How to Switch from Residential to Commercial Real Estate
March 28, 2019 |
The real estate industry offers many choices to licensed agents; they can work with buyers or sellers or both, they can help facilitate sales, rentals, or both types of transactions, and they can work in residential or commercial real estate (CRE). If you’re currently working in residential real estate and considering a switch to commercial, read this entire post before you take the next step.
First, the education portion is usually the same. If you took an accredited real estate course and passed your license exam, there is no distinction between a residential and commercial real estate license in most states. The first step toward switching from residential to commercial real estate is to find a firm that handles both residential and commercial sales. Unless you have large savings to draw from, you’ll need to rely on your residential sales income while you build your commercial real estate experience, knowledge, and clientele. Once you’ve located a firm, they’ll be able to tell if you if additional licensing or formal education is required.
If you have trouble finding a brokerage that handles both residential and commercial, look for a brokerage that has a training program for new associates. The best opportunities will offer you a salary during your training period so that you can draw an income while you are putting your first deals together.
Next, evaluate your local market and choose a specialty. Just as residential realtors can specialize in single family homes, condos, or investment properties, commercial real estate agents can specialize in office, retail, industrial, institutional, investment, or resort/recreational. Before you pick one, do some research on your local market. For example, if you’re considering the industrial/retail avenue, is there land available for development or old properties available for rehab? Keep in mind that retail is down in most major metros unless you’re in one of the fastest growing cities. If you’re considering resort/recreational, is that sector growing in your area? Local market conditions will have an impact on which specialty you choose, be sure to do your research with local economic advisors and business groups.
Be prepared to work more. According to a recent Forbes article, commercial brokers can often “underwrite 100 properties before finding one to submit offer on.” The hours are long and the turnaround from transaction to payment can be much, much longer. Before you begin your commercial real estate journey, it’s wise to build up or draw on savings to pay your bills while you get a few deals in the pipeline.
Commercial Real Estate Mentor
Out of all of the recommendations listed here, this one is the MOST important for a successful career in commercial real estate: Find a mentor. Within each niche, there’s a high level of specialized knowledge. If you don’t have the right background, you can quickly find yourself in over your head, jeopardizing your reputation. Look for a mentor who is invested in your success – more than simply selling you a course or letting you shuffle paperwork. A good mentor will offer you a split on new deals so that they are compensated for their time, effort, and energy in helping you close a successful transaction.
Go For It
If you’re in a small market, you can straddle the line between residential and commercial and you won’t need to choose between the two choices. Like everything else in life, you won’t know until you try!