The New Agent’s Guide to Commercial Real Estate
Jacqueline Kyo Thomas
Is it your time to break into the commercial real estate market?
If you're a licensed salesperson in the state of Massachusetts, but looking to expand your horizons beyond residential real estate, the answer might be to move into the commercial space.
For an agent accustomed to selling single family homes and other types of residences, commercial real estate offers an exciting change of pace. Swap homes for hotels and condos for convenience stores, and you're just scratching the surface of types of properties you'll be working with as a commercial real estate agent.
Let’s discuss how to become a commercial real estate agent in Massachusetts.
When most people think “real estate,” the first thing that pops into mind is the residential side of real estate. There tends to be more residential agents than those who work with commercial spaces,but agents are in demand for both sides of real estate.
So what exactly does a commercial real estate agent do that sets them apart from a residential agent?
A commercial real estate agent is a professional who helps in the selling, leasing, or management of a property that's intended for business use.
Here's a non-exhaustive list of the most common types of commercial real estate:
Office Space - This may include workspaces and office buildings where multiple businesses can rent space and operate
Retail Space - This may include properties used for buying and selling goods and services (Shopping centers, strip malls, standalone shops, and regional malls)
Industrial Space - This may include warehouses and manufacturing spaces used for producing goods
Residential Complexes - This may include multi-family properties that contain two or more units (duplexes, triplexes, quadplexes, garden, mid-rise, and high-rise apartments, senior and assisted living)
Land - This may include purchases made for business purposes, include agriculture and farming
Hotels - This may include full service, limited service, and extended stay properties, such as resorts, hotels, motels, and beds and breakfasts
Special Purpose - Not all commercial real estate is used for traditional business purposes. These properties include churches, schools, car washes, funeral homes with crematoriums, hospitals, wineries, golf courses, and the list goes on
Like residential agents, commercial agents provide expert knowledge to their clients, which may include pricing recommendations and how the owner can improve the property to make it more desirable to attract the target buyer.
However, unlike residential agents, commercial agents need to know a lot about zoning laws for commercial use as well as specific types of market data that a potential buyer will use to determine whether or not to buy a property.
Unless they specialize in a particular industry, commercial agents must understand the needs of many different industries because they never know what their next client will need a space for. A commercial agent may sell or manage several types of commercial spaces, including restaurants, retail, clinics, and much more.
Here's an overview of the most common responsibilities you'll have as a commercial real estate agent.
Prospect for potential clients in your area through networking, cold calling, and new and traditional forms of marketing
Locate properties for commercial use, noting the property's specific zoning regulations
Create comparison analysis for various investments
Conduct market studies to determine if a property can align with a buyer's goals
Negotiate between buyers, sellers, and renters
Draft contracts and other legal documents
Set up and attend property inspections
Lease and manage properties for owners
Assist a property owner by finding tenants for a commercial space
Let’s discuss the biggest benefits of becoming a commercial real estate agent.
More Money - Most commercial real estate agents make a commission of between 4% to 8%. Because the amount of the sale is usually considerably more than residential real estate, you can expect a bigger commission check.
More Serious Clients - In residential real estate, you'll come across a lot of people who aren't serious or seriously ready to buy. They may not even be pre-qualified, let alone pre-approved, to look for properties. You'll also deal with sellers who are way too emotionally attached to their properties and unwilling to listen to your expert advice on pricing and the like.
In the commercial sector, your prospective clients are much more prepared to buy or sell. Since it's business and not personal, they're more willing to treat you as a trusted advisor and less likely to hem and haw. However, all clients are human and you will need to manage expectations and have a plan to deal with unrealistic expectations, especially from first-time commercial real estate buyers.
Less Competition - Most agents focus on residential real estate. Very few venture over into the commercial side, and that's a good thing. Less competition means that you'll have more opportunities to find clients at networking events or through referrals.
Transitioning from residential to commercial real estate can be a great move for some but not all. Enjoying and doing well in residential real estate doesn’t automatically guarantee your success as a commercial agent.
While all real estate transactions are complicated, commercial real estate transactions are even moreso. This is because commercial agents need to spend a lot of time researching properties, market trends, zoning laws, and more. And because commercial transactions tend to be much larger than residential, the stakes are also higher. Your client will depend on you to provide wise counsel as they navigate through buying, selling, or investing. You may need to provide even more tax advice, which requires you to know tax laws for the local area. And you can’t afford to make mistakes when you’re dealing with multi-million dollar properties.
Here are some other factors to consider before jumping into commercial real estate:
More Complicated - In addition to what you know about residential real estate, you also need to know the in's and out's of buying, selling, and managing commercial real estate spaces. When you're new, it can be a lot of information to navigate.
Fewer Transactions - While you'll stand to make a higher amount in commission, you won't handle as many transactions in commercial real estate. There are simply more houses and less commercial space.
Here’s how you can pursue a career as a commercial real estate agent:
To become a licensed commercial real estate agent in the state of Massachusetts, you must meet the following requirements:
That's it! Fortunately, there isn't a laundry list of requirements to check off before you can become a licensed real estate agent in Massachusetts. And these rules apply to both residential and commercial real estate salespeople.
Before you're able to legally work as a commercial real estate agent, you must take 40 hours of classes at a Massachusetts real estate school. You can do that through us. We offer flexible options to meet any schedule, including our on-demand streaming classes that you can take online from anywhere and at any time. These on-demand classes are available 24/7. We also offer live-streaming classes that are available day, night, and weekend. You create the schedule and set the pace.
After you complete your 40-hour pre-license classes, you'll be eligible to register for the Massachusetts real estate exam. This exam is administered through PSI Exams, which oversees all real estate salesperson license exams for the state of Massachusetts. You can register for an exam on most weekdays and weekends. They offer both in-person and remote online proctored testing. You'll need 70% to pass the exam.
When you pass the test, you can get your real estate license immediately (if you took the test in person). If you opt to take the test remotely, you'll need to visit an exam center to take a license photo and pick up your license.
After you've received your Massachusetts real estate salesperson license, you're able to work as both a residential and a commercial agent. In addition to sales, you can handle leases, appraisals, and manage properties. But you can't do it on your own — not if you're a salesperson.
You'll need to work under a licensed broker. But not every broker has experience in commercial sales and leasing, so choose wisely. Look for brokerages that are already working in the commercial space. Some brokerages do both residential and commercial sales and leasing, and others focus specifically on one or the other.
If you'd like to gain knowledge in commercial sales, consider working for a brokerage that's either all or mostly commercial. This will help you gain a lot of experience quickly. Because commercial real estate is more complex than residential, look for a brokerage that offers a training program. You may even luck up on a brokerage that offers a salaried program, but keep in mind that getting a position at one of these brokerages is often more difficult.
You may be a licensed real estate agent, but it's also a good idea to become a member of one or more industry associations. Memberships add credibility and also give you an opportunity to network with others. Some associates may offer educational programs that can help you kill it as a commercial agent.
Some of the top commercial real estate associations to join include:
For those of you who currently work in residential real estate and are interested in moving over into the commercial space, how do you do it?
Follow these tips:
Don't give up your day job just yet. While you're transitioning from residential to commercial, you'll need a continual flow of cash coming in until you're able to finally land and close a commercial deal. Commercial deals tend to take a lot longer than residential, so you need something to sustain you in the meantime.
Finding a mentor is one of the keys to your success as you move into commercial real estate. Not only do you need someone who can answer your many questions, but you should also find a mentor who will allow you to shadow them as they do their deals. This is why it's best to choose a brokerage that works in commercial space and has a training program or mentorship.
Can't find a mentor at your brokerage? Attend networking events where you can meet commercial real estate agents and investors in your area. Be sure to have your business card handy. Follow up with the agents you meet at these events and ask if you can work as their apprentice.
As an apprentice, you may do market research, set appointments, or anything else that the mentor needs assistance with. And while you'll do it for free, you'll be receiving a hands-on education and building connections that will make it easier for you to transition fully from residential to commercial.
As a real estate professional, investors will expect you to be the expert on your local market. You need to know everything there is know about your area. You'll also need to identify opportunities in your area that can appeal to your clients, as well as help them through every step of the approval and permit process. After you develop a thorough understanding of your local commercial market, you’ll be in a better position to gain the trust of potential clients.
Getting into commercial real estate isn’t something that will happen overnight. It will take time for you to understand how commercial real estate works because it’s a totally different game than residential. Be patient with yourself as you’re learning. And remember that some commercial real estate deals take years to close. You need patience not only as you transition into commercial, but also as you start working deals.
Commercial real estate offers an exciting change for agents who are bored of residential and looking for something different. You'll definitely face unique (and oftentimes greater) challenges as a commercial real estate agent, but the rewards are also great.
Have you taken the steps to become a licensed real estate agent in the state of Massachusetts yet? Get started here.