A commercial real estate sales agent works for a real estate broker. Even if the sales agent handles the complete transaction themselves, state laws require the commission to be paid to the broker. It's then up to the commercial real estate broker to pay the agent. There are countless ways that brokers structure their commission splits.
- Find Commercial Real Estate Agent
- Commercial Real Estate Leasing Agent
- Do Leasing Agents Make Money Commercial Real Estate Companies
- Commercial Real Estate Leasing Process
- Make Money App
Many real estate agents fail because they don’t realize that it costs money to run their business and when they realize it does, they don’t have enough money to live on. Not having money to make car payments, student loan payments, buy groceries, or to buy other necessities is another reason why real estate agents fail. Real estate agents are motivated to close deals because they don’t get paid until that happens. How much does a real estate agent make? Real estate agents ’ median gross income is on the rise, according to the National Association of REALTORS® (NAR)—jumping from an average of $39,800 in 2017 to $41,800 in 2018. However, it’s important.
Commercial real estate brokers get paid a commission on the deals they close. These commissions are paid for by the landlord or seller, no money comes out of your pocket.
The commission fee is built into the deal and the full amount will get paid to all brokers involved. That means if you do not have someone representing you, the entire commission amount will go to the broker representing the landlord or seller. Do not think that you will get a better deal if you don’t have a broker, because you won’t. The entire commission amount will be paid, it will just go to the landlord or seller’s broker. It would be in your best interest to have your own representation.
Commission rates are negotiated and it is illegal to set an industry standard, but can range from 2-8%. For leases it is based on the total rent over the term. Sales are based on the final sale price. Typically, the higher the sales price, the lower the percentage. For example:
| Deal Structure | Consideration | Commission | Total Commission* |
| Lease 5-year lease x 2,000 SF x $12.00 per SF | $120,000 | 6% | $7,200 |
| Sale Price: $4,000,000 | n/a | 6% | $240,000 |
| Sale Price: $15,000,000 | n/a | 3% | $450,000 |
* split between tenant/buyer and landlord/seller representatives
It is very important to understand that it will not save you money to be your own representative. In fact, you will more than likely rely on the landlord’s representative for some guidance during the process, but their fiduciary duty is with the landlord, not you. You will probably end up paying more in rent and have fewer concessions if you do not have your own representative looking out for your best interest.
Find Commercial Real Estate Agent
Let’s look at a couple of scenarios:
You have a tenant rep broker
Your tenant rep broker finds you the space, guides you through the process, and negotiates with the landlord for the best deal. For leases, the landlord pays the broker the first half when the lease is signed and the second half when you move in. Sales commissions are paid 100% at the time of closing.
You do not have a tenant rep broker
You may have thought you would save some money by going directly to the landlord. You have spent your own time doing some research, but probably not enough to know what a fair market rate would be or what concessions you should ask for. You will be dealing directly with the landlord’s broker. As mentioned above, their loyalty is to the landlord and the deal will be in their favor. You will not get the best deal going this route. At the end of the day, the landlord’s broker will be earning the commission your own broker could have earned.
Regent Real Estate are experts in their field and would welcome the opportunity to talk to you about your real estate needs. Contact them today.
Are you interested in becoming a thriving real estate agent? If so, the first thing you must ask yourself is whether you want to work in commercial or residential real estate. Granted, because more people are likely to buy or lease a place to live versus a place to run a business, it is easier to get into residential real estate — where there will always be more potential clients and transactions.
However, commercial real estate can also bring in a substantial number of clients by potentially offering investors steady returns and better cash flow than residential properties. It also brings in more money for agents. In fact, according to Glassdoor.com, commercial agents had an average salary of $90,914 nationwide, whereas the average salary for real estate agents was $50,897 – this number being skewed towards residential real estate agents . So, if you want to earn more, you need to understand what it takes to become a commercial real estate agent, as well as the pros and cons of the business.
The first step to success in any field is to understand your product and know what you’re selling. Commercial real estate (CRE) refers to properties meant to generate income. These include places where companies conduct business, multifamily structures and hotels, among others. They’re usually owned by investors who collect rent from each business/tenant that operates on the property.
What is a Commercial Real Estate Agent?
According to the Association of Real Estate License Law Officials (ARELLO), there are about 3 million real estate agents in the United States. Those who deal with CRE are specialized and are called commercial real estate agents as opposed to their counterparts, residential real estate agents, who specialize in residential properties. Specialization is necessary because CRE transactions are often more complex than residential transactions.
Furthermore, CRE agents often represent both buyers and sellers, as well as lessors and lessees. And, in addition to receiving commissions, they are also sometimes salaried by their brokerage. The scope of work may also vary because there are diverse niches in the CRE industry. For instance, besides selling, buying and leasing, CRE agents may also be property managers, appraisers or real estate developers.
How to Become a Commercial Real Estate Agent
1. Obtain a Real Estate License
All real estate agents must obtain a license from the state in which they wish to practice in order to represent buyers and sellers, as well as lessors and lessees in property transactions. This is the same license regardless of whether you want to sell commercial or residential properties. To obtain the license, you must:
Meet the State’s Eligibility Requirements
Each state has its own licensing requirements and regulatory offices. Common requirements include a minimum age, background check and a high school diploma. You should also check to see if your state has a reciprocal licensing agreement with other states, which means that obtaining a license in one state could allow you to practice in another state, too.
Take approved prelicensure classes
Required courses vary by state in terms of hours and content. For example, New York requires 75 hours of courses, whereas Texas requires 180 hours. The courses cover topics like real estate fundamentals and laws, along with national and state-specific topics. These courses have a difficulty level similar to a first-year college course and are usually priced between $150 and $500, depending on the state and format (such as live, online or independent study).
Pass the exam
Exams are usually administered by the state and contain between 75 and 150 multiple choice questions. And, because pass rates are around 50-60%, pre-exam study guides or programs are recommended. States will post the results about a week later and issue the license a week after that.
2. Find a Real Estate Brokerage Firm with Commercial Deals
Once licensed, it’s important to find a brokerage specialized in commercial real estate to gain experience in the market in which you intend to practice. If you’re interested in commercial, these are the two best options:
A Real Estate Brokerage That Works in Both Commercial & Residential Real Estate
The potential for steadier income is in residential transactions, which are easier to obtain and faster to close whether your client is renting, buying or selling. Plus, as a new agent, you’ll likely also find it more difficult to source commercial deals with little experience. So, in the meantime, you can learn from the commercial deals of other agents and build a client base of your own as you work toward becoming a commercial real estate agent.
Commercial Real Estate Leasing Agent
The disadvantage here is that few brokerages have deals split evenly between commercial and residential. This can mean that you might have less exposure to commercial transactions than you would in a brokerage specific to commercial real estate.
A Real Estate Brokerage That Works Exclusively in Commercial Real Estate
The advantage of a brokerage that is focused strictly on commercial real estate is that many usually have salaried training programs for new associates. These programs can last a year or more and, therefore, allow trainees to focus solely on CRE and not rely on residential deals for income while learning the ropes.
However, the disadvantage is that brokerages with training programs are also harder to get into because there’s more competition. But paid trainees can expect to earn about $25,000 to $45,000 per year before making their first commercial transactions. Keep in mind, though, that some training programs are not salaried.
In addition to the two methods mentioned above, another way to jumpstart your career in CRE is by interning in a commercial brokerage before becoming licensed or by working in its marketing department.
3. Join a Professional Association and/or Become a Realtor
Many commercial real estate firms require their agents to join a national or state-level professional association, like NAR, ULI or REBNY. This is one of the most important tips to becoming a successful commercial real estate agent because these associations offer continuing education, networking opportunities, and supply and service discounts (such as manuals, software and more). You can also become a realtor by joining the aforementioned NAR, the largest trade association in the U.S. with more than 1 million residential and commercial real estate professionals. Realtors are agents who subscribe to NAR’s code of ethics, and NAR membership will also add to your professional credibility.
4. Specialize
With so many types of commercial properties, it’s important to specialize to help narrow your focus and develop a deeper understanding about your niche. Specialization also helps you better target your intended clients and build your reputation in your chosen field. You can specialize in various types of properties — such as office, retail, industrial and more — and further sub-specialize in specific uses, like laboratories, for example.
5. Create a Marketing Strategy
Mentorship and professional organization allow you to learn the local commercial real estate market, but it’s also important to create a marketing strategy. This should identify the type of properties you want to focus on, how you plan to target clients, a unique selling point (USP), a budget, marketing formats, and success benchmarks. You can also expand on this further by referencing general marketing plan guidelines for a roadmap to generate leads.
6. Explore Additional Career Options
As a commercial agent, you can also work in several areas besides sales, including development — which is purchasing land and building on it, arranging financing, negotiating tenant leases, and supervising the process — or in salaried property management (which includes handling day-to-day operations, such as repairs, staffing and so on).
Things to Consider About the Industry
Before you decide to jump into CRE, it’s important to consider the following:
Is It a Match for Your Personality?
Finding clients and leads is imperative to being successful. Specifically, you need to have or develop salesperson qualities, such as being proactive, persistent, competitive, ambitious and an ability to convincingly pitch a product. Being sociable and unfettered by making cold calls and talking to strangers is also crucial. Meanwhile, with more and more technological tools in the field, being tech-savvy is also important and, because the market is always changing, staying up to date on the latest information and developments is essential.
Understand the Challenges & Differences Between Commercial & Residential Agents
Being a CRE agent is different than being a residential agent and, as such, presents its own challenges:
Stringent Educational Requirements
Although you must obtain a state-issued real estate license for both types of real estate in your state of practice, as a residential agent, you’re not required to have a college degree. However, CRE agents often do need a degree — preferably in business or finance — because the job requires an understanding of more complex concepts, such as capitalization rate and internal rate of return, among others.
Do Leasing Agents Make Money Commercial Real Estate Companies
More Training
While both types of agents must have some training in the field, CRE agents need more training through mentorship programs with a commercial broker. This is due to the more complex types of transactions and properties in CRE.
Commercial Real Estate Leasing Process
More Complex Properties Involved
In CRE, you’ll be selling larger properties, like shopping centers or office buildings. As a result, you need to understand many more nuances, like economic cycles, special tax laws and gross rent multipliers, for example.
Fewer Transactions
Obviously, it’s easier to sell a home than it is to sell a considerably larger — and usually more expensive — commercial property. Consequently, residential real estate agents usually make more sales per year but receive lower commissions. Conversely, as a commercial real estate agent, you’ll make higher commissions per sale, but have fewer transactions per year.
A Different Client Base
Residential agents have an easier time finding clients because of the larger client pool — there are approximately 130 million households in the U.S. Essentially, residential properties are a form of consumption, a place where people live. Commercial properties, on the other hand, are purchased strictly as a form of investment and, because of their larger price tags, it’s often more difficult to find clients.
More Traditional Working Hours
Make Money App
Residential real estate agents work any time of the day or week based on when potential clients have time to view a property. However, as a CRE agent, you’ll normally work only five days a week during business hours. You’ll also work on networking and marketing, which will take a considerable amount of time. Furthermore, part-time isn’t always an option as a CRE agent, as you’ll be under the auspices of a brokerage, whereas residential agents may work part-time.
Different Types of Tasks
As a CRE agent, you’re required to constantly visit different commercial properties and know all the minute details about the properties you’re representing, like the cap rate, population growth reports and so on. By contrast, as a residential real estate agent, knowing such complex metrics is not mandatory, visits tend to be only to properties whose sellers you represent, and only a knowledge of the local residential real estate market is enough.
Conclusion
Clearly, if you’re an aspiring agent, there are many factors to consider before choosing to dive into the complex world of CRE. While it does offer high commissions and a diverse array of specialties, it also has its own unique challenges, such as more educational requirements, longer closing times and possibly fewer deals per year. The most important step is weighing all the factors to truly understand if CRE is right for you.