People considering signing up for real estate classes commonly ask the question “Can I do commercial real estate once I get my real estate license?” The answer to this may vary depending on your state.
People considering signing up for real estate classes commonly ask the question “Can I do commercial real estate once I get my real estate license?” The answer to this may vary depending on your state. In the case of California, our Department of Real Estate makes no distinction with regard to licensing commercial or residential real estate agents. The same license to sell a house would be the same license to sell a large building .
While this is encouraging for the new licensee considering beginning a new career, it’s important to understand that there are different specialities as it relates to the world of commercial real estate.
The five commercial real estate disciplines are office, retail, industrial, multifamily and raw land sales. With the exception of land, each of these areas have a couple of different ways to make money: Leasing and sales.
While real estate commissions are negotiable in California, the typical percentage earned is 3-6 percent of the transaction value regardless of whether you are leasing or selling the underlying real estate. As an example - Let's start with a commercial lease.
Imagine you are a commercial leasing agent and you have a dentist looking for 3,000 square feet of space in Los Angeles, and the rent is set at $3 per foot. She is likely going to be signing a lease for a five year term or 60 months. 60 months x $9,000 per month is a $540,000 lease value. This doesn't take into account annual rent increases that you'll likely be paid on also. Generally, representing this dentist would yield you a $16,200 commission. ($540,000 x 3% = $16,200)
This is a handsome payday considering there's no escrow period, no appraisal, and there’s no home inspection. No request for repair or even a termite report. You sign the lease, generate an invoice and get paid. On commercial sales, the commissions can be even larger. Imagine a $6 million office building. You would generally get 3% of this. Your commission would be around $180,000. Not bad.
Commercial real estate can be a lucrative career for someone seeking something a little different from the day to day life of selling houses. What's also nice about commercial real estate is that there are so many different disciplines. You can focus on selling shopping centers or office buildings, or even helping developers find land on which to build. Each one of these practice areas requires a different skill set and has unique vocabulary depending on what you are selling.
For example, in industrial real estate the wiring and power capacity might be important. Do we have 3-phase power? In retail the co-tenancy would be a consideration. Who are the other retailers in the center and how can they help drive traffic to my store? Office and the other disciplines have their own unique considerations.
When you get your real estate license in California, it doesn’t have to be about just selling houses. There are a lot of other career choices that are less competitive, but more lucrative than residential. If you are considering doing both it’s important to bear in mind that very few real estate companies do both well. The skillset, paperwork and databases to sell houses are actually different than those associated with selling commercial.
That's why it's important to make sure that when you do get your real estate license in California, you are lined up with a brokerage that can set you up to succeed. Commercial real estate databases like LoopNet or CoStar can be quite expensive and most residential real estate companies don't have active subscriptions. Similarly, most commercial real estate companies don't have MLS access like a Century 21 or Keller Williams would.
If you have any questions about getting your license or if I can help you get started please call me at 888 768 5285 or drop me a message.
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