After reaching a certain level of success in residential real estate, many agents begin to set their sights higher. Deciding to break into commercial real estate can be a very fruitful career decision.
While residential real estate can be very profitable on its own, commercial real estate can help you close much larger real estate transactions.
However, breaking into commercial real estate is challenging. You'll need the right credentials, connections and experience to build a successful career in commercial real estate.
If you've decided to take the leap into the world of commercial real estate, here are some steps that will help you accomplish your goals.
A college degree may not be required, but it can certainly help start moving things in the right direction. Many successful real estate agents began by getting a college degree and then breaking into real estate investment banking.
The benefit to first obtaining a college degree, In addition to learning valuable skills, is that top real estate schools will make you part of vast alumni networks that will help you get a head start on your career.
Of course, if you don't have it already, you'll have to get a real estate license.
Whether you decide to pursue a degree or not, there is no substitute for experience. This is true of any career.
You can't possibly expect to jump straight into managing large, multimillion-dollar properties out of the gate.
Instead, your first job opportunities will likely involve working under an experienced commercial real estate agent. Even if you have experience managing residential properties, you can expect to be relegated to a support position when you first enter the commercial real estate industry.
Your network might be the single most important factor in your success as a commercial real estate agent. It's how you'll find new leads, develop partnerships, receive guidance and more. If you decide to pursue a career in commercial real estate, then begin networking immediately. Going to a top real estate school is a great way to break into a valuable alumni network. If you didn't go to school, then it might take longer to build a strong network—but it's still possible.
Try teaming up with a credible commercial broker in your local market. Go with them to networking events and meet their colleagues. This is a great way to make yourself part of a larger network of real estate professionals.
Before diving into commercial real estate, you should consider the types of investment opportunities that fit your interests.
Core investors typically want to generate a stable income without taking on too much risk. In commercial real estate, this would mean taking over and managing existing properties. You can expect to receive lower returns, but you will greatly minimize your risk.
Develop Existing Properties
Value-added investing essentially means taking over and improving an existing property. Instead of managing the property as is, you would try to add value and maximize your returns.
This is generally riskier than core investing, as you are investing in a less valuable property while expecting to greatly increase the resale value of the property.
Build New Properties
You may also choose to pursue real estate development, meaning developing brand-new properties rather than investing in existing properties. Real estate development has the potential to receive incredibly high returns; however, it also generally has the biggest risk.
It's also worth noting that real estate development is typically open to people of all educational backgrounds, while other investments tend to favor professionals strictly from real estate backgrounds.
Commercial Real Estate Loans
To begin investing in commercial real estate properties, you'll likely need some financial assistance. Commercial real estate loans allow businesses or individuals to purchase and renovate properties.
More often than not, commercial real estate loans require that the property be "owner-occupied." This means the building has to be occupied by at least 51% of the business that owns the building.
Commercial real estate loans can be used to finance several types of properties, including restaurants, shopping centers, office buildings and more.
There are several different types of commercial real estate loans, including:
Commercial bridge loans
Soft money/hard money loans
Each type of loan is best suited for borrowers in different circumstances, so it's important to learn which type of commercial real estate loan is right for you. You can even consider taking on loans that are not specific to real estate, like small business loans that could help jumpstart the creation of your own practice.
Pursuing a career in commercial real estate can be a profitable but difficult venture. Taking these steps can help you get started on your career in commercial real estate.