Five Key Condsiderations for Choosing the right Commercial Real Estate Broker
Commercial Real estate investing requires working with the right Commercial Broker to reach your investment goals. The following Five Key considerations will determine if a broker will bring you a stream of quality properties you are looking for and makes your business their priority.
Key consideration number one: Do your due diligence.
Start by doing the same kind of Due diligence on your Broker Candidates as you would on properties themselves. This will increase the probability that the broker you choose will be the right broker. Make sure you create a guideline containing your specific goals and needs to qualify your broker candidates. I research the agents that i will potentially be working with. I read their brochures, promotional real estate training literature, websites, past closings, etc so i can cross reference credentials and history with other brokers in the marketplace. Remember, choosing the right Commercial Real estate broker can potentially net you millions of dollars worth of time and money.
Key consideration number two: How long has the broker been in the business?
There are many brokers who cross over from Residential Real estate into Commercial Real estate in an effort to “make big money”. What they fail to realize is that Commercial Real estate is more than just selling or buying real estate. It requires an ability to understand and interpret profit and loss statements, rent rolls, third party contracts, and many more specific documents that are involved with each transaction. It’s more than just writing up a contract. If your potential broker can not figure out the net Operating Income of a building or can not tell you what the debt service coverage ratio is, then you need to keep looking.
Key consideration number three: Have they kept current with changes in their profession along with market changes?
Ask the commercial real estate broker about his or her credentials, certification and education in terms of selling commercial properties. Your Commercial Real estate broker may have years of experience but they also need to be able to adjust to new selling or buying methods. If your broker is not in the loop about the newest trends of investors buying pools or how new technology is affecting the market trends, you may potentially lose out on a property. I never deal with brokers who have some commercial experience, it is important to know who you are working with in terms of their familiarity with the type of investment you are considering.
Key consideration number four: Make it a point to get to know the broker’s staff.
It is important to ascertain the competency of their staff to see if your deal will be handled with professionalism and efficiency. The right broker will have key employees that have a wealth of knowledge about an area and the ability to make a transaction smooth. Things to consider are: Who do they know that will help me build my team? What type of relationships do they have in the industry? Do they maintain broad relationships that can assist me in developing market contacts?
Key consideration number five: Most of all, make sure the broker is loyal to your needs as an investor and is not in a conflict of interest.
A broker with a fiduciary interest in a property is incapable of putting my needs first. I am very careful to deal with business ambiguity up front in all contractual relationships and will work with someone based on their their loyalty to me being their first priority. Pay particular attention to how fast they return telephone calls after meeting. This may sound insignificant, but it says something about their professionalism and the way they do business. First, a broker will have information about the market that you will not, especially if they have worked in the area for an extended period of time. I have worked with brokers that have sold the exact same properties a number of times. They were able to give me history about building conditions and ownership that i was unable to get from other sources.
Interview as many brokers as needed to make sure they are a good match to do business. The right broker will find commercial properties that meet your investment and business criteria. In the long run this is a business relationship that grows over time, so make it a point to nurture this relationship. Clarity about your investment criteria will help reduce problems finding the right broker. Some resources that can help you begin your process would be the National Association of Realtors, recommendations from other investors, checking professional periodicals online and off, investment associations, and word of mouth from trusted allies.
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