How to Get into Commercial Real Estate? A Detailed Guide

Investing in commercial real estate can be a lucrative and rewarding venture, offering attractive returns and diversification benefits.

However, commercial property investments can be hard for beginners. In this detailed blog post, we’ll explain how to get into commercial real estate, how to become a commercial real estate agent, and how much commercial real estate agents make.

How to get into commercial real estate?

Follow these steps to become a successful commercial real estate investor:

Step 1: Set Clear Investment Goals

Before diving into commercial real estate investing, define your investment objectives. Consider the following:

• What are your desired returns? (e.g., cash flow, appreciation, or tax benefits)

• What’s your risk tolerance? (e.g., conservative, moderate, or aggressive)

• Are you seeking long-term appreciation or regular income?

• Do you have a specific investment horizon? (e.g., short-term, mid-term, or long-term)

Establishing clear goals will help you focus on suitable investment strategies.

Step 2: Understand Commercial Property Types

Familiarize yourself with various commercial property types, including:

• Office buildings: Class A, B, or C; suburban or urban locations

• Retail spaces: Shopping centers, strip malls, or freestanding buildings

• Industrial properties: Warehouses, manufacturing facilities, or logistics centers

• Multifamily housing: Apartment complexes or condominiums

• Hospitality properties: Hotels, motels, or resorts

Each property type has unique characteristics, advantages, and challenges. Understanding these differences will help you make informed investment decisions.

Step 3: Learn Commercial Real Estate Valuation

Grasp the fundamentals of commercial property valuation, including:

• Income approach: Calculate property value based on potential income

• Sales comparison approach: Analyze similar property sales

• Cost approach: Determine property value based on replacement cost

Understanding valuation methods will help you determine property values, calculate potential returns, and make informed investment decisions.

Step 4: Explore Investment Options

Discover various commercial real estate investment options, such as:

• Direct property investment: Purchasing a property directly

• Real estate investment trusts (REITs): Investing in publicly traded REITs

• Real estate crowdfunding: Investing in properties through online platforms

• Real estate mutual funds: Investing in a diversified portfolio of properties

Each option offers distinct benefits, risks, and requirements. Choose the best fit for your investment goals and risk tolerance.

Step 5: Conduct Market Research

Stay informed about market trends, including:

• Supply and demand dynamics: Understand the balance between available properties and demand

• Rental rates and vacancy trends: Analyze market conditions and potential returns

• Local economic conditions: Assess the impact of local economy on property values

• Regulatory changes: Stay updated on zoning laws, tax regulations, and environmental regulations

Market research will help you identify opportunities, anticipate challenges, and make informed investment decisions.

Step 6: Build a Strong Team

Assemble a team of professionals, including:

• Commercial real estate agents: Expertise in property transactions

• Property managers: Oversight of property operations and maintenance

• Attorneys: Guidance on legal matters and contract negotiations

• Accountants: Expertise in tax planning and financial reporting

A skilled team will help you navigate complex transactions, ensure compliance, and optimize investment performance.

Step 7: Secure Financing

Explore financing options, such as:

• Traditional bank loans: Conventional financing with fixed interest rates

• Private lending: Alternative financing options with flexible terms

• Partnerships: Joint ventures or equity partnerships

• Mezzanine financing: Hybrid financing combining debt and equity

Understand financing terms, interest rates, and repayment structures to ensure alignment with your investment goals.

Step 8: Monitor and Adjust

Continuously monitor your investments’ performance and adjust your strategy as needed. Stay informed about market changes, tenant needs, and property conditions to optimize returns and minimize risks.

• Market changes: Shifts in supply and demand, rental rates, or local economy

• Tenant needs: Changes in tenant requirements or market trends

• Property conditions: Maintenance, repairs, or upgrades required

Stay informed, adapt to changing market conditions, and continually refine your investment strategy to achieve long-term success.

How to become a commercial real estate agent

Commercial real estate offers opportunities for investment, development, and management. If you’re interested in becoming a commercial real estate agent, here’s a step-by-step guide to help you get started:

1. Gain Relevant Education and Training

Start by learning the fundamentals of commercial real estate, including finance, accounting, and property management. Consider earning a degree in real estate or a related field.

Earning a degree in real estate or a related field can provide a solid foundation for a career in commercial real estate. Coursework should include subjects like:

• Real estate finance and investment

• Property management and operations

• Real estate law and regulations

• Market analysis and trends

• Accounting and financial analysis

Consider pursuing a graduate degree for advanced knowledge and qualifications.

2. Get Industry Certifications

Industry certifications demonstrate expertise and commitment to the field. Obtain professional certifications like CCIM (Certified Commercial Investment Member) or SIOR (Society of Industrial and Office Realtors) to demonstrate your expertise.

Some notable certifications include:

• CCIM (Certified Commercial Investment Member): Focuses on commercial investment analysis and negotiations

• SIOR (Society of Industrial and Office Realtors): Recognizes excellence in industrial and office real estate brokerage

• CPM (Certified Property Manager): Validates skills in property management and operations

These certifications often require coursework, exams, and industry experience.

3. Build a Strong Network

Networking is crucial in commercial real estate. Connect with experienced professionals in the industry through networking events, conferences, and online platforms.

Attend:

• Industry events and conferences

• Trade shows and exhibitions

• Local real estate association meetings

• Online forums and webinars

Connect with professionals on LinkedIn and engage in industry-specific groups.

4. Choose a Specialization

Commercial real estate encompasses various sectors. Focus on a specific area of commercial real estate, such as:

• Office buildings: Leasing, sales, or management

• Retail spaces: Shopping centers, restaurants, or entertainment venues

• Industrial properties: Warehouses, manufacturing facilities, or logistics centers

• Multifamily housing: Apartment complexes or condominiums

Specialization helps you develop expertise and attract clients seeking specific services.

5. Find a Mentor

A mentor can provide guidance, share industry insights, and introduce you to valuable connections. Partner with an experienced mentor who can guide you through the process and provide valuable insights.

Look for someone with:

• Extensive industry experience

• A strong reputation

• Similar interests or specialization

Ask for advice on industry best practices, market trends, and career development.

6. Stay Up-to-Date with Market Trends

Continuously educate yourself on market trends and industry developments. Stay informed about market fluctuations, regulatory changes, and industry developments through:

• Industry publications and news outlets

• Social media and online forums

• Webinars and seminars

• Market research reports and analysis

This knowledge helps you make informed decisions and provide valuable insights to clients.

7. Consider an Internship or Assistant Role

Gain hands-on experience by interning or working as an assistant to a commercial real estate professional. This helps you:

• Understand industry operations

• Develop practical skills

• Build connections and network

• Gain experience working on real-world projects

8. Develop a Strong Skill Set

Focus on building skills in areas like:

• Financial analysis: Property financials, income statements, and cash flow projections

• Marketing: Promoting properties and attracting clients

• Negotiation: Lease agreements, sales contracts, and partnerships

• Communication: Effective client communication and presentation skills

Continuously update your skills to stay competitive in the industry.

How much do commercial real estate agents make?

Commercial real estate agents’ earnings vary widely based on factors like location, experience, property type, and transaction volume. Here are some general income ranges:

• Rookie agents (0-2 years of experience): $40,000 – $60,000 per year

• Intermediate agents (2-5 years of experience): $60,000 – $100,000 per year

• Senior agents (5-10 years of experience): $100,000 – $200,000 per year

• Top-producing agents (10+ years of experience): $200,000 – $500,000 per year

Keep in mind that these figures are approximate and may vary depending on the specific market, brokerage, and individual performance. Commercial real estate agents typically earn a commission-based income, ranging from 4-8% of the transaction value, split between the agent and the brokerage.

Selling Commercial Properties

Commercial real estate agents earn a commission on the sale of properties. The commission rate varies between 4-8% of the transaction value, depending on the brokerage, location, and property type.

Here’s a breakdown of the commission structure:

• Land sales: 6-8% commission

• Industrial and office properties: 5-7% commission

• Retail properties: 5-6% commission

• Multifamily properties: 4-6% commission

For example, if an agent sells a $1 million office building with a 6% commission, their earnings would be: $1,000,000 x 6% = $60,000

Leasing Commercial Properties

Commercial real estate agents also earn commissions on leasing transactions. The commission rate varies between 4-6% of the total lease value. Here’s a breakdown of the commission structure:

• Office leases: 5-6% commission

• Industrial leases: 4-5% commission

• Retail leases: 4-5% commission

For example, if an agent negotiates a 5-year office lease with a total value of $500,000 and a 5% commission, their earnings would be: $500,000 x 5% = $25,000

Additional Income Streams

Top-producing commercial real estate agents often have additional income streams, such as:

• Referral fees: Earning a fee for referring clients to other agents or services

• Consulting fees: Providing expert advice to clients for a flat fee or hourly rate

• Property management fees: Managing properties and earning a percentage of the monthly rent

These additional income streams can significantly boost an agent’s overall earnings.

Conclusion

In conclusion, getting into commercial real estate investing requires a strategic approach, thorough research, and a solid understanding of the market. By following these actionable steps, you can set yourself up for success:

1. Set Clear Investment Goals: Define your desired returns, risk tolerance, and investment horizon to guide your decisions.

2. Understand Commercial Property Types: Familiarize yourself with various property types, their characteristics, and potential returns.

3. Learn Commercial Real Estate Valuation: Grasp the fundamentals of valuation methods to determine property values and calculate potential returns.

4. Explore Investment Options: Discover direct property investment, REITs, crowdfunding, and mutual funds to find the best fit for your goals.

5. Conduct Market Research: Stay informed about market trends, supply and demand, rental rates, and local economic conditions.

6. Build a Strong Team: Assemble a team of professionals, including agents, property managers, attorneys, and accountants.

7. Secure Financing: Explore traditional bank loans, private lending, partnerships, and mezzanine financing to find the best option.

8. Monitor and Adjust: Continuously monitor your investments’ performance and adjust your strategy as needed.

Additionally, understanding how much commercial real estate agents make can help you navigate the market and make informed decisions.