The world of commercial real estate can be intoxicating, especially for young professionals. Many new commercial mortgage brokers have dreams of making it big, with bright-eyed visions of gleaming skyscrapers and bustling mixed-use developments.
For better or worse, developing exciting capstone projects does not usually happen on your first day, or even during your first year, of commercial-property work. A career in commercial real estate can be challenging, but it yields lucrative rewards for those ready to put in the work.
Like any endeavor in life, getting a good start is integral to long-term success. In the commercial real estate world, there are many different avenues to victory. There is one thing that all top-level commercial mortgage producers have in common, however, and that is a solid understanding and practice of the industry’s fundamentals.
The business defined
The vast majority of new professionals in commercial real estate sales and loan origination fail in their first year. One reason for this high turnover rate is that many people get into the industry without understanding the roles, responsibilities and grit needed to succeed. Educating yourself about the ins and outs of commercial real estate can help you avoid this pitfall.
That starts with discerning the differences between residential and commercial real estate transactions. Most people are somewhat knowledgeable about residential real estate transactions. Many people take part in a real estate transaction at some point in their lives, and this gives them some level of insight into the process.
Commercial real estate is less accessible to the general public. A simple definition for commercial real estate is any real property that exists to generate income for the owner or owners.
Commercial real estate encompasses a wide range of property, from industrial developments to medical offices, schools and retail centers. Unused or vacant land that’s held as an investment or developed also is considered commercial property. Although the licensing requirements are the same, the players, the motivations and the metrics between commercial and residential real estate are nothing alike.
Lay of the land
There are two main avenues to travel down in the commercial real estate world. Most individuals either work in some form of sales or finance. In the simplest terms, the sales side helps buyers and sellers meet and conduct transactions. The finance side helps interested parties receive financing for commercial real estate purchases as well as property development. Each state has different rules and regulations governing commercial real estate finance.
Commercial real estate finance can be a very profitable field. The best strategy for a new mortgage broker is to find a niche. This will allow you to develop expertise and become a crucial addition to specific projects that require your skills.
Some commercial mortgage brokers specialize in arranging debt financing for triple net-lease properties — which involve lease agreements in which the tenant agrees to pay real estate taxes, building insurance and maintenance costs. Others only work with nonbanks and hard-money loans — which are based on the value of the borrower’s hard assets (i.e., the real estate’s value). Yet others focus on deals involving agency debt — such as multifamily-property transactions financed through Fannie Mae or Freddie Mac. Alternatively, starting as a bank loan officer, with the requisite credit training or analysis skills, works for some better than others.
Commercial real estate finance tends to require a better understanding of math than selling real estate does. But sales and persuasive skills are required, too. Commercial real estate finance professionals often come from a real estate analyst’s background or are ex-loan officers, investment-sales brokers, or residential lenders or agents making a career change.
There are many differences between large and small commercial mortgage companies. Large enterprises hire many people who are in the very beginning of their career. At larger companies, the split that the company takes can be as high as 50 percent of the commission.
Smaller companies have a much different feel. Frequently these ventures are more relaxed than their behemoth commercial real estate finance cousins. The opportunities for advancement at smaller companies can be greater than at larger companies. This greater advancement opportunity exists because brokers at small companies must wear many hats. You may be expected to know and do more at a small company, but that experience and knowledge is an invaluable asset when it comes to advancement opportunities — both within the company or at a different company.
One of the first notable hurdles you need to clear in order to succeed is surviving for six to 12 months without a paycheck. Commercial loans take longer to close than traditional residential single-family home loans. It can take up to a year or longer to get paid on your first few deals.
Many people, especially recent graduates, do not have six to 12 months of reserves available. If you do not have savings to use, many people hold down part-time work while getting started in commercial real estate.
In the real estate world, there are no shortcuts to success. Getting ahead as a commercial mortgage broker will require a vital time investment. The hours you work also are nontraditional. You may need to speak with clients on weekends, evenings, etc., whatever it takes to get the deal in the books. The workload can be jarring to new brokers. You are putting in 50 or 60 hours a week without being able to immediately see the fruits of your labor.
In many careers, professionals can compartmentalize their lives to keep work and family life separate. In most cases, that is impossible in commercial real estate finance. Because you will be on call 24/7, your family or other social peers will have to be supportive of your career. It also is important to not be too dependent on your social network for leads and deals. No matter how close you are with someone, when money is on the line, potential clients will need you to show value — friendship or not.
Path to success
The first impression you make on a client will be a huge factor in whether you get their business. Look, act and dress the part. Be prepared. Be credible: Show up and make a good first impression.
The reality is that shrinking violets do not tend to do well as commercial mortgage brokers. A big part of the job has to do with putting yourself out there. The top earners in any form of sales must be willing to engage with clients and colleagues in a meaningful manner. Now, that doesn’t mean you have to glad-hand and back-slap everyone you meet in the course of business, but networking effectively is integral to your initial and long-term progress.
An adage you often hear in the commercial mortgage world is “under promise and over deliver.” Clients expect your best performance while you are working on their transaction. If you say something, it is imperative that you back it up with your actions. Your clients will need to put a great deal of faith in you. Your job is to make that easy to do by demonstrating consistency in your words and actions.
Become an expert
Most people would not go to a doctor who “kind of cares” about their job. The same is true of a commercial mortgage broker. Clients will not flock to someone they see as not being well-informed. In fact, they will run in the opposite direction toward those who can show expertise in their chosen specialty.
The baseline for an excellent commercial mortgage broker is the ability to understand all the variables in play in a market. Whether that be midtown Manhattan or downtown Tampa, Florida, the same rule applies.
Being well acquainted with a neighborhood as well as industry tools can help you in other ways by making you a go-to person for that expertise, such as being good at finding comparable properties to help determine the value of a property being bought or sold. Once you are in a position to help others move deals along, you also are more likely to get potential deal referrals from those you help.
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There is no “magic bullet” for success as a commercial mortgage broker. Even if you get off to a great start, there will be considerable obstacles to overcome before you reach a comfortable level. Nothing in life comes easy, but you can maximize your chances of doing well by conducting yourself with dignity, integrity and, most of all, perseverance.