Many investors are turned off by real estate because they do not have the time or inclination to become landlords and property managers, both of which are in fact, a career in themselves. If the investor is a rehabber or wholesaler, real estate becomes more of a business rather than an investment. Many successful property "investors" are actually real estate "operators" in the real property business. Fortunately, there are other ways for passive investors to enjoy many of the secure and inflation proof benefits of real estate investing without the hassle.
Active participation in property investing has many advantages. Middlemen fees, charged by syndicators, brokers, property managers and asset managers can be eliminated, possibly resulting in a higher rate of return. Further, you as the investor make all decisions; for better or worse the bottom line responsibility is yours. Also, the active, direct investor can make the decision to sell whenever he wants out (assuming that a market exists for his property at a price sufficient to pay off all liens and encumbrances).
Passive investment in real estate is the flip side of the coin, offering many advantages of its own. Property or mortgage assets are selected by professional real estate investment managers, who spent full time investing, analyzing and managing real property. Often, these professionals can negotiate lower prices than you would be able to on your own. Additionally, when a number of individual investor's money is pooled, the passive investor is able to own a share of property much larger, safer, more profitable, and of a better investment class than the active investor operating with much less capital.
Most real estate is purchased with a mortgage note for a large part of the purchase price. While the use of leverage has many advantages, the individual investor would most likely have to personally guarantee the note, putting his other assets at risk. As a passive investor, the limited partner or owner of shares in a Real Estate Investment Trust would have no liability exposure over the amount of original investment. The direct, active investor would likely be unable to diversify his portfolio of properties. With ownership only 2, 3 or 4 properties the investor's capital can be easily damaged or wiped out by an isolated problem at only one of his properties. The passive investor would likely own a small share of a large diversified portfolio of properties, thereby lowering risk significantly through diversification. With portfolios of 20, 30 or more properties, the problems of any one or two will not significantly hurt the performance of the portfolio as a whole.
Types of Passive Real Estate Investments
REITs
Real Estate Investment Trusts are companies that own, manage and operate income producing real estate. They are organized so that the income produced is taxed only once, at the investor level. By law, REITs must pay at least 90% of their net income as dividends to their shareholders. Hence REITs are high yield vehicles that also offer a chance for capital appreciation. There are currently about 180 publicly traded REITs whose shares are listed on the NYSE, ASE or NASDAQ. REITS specialize by property type (apartments, office buildings, malls, warehouses, hotels, etc.) and by region. Investors can expect dividend yields in the 5-9 % range, ownership in high quality real property, professional management, and a decent chance for long term capital appreciation.
Real Estate Mutual Funds
There are over 100 Real Estate Mutual Funds. Most invest in a select portfolio of REITs. Others invest in both REITs and other publicly traded companies involved in real estate ownership and real estate development. Real estate mutual funds offer diversification, professional management and high dividend yields. Unfortunately, the investor ends up paying two levels of management fees and expenses; one set of fees to the REIT management and an additional management fee of 1-2% to the manager of the mutual fund.
Real Estate Limited Partnerships
Limited Partnerships are a way to invest in real estate, without incurring a liability beyond the amount of your investment. However, an investor is still able to enjoy the benefits of appreciation and tax deductions for the total value of the property. LPs can be used by landlords and developers to buy, build or rehabilitate rental housing projects using other people's money. Because of the high degree of risk involved, investors in Limited Partnerships expect to earn 15% + annually on their invested capital.
Limited Partnerships allow centralization of management, through the general partner. They allow sponsors/developers to maintain control of their projects while raising new equity. The terms of the partnership agreement, governing the on-going relationship, are set jointly by the general and limited partner(s). Once the partnership is established, the general partner makes all day to day operating decisions. Limited partner(s) may only take drastic action if the general partner defaults on the terms of the partnership agreement or is grossly negligent, events that can lead to removal of the general partner. The LPs come in all shapes and sizes, some are public funds with thousands of limited partners, others are private funds with as few as 3 or 4 friends investing $25,000 each.
Don H Konipol has a BS in Economics and an MBA in Finance from the University of Michigan and is General Partner of the Managed Mortgage Investment Fund LP, a private limited partnership that invests in short term, high yield private mortgage notes. He is also General Partner of Real Estate Asset Management Fund LP, a private fund set up to invest in distressed property as 60% or less of value .He can be reached at 832.577.8838 or by email at dkonipol@yahoo.com.
[http://PrivateMortgageFinancing.com].
ABOUT DON KONIPOL
Don Konipol holds an MBA in Finance from the University of Michigan and a B.S. in Economics from the City University of New York. In 2002 he formed the Managed Mortgage Investment Fund LP as a high yield real estate mortgage fund, and serves in the capacity of General Partner. The fund invests in a diversified portfolio of short term, high interest real estate mortgages secured by investment real estate. Upon receiving his MBA in 1975, Mr. Konipol went to work for Societe General De Survalliance S.A., Geneva, Switzerland in investment banking.
He left in 1978 to come back to the United States and went to work as a commercial realtor for First Equity Company in Houston, Texas. In 1984 Mr. Konipol formed the Investment Realty Group to purchase distressed real estate at auction. Don has successfully invested in numerous real estate deals, operating businesses, high yield commercial mortgages, and REITs. He currently invests his capital and client/investors capital in real estate, real estate debt and real estate securities.
Don Konipol can be reached at (832) 577-8838 or emailed at donhkonipol@yahoo.com
Friday, June 14, 2019
Sunday, May 12, 2019
Commercial Real Estate, A Career - How Do You Get Into It?
1. WHAT IS IT AND HOW DO YOU GET INTO IT?
Several years ago, I was attending a Society of Industrial Realtors Annual Spring Conference in Maui. My wife had accompanied me on the trip so that we could also do a lot of sightseeing. Colliers International, a 241 office worldwide firm, sponsored its own company cocktail party the night before the Conference officially began and my wife and I attended the party.
A short while into introductions, a fellow came in from the golf course and he sat down at our table. Andrew Friedlander introduced himself an we discussed our home in Philadelphia, his original home in Brooklyn and his new home in Honolulu. As to how he ended up in Hawaii, Andrew told us that on R&R during his tours in the Army in Vietnam, he decided to take a break in Hawaii after he was finished his last duty tour. He rented an apartment, waited tables, washed cars, etc. to have some extra cash. He said that he paid his apartment rent to an older man who came around once a month and he finally asked the man whether that was his business. Andrew said that he never thought about property management as a business, but the more he spoke to the man the more that he realized how diverse a business commercial real estate could be, particularly in Hawaii. The rental agent began to show Andrew the basics of the business and Andrew decided not to return to Brooklyn.
Forty years later, Andrew is the manager of approximately six Colliers International offices in Hawaii with over 40 brokers and salespeople as his responsibility. Aside from selling and leasing commercial real estate and traditional brokerage transactions through the islands, Andrew's team is involved in all of the other aspects of commercial and industrial real estate.
As one concierge person told my wife and I while we were touring there, "Yes, it is a great place, now where would you ever think of moving to once you are here."
In the past year, a young Army Captain and friend called me from Hawaii. He and his wife were taking in some R&R after his last duty tour and he called to ask me for some advice on commercial real estate firms. I gave him Andrews phone number after I checked with Andrew on his availability. Andrew treated my friend to lunch and introduced him to Colliers' business in the islands. As it turned out, my friend and his wife decided later to relocate to Florida to be closer to their parents. Our Colliers office in Ft. Lauderdale was anxious to interview him and did so. He found a better fit for a concentration in office brokerage with another firm, but I think that it is clear that opportunities do exist with major firms for someone who has an interest, who can demonstrate that they are self motivated and whose comportment (manners, speech, personal grooming, business attire) are all positive. A long time friend told me one night after we and our wives checked in, very late, at a hotel owned by a well known hotel group, "That desk clerk is the person representing this hotel company to its customers and I know the CEO. That clerk's slight rudeness toward us does not at all represent what their CEO wants his company to be known for in their business. He will need to learn that if he is going to be more than the late night clerk."
I mention this because a company such as Colliers or any of its competitors must ensure that a salesperson or broker first meeting a potential customer properly represents the company's image. So much money is spent defining that image to the business community that each person, including all staff, must reflect that effort. Otherwise, a potential customer will choose to hire a competitor whose act is together. My understanding is that customer relation training at Wal-Mart is quite strong for all personnel. I would think that any major restaurant chain has in place a thorough program for staff training and it may pay to observe whether if the customer is not always right at an establishment how the staff person handles a customer who is being a bit particular.
2. Entry
I use Andrew's story as an example of the opportunity that commercial real estate offers. A senior business mentor and good friend of mine told me in Florida in 1971, just at the beginning of that recession, that commercial real estate offered an opportunity to enter a business without having my own capital to invest other than my time and energy, and, with no limit on the size of transactions that could be put together. We discussed this in relation to my going back to law school. His opinion was that it was almost a "sky is the limit" approach, but with some basic sense to it. I had done a few financial reports on potential deals offered to him. I also handed over that year, at my mentor's instruction, a $300k commission check to a broker who he had employed to buy a property that he had settled on the year prior to that. The next year, at the same time, I handed over the same check to that broker as the second half of that commission to that broker. Please realize that in 1972 that commission amount in the onset of that recession was a significant amount of money for any transaction.
Each state has its own regulations for licensure. Florida required a person to take a sales licensing course, pass that, then work in a licensed real estate broker's office for a minimum of two years before being eligible to take a state broker's exam. The sales course is offered by numerous private firms and colleges, evening courses in particular. The cost of the course is minimal. The basic skills for reading, writing and math portions are not difficult. Depending upon your educational qualifications, commercial real estate firms may often offer to provide the course. Smaller, more generalized, brokerage firms may also do the same in order to gain a salesperson.
There typically is a recognized "culture" or business reputation known for a real estate firm in any community, The community can be local, regional or national. It pays to do your homework as to which firm appears to suit your style. The internet is definitely one of the most productive sources for finding a firm's history, its areas of expertise, personnel, and its successes. Recognize that major metropolitan commercial firms often outsource client needs in an outlying area to a smaller commercial firm in that area rather than requiring one of their main office brokers to commit to travel time. Consequently, if you are in a rural market outside or between major metropolitan markets, you should investigate which real estate firms have those relationships for the larger deals.
Your time for success starting in commercial real estate (particularly without capital) will be the result of what you put into it. I had the option in the early '70's of returning to law school and finishing. What I realized most was that I liked being out of an office and "on the street." My attorney friends in Ft. Lauderdale were spending innumerable hours, as needed, in their offices to write briefs, draft documents, etc., all of which that profession requires. My decision was to put in the same hours on commercial real estate that I would have to put in for any law practice. If it worked, then fine, if not I would go back to school.
Considering that the early '70's recession in Florida hit every occupation with almost equal damage, many attorneys had practices with slim billings and clients whose businesses were suffering economically. Several real estate brokers who I met were having very difficult times because the banks were not lending money for deals. Florida had a usury cap of 14% at that time. Deposits were down and when interest rates in California started to go above 14% that is where the money went.
Weekdays in those years, I was knocking on the doors of businesses in the West Palm to Miami corridor. Weekends, I was often painting a house or captaining a motor sailer owned by a friend's corporation. Weekday evenings after dinner, I was at the office reviewing property information, ownerships, tax data, etc. for the next day's driving or phone calls. I found that it was possible to earn a living while getting into the commercial real estate field. I later found out after moving back to Philadelphia, that several of the commercial real estate firms did not mind their starting salespeople to moonlight as bartenders, waiters, or whatever until they had enough experience to close transactions. That has changed somewhat in the larger cities due to the financial strength of the larger firms and their ability to either offer a base salary or draw to new salespersons.
Gender in today's commercial real estate world is not an issue as it was in the '70's. At that time, men only eating clubs were often the norm and women were not often able to match that type of selling locale. The number of women who have joined commercial real estate organizations such as SIOR, CCIM, etc. (which I will discuss later) has increased dramatically over the past 15 years. The commercial real estate courses offered today provide an excellent means of obtaining knowledge that once was taught generally "in house" by senior brokerage personnel responsible for a new salesperson's progress.
Therefore, in considering commercial real estate the aspect of having minimal capital has not changed. Gender is not an issue and many women who have chosen to specialize in industrial or office real estate have done very well. You
can choose your hours, choose your area of specialty(s), choose your market area(s), and choose who you want to approach as a firm to join. Most commercial real estate involes the standard business week, not including late Saturday or Sunday hours (vs. residential Sunday open houses). These are several of the positive aspects of working in commercial real estate. The competition is keen, your competitors respect a good work effort and, most importantly, they respect a strong reputation for any individual.
You should investigate both larger commercial firms and smaller real estate brokerage firms. There are advantages and disadvantages to both.
A). Larger firms may be willing to offer a base salary or a draw against commissions. They may prefer prior business experience, but not necessarily prior real estate brokerage experience that may conflict with what their "culture" is and what their in-house training entails. Typically, a new salesperson would be assigned to a senior broker or brokers to do cold calling, marketing materials, marketing reports for any existing client's property and probably handle property inspections by other competing brokers with their prospects.
A few points on Larger Firms:
Future ownership potential for you in the company may be limited or non-existent.
Control over what market, territory or discipline that you work in may not be your choice. If you are hired for one department, such as retail, that may change if they need personnel support in another department, such as office. You may find that they prefer a new person to rotate through each department and possible each regional office if they have multiple offices.
Depending upon whether the firm is privately held or a public company it could be sold or merged without you being involved in the discussion. There is no real "safety blanket" for any position in a larger firm. If a primary, large, client is lost to a competitor, cuts may be relatively fast to absorb the lack of revenues.
Senior brokers who are successful occasionally leave to join another firm or to start their own competing firm. Clients usually follow those brokers and that could disrupt your potential income if you are in that department and the rain makers leave.
Deal volume can be significant as can be the size of the deals. If an institutional owner (bank, insurance company, pension fund, etc.) has a presence in an urban market, the leasing or sale assignment that they may award to a larger firm can be a "year maker" if the assignment is completed. Usually some year end bonus money flows down to the salespersons who may have participated in the marketing effort.
Senior brokers should have upper level corporate contacts through either a business association, country club, educational institutions, commercial lenders, or contacts referred from other cities where a corporate headquarters may be located. If the firm owners or top brokers are not developing those contacts and relationships, but are relying on the mid-level brokers to do that you may want to look at another firm whose top management is better involved. You want work to filter down from the top instead of getting the crumbs leftover from competing firms who have a solid community (business and non-business) presence.
B). Smaller firms usually will have a broker/owner running the operations with or without broker partners in the firm. Quite often they will have a residential department and a separate commercial department in which a few of the brokers may work in residential and commercial properties.
A few points about Smaller Firms:
Future ownership shares may be offered depending upon deal volume and commitment to the firm. If the founding broker of the firm is nearing retirement age, the opportunity may be better provided that they are maintaining an fully active presence in the community.
Commission percentages may be much more liberal once a minimum threshold of deal volume is met to cover the cost of your desk, phone, secretarial, etc..
A salary or draw is less likely to be offered.
A senior broker may be more likely to have you work directly under him on any property. You will be accountable directly to him and, as should be the case, learn "on the job."
If there is a residential component to the firm, those brokers specializing in that area should be a source of commercial referrals and the same for you referring any possible single family residential to them. Smaller multi-family buildings should be on the commercial side of the business, but motels may be on either side. This can vary in an area such as Ft. Lauderdale, Hilton Head, or New Jersey resorts where a residential owner with a relationship to the firm may also own retail rentals.
Most regional areas have a Realtors Association, Chamber of Commerce or other organization that offers discounted insurance and other benefits to its members. Whereas a larger firm may have a good corporate health plan and other bulk discounted benefits to its employees, you should look at the costs for each that are offered. I have not found that much of a saving on either side, but if you leave a larger firm you will need to find the alternatives that are affordable.
Your business exposure may actually be more effective working out of a smaller firm and being a primary contact for that firm instead of a secondary contact at a larger firm.
Property databases and the Internet have provided smaller firms with much better access to real estate information than in the mid-'90's and before when only larger firms could afford to maintain proprietary property information for a larger market. Launching a significant marketing campaign for a property can be expensive even with the Internet and smaller firms will have a lack of cash resources to compete for major property listings. Deal size, therefore, will be smaller and you will have to strive for volume,
Best regards.
Peter P. Liebert,IV-SIOR
Flourtown, PA
Several years ago, I was attending a Society of Industrial Realtors Annual Spring Conference in Maui. My wife had accompanied me on the trip so that we could also do a lot of sightseeing. Colliers International, a 241 office worldwide firm, sponsored its own company cocktail party the night before the Conference officially began and my wife and I attended the party.
A short while into introductions, a fellow came in from the golf course and he sat down at our table. Andrew Friedlander introduced himself an we discussed our home in Philadelphia, his original home in Brooklyn and his new home in Honolulu. As to how he ended up in Hawaii, Andrew told us that on R&R during his tours in the Army in Vietnam, he decided to take a break in Hawaii after he was finished his last duty tour. He rented an apartment, waited tables, washed cars, etc. to have some extra cash. He said that he paid his apartment rent to an older man who came around once a month and he finally asked the man whether that was his business. Andrew said that he never thought about property management as a business, but the more he spoke to the man the more that he realized how diverse a business commercial real estate could be, particularly in Hawaii. The rental agent began to show Andrew the basics of the business and Andrew decided not to return to Brooklyn.
Forty years later, Andrew is the manager of approximately six Colliers International offices in Hawaii with over 40 brokers and salespeople as his responsibility. Aside from selling and leasing commercial real estate and traditional brokerage transactions through the islands, Andrew's team is involved in all of the other aspects of commercial and industrial real estate.
As one concierge person told my wife and I while we were touring there, "Yes, it is a great place, now where would you ever think of moving to once you are here."
In the past year, a young Army Captain and friend called me from Hawaii. He and his wife were taking in some R&R after his last duty tour and he called to ask me for some advice on commercial real estate firms. I gave him Andrews phone number after I checked with Andrew on his availability. Andrew treated my friend to lunch and introduced him to Colliers' business in the islands. As it turned out, my friend and his wife decided later to relocate to Florida to be closer to their parents. Our Colliers office in Ft. Lauderdale was anxious to interview him and did so. He found a better fit for a concentration in office brokerage with another firm, but I think that it is clear that opportunities do exist with major firms for someone who has an interest, who can demonstrate that they are self motivated and whose comportment (manners, speech, personal grooming, business attire) are all positive. A long time friend told me one night after we and our wives checked in, very late, at a hotel owned by a well known hotel group, "That desk clerk is the person representing this hotel company to its customers and I know the CEO. That clerk's slight rudeness toward us does not at all represent what their CEO wants his company to be known for in their business. He will need to learn that if he is going to be more than the late night clerk."
I mention this because a company such as Colliers or any of its competitors must ensure that a salesperson or broker first meeting a potential customer properly represents the company's image. So much money is spent defining that image to the business community that each person, including all staff, must reflect that effort. Otherwise, a potential customer will choose to hire a competitor whose act is together. My understanding is that customer relation training at Wal-Mart is quite strong for all personnel. I would think that any major restaurant chain has in place a thorough program for staff training and it may pay to observe whether if the customer is not always right at an establishment how the staff person handles a customer who is being a bit particular.
2. Entry
I use Andrew's story as an example of the opportunity that commercial real estate offers. A senior business mentor and good friend of mine told me in Florida in 1971, just at the beginning of that recession, that commercial real estate offered an opportunity to enter a business without having my own capital to invest other than my time and energy, and, with no limit on the size of transactions that could be put together. We discussed this in relation to my going back to law school. His opinion was that it was almost a "sky is the limit" approach, but with some basic sense to it. I had done a few financial reports on potential deals offered to him. I also handed over that year, at my mentor's instruction, a $300k commission check to a broker who he had employed to buy a property that he had settled on the year prior to that. The next year, at the same time, I handed over the same check to that broker as the second half of that commission to that broker. Please realize that in 1972 that commission amount in the onset of that recession was a significant amount of money for any transaction.
Each state has its own regulations for licensure. Florida required a person to take a sales licensing course, pass that, then work in a licensed real estate broker's office for a minimum of two years before being eligible to take a state broker's exam. The sales course is offered by numerous private firms and colleges, evening courses in particular. The cost of the course is minimal. The basic skills for reading, writing and math portions are not difficult. Depending upon your educational qualifications, commercial real estate firms may often offer to provide the course. Smaller, more generalized, brokerage firms may also do the same in order to gain a salesperson.
There typically is a recognized "culture" or business reputation known for a real estate firm in any community, The community can be local, regional or national. It pays to do your homework as to which firm appears to suit your style. The internet is definitely one of the most productive sources for finding a firm's history, its areas of expertise, personnel, and its successes. Recognize that major metropolitan commercial firms often outsource client needs in an outlying area to a smaller commercial firm in that area rather than requiring one of their main office brokers to commit to travel time. Consequently, if you are in a rural market outside or between major metropolitan markets, you should investigate which real estate firms have those relationships for the larger deals.
Your time for success starting in commercial real estate (particularly without capital) will be the result of what you put into it. I had the option in the early '70's of returning to law school and finishing. What I realized most was that I liked being out of an office and "on the street." My attorney friends in Ft. Lauderdale were spending innumerable hours, as needed, in their offices to write briefs, draft documents, etc., all of which that profession requires. My decision was to put in the same hours on commercial real estate that I would have to put in for any law practice. If it worked, then fine, if not I would go back to school.
Considering that the early '70's recession in Florida hit every occupation with almost equal damage, many attorneys had practices with slim billings and clients whose businesses were suffering economically. Several real estate brokers who I met were having very difficult times because the banks were not lending money for deals. Florida had a usury cap of 14% at that time. Deposits were down and when interest rates in California started to go above 14% that is where the money went.
Weekdays in those years, I was knocking on the doors of businesses in the West Palm to Miami corridor. Weekends, I was often painting a house or captaining a motor sailer owned by a friend's corporation. Weekday evenings after dinner, I was at the office reviewing property information, ownerships, tax data, etc. for the next day's driving or phone calls. I found that it was possible to earn a living while getting into the commercial real estate field. I later found out after moving back to Philadelphia, that several of the commercial real estate firms did not mind their starting salespeople to moonlight as bartenders, waiters, or whatever until they had enough experience to close transactions. That has changed somewhat in the larger cities due to the financial strength of the larger firms and their ability to either offer a base salary or draw to new salespersons.
Gender in today's commercial real estate world is not an issue as it was in the '70's. At that time, men only eating clubs were often the norm and women were not often able to match that type of selling locale. The number of women who have joined commercial real estate organizations such as SIOR, CCIM, etc. (which I will discuss later) has increased dramatically over the past 15 years. The commercial real estate courses offered today provide an excellent means of obtaining knowledge that once was taught generally "in house" by senior brokerage personnel responsible for a new salesperson's progress.
Therefore, in considering commercial real estate the aspect of having minimal capital has not changed. Gender is not an issue and many women who have chosen to specialize in industrial or office real estate have done very well. You
can choose your hours, choose your area of specialty(s), choose your market area(s), and choose who you want to approach as a firm to join. Most commercial real estate involes the standard business week, not including late Saturday or Sunday hours (vs. residential Sunday open houses). These are several of the positive aspects of working in commercial real estate. The competition is keen, your competitors respect a good work effort and, most importantly, they respect a strong reputation for any individual.
You should investigate both larger commercial firms and smaller real estate brokerage firms. There are advantages and disadvantages to both.
A). Larger firms may be willing to offer a base salary or a draw against commissions. They may prefer prior business experience, but not necessarily prior real estate brokerage experience that may conflict with what their "culture" is and what their in-house training entails. Typically, a new salesperson would be assigned to a senior broker or brokers to do cold calling, marketing materials, marketing reports for any existing client's property and probably handle property inspections by other competing brokers with their prospects.
A few points on Larger Firms:
Future ownership potential for you in the company may be limited or non-existent.
Control over what market, territory or discipline that you work in may not be your choice. If you are hired for one department, such as retail, that may change if they need personnel support in another department, such as office. You may find that they prefer a new person to rotate through each department and possible each regional office if they have multiple offices.
Depending upon whether the firm is privately held or a public company it could be sold or merged without you being involved in the discussion. There is no real "safety blanket" for any position in a larger firm. If a primary, large, client is lost to a competitor, cuts may be relatively fast to absorb the lack of revenues.
Senior brokers who are successful occasionally leave to join another firm or to start their own competing firm. Clients usually follow those brokers and that could disrupt your potential income if you are in that department and the rain makers leave.
Deal volume can be significant as can be the size of the deals. If an institutional owner (bank, insurance company, pension fund, etc.) has a presence in an urban market, the leasing or sale assignment that they may award to a larger firm can be a "year maker" if the assignment is completed. Usually some year end bonus money flows down to the salespersons who may have participated in the marketing effort.
Senior brokers should have upper level corporate contacts through either a business association, country club, educational institutions, commercial lenders, or contacts referred from other cities where a corporate headquarters may be located. If the firm owners or top brokers are not developing those contacts and relationships, but are relying on the mid-level brokers to do that you may want to look at another firm whose top management is better involved. You want work to filter down from the top instead of getting the crumbs leftover from competing firms who have a solid community (business and non-business) presence.
B). Smaller firms usually will have a broker/owner running the operations with or without broker partners in the firm. Quite often they will have a residential department and a separate commercial department in which a few of the brokers may work in residential and commercial properties.
A few points about Smaller Firms:
Future ownership shares may be offered depending upon deal volume and commitment to the firm. If the founding broker of the firm is nearing retirement age, the opportunity may be better provided that they are maintaining an fully active presence in the community.
Commission percentages may be much more liberal once a minimum threshold of deal volume is met to cover the cost of your desk, phone, secretarial, etc..
A salary or draw is less likely to be offered.
A senior broker may be more likely to have you work directly under him on any property. You will be accountable directly to him and, as should be the case, learn "on the job."
If there is a residential component to the firm, those brokers specializing in that area should be a source of commercial referrals and the same for you referring any possible single family residential to them. Smaller multi-family buildings should be on the commercial side of the business, but motels may be on either side. This can vary in an area such as Ft. Lauderdale, Hilton Head, or New Jersey resorts where a residential owner with a relationship to the firm may also own retail rentals.
Most regional areas have a Realtors Association, Chamber of Commerce or other organization that offers discounted insurance and other benefits to its members. Whereas a larger firm may have a good corporate health plan and other bulk discounted benefits to its employees, you should look at the costs for each that are offered. I have not found that much of a saving on either side, but if you leave a larger firm you will need to find the alternatives that are affordable.
Your business exposure may actually be more effective working out of a smaller firm and being a primary contact for that firm instead of a secondary contact at a larger firm.
Property databases and the Internet have provided smaller firms with much better access to real estate information than in the mid-'90's and before when only larger firms could afford to maintain proprietary property information for a larger market. Launching a significant marketing campaign for a property can be expensive even with the Internet and smaller firms will have a lack of cash resources to compete for major property listings. Deal size, therefore, will be smaller and you will have to strive for volume,
Best regards.
Peter P. Liebert,IV-SIOR
Flourtown, PA
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