estate Broker
  • Tacoma, WA
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Jameson Sullivan
  • Real Estate Broker
  • Tacoma, WA
Replied Feb 16 2018, 12:45

I would say find yourself an experienced broker. It costs you absolutely nothing but will have someone in your corner fighting to get you the best deal. The LA will obviously be incentivized to get the deal done for a larger commission but that doesn't mean he is incentivized to get the deal done at terms that work for you. Frankly he will have a prior relationship with the Landlord/Owner and most likely want to keep that relationship and will do what's best for him. I cant imagine any reason you, as a buyer, would not use a broker.

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Replied Jan 27 2022, 07:43

If you know enough about commercial real estate, can analyze financials, leases, contract nitty-gritty etc you are golden. You don't need an agent per se. Though if you are not confident in what you are doing, yes, go get a help. 

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John Mckee
  • Investor
  • Fairfax, VA
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John Mckee
  • Investor
  • Fairfax, VA
Replied Jan 28 2022, 15:35

You don't need a broker, but if it's your first time you might want a second set of eyes on the deal.  My first few deals were with brokers, but I was surprised how little they know.  They didn't know the right questions to ask during the due diligence process so I felt like I was doing all the work.  I have a checklist of items that i put myself through on every deal and it includes legal, financing, and due diligence. I'm more than happy to share it with you.  The biggest thing when working with the seller agent is to let them know your serious and not just an internet tire kicker.  Show them your bank statement, background, FICO Score, experience or term sheet. Better yet...MEET with Them!  Generally they will work with you regardless as they don't have to share their commission with a buyer's broker.