buildingBy Dan Bates

Most graduates of real estate licence programs head directly into the residential side of the real estate brokerage business. As the owner/broker of record of Binswanger Hectare Commercial Realty in Mississauga, Ont., I can fully understand why, for many reasons. The No. 1 reason I am told is that the first commission cheque will come much sooner.

This is true in most cases, so those who do decide to get into the commercial side of real estate should have some cash stashed away. In my 23 years of commercial real estate experience, the first commission cheque lag time is usually three to six months and the cheques may not be that substantial. The general rule of thumb for someone who is serious and willing to work hard and smart is that it takes closer to two years to start making “good money”.

After that, the sky is the limit as to how much an agent can make selling and leasing commercial real estate. The main advantages to working in commercial is that the hours are more in line with business hours, traditionally 9 to 5, Monday to Friday. However, some nights and some weekend time is what sets the high earners apart from the low earners.

The other main advantage is that the sell is less “emotional”. Business people deal with contracts all day long and take the emotion out of the deal. “Business is business” as the saying goes. On the residential side, emotion can very much come into play. After all, someone’s home is usually their largest asset and they may not have done a deal for years, so it can be traumatic.

Once someone has decided that commercial real estate is their decision, the next step is to decide where to work and how to work. There are three different scenarios available to commercial agents. They are:

1) start your own brokerage and work from home or

2) become employed by a boutique broker or

3) work at one of the larger brokerages.

There is no right or wrong, but as in any business there are pros and cons. Let’s start with opening your own brokerage. While you will receive 100 per cent of the commissions, you will also be doing all of the paperwork including that for the local boards, regulators, FINTRAC, corporate taxes, year-end statements, HST and financial audits. This can be very time consuming and take away from your core selling time.

The other disadvantage is the lack of interaction that can be very beneficial when working in an office with other agents. Quite often when facing an obstacle in trying to get a deal done, bouncing ideas and solutions off another agent is helpful.

A significant advantage of having your own brokerage can be the tax savings. I have worked with many agents over the years who make a lot of money, but also pay substantially more in tax than if they had their own shop.

Another alternative is to work with a boutique-type brokerage. The advantages here are that you will not have to fuss with a lot of the paperwork mentioned above but support may have some limitations. Research can be somewhat limited; however with the Internet today, most information is available to allow a commercial Realtor to succeed. A boutique shop is often more personal and agents will have a tendency to work together, which is a huge advantage. The splits in a boutique shop will also be much more favourable. Some boutique shops that are independently owned have an international or global affiliation of some sort, putting them on a level playing field with the big brokers.

Choosing to work at the big brokerage also has its advantages and disadvantages. The main advantage is the branding and research, and the support staff is deeper. However, the agent pays for that in lesser splits and needs to weigh the advantages vs. disadvantages. Also, within the large brokerages there is often competition between agents, which can lead to in-house situations where some agents may not be able to go after certain accounts or opportunities because a senior agent may have already claimed stake to the account.

Where you choose depends on your personality and make-up. Entrepreneurial types would start their own firm and take a chance on failure or success. The agent who has some entrepreneurial spirit may chose the boutique broker because they do not need all the services offered by the big broker and may prefer the “family” atmosphere and better splits. For the agent who prefers the large broker, splits may not be as important as the brand or security of working for a big brokerage.

Whatever route you choose, you’ll find that commercial real estate is competitive and the saying, “You eat what you kill” is very true. Like everything else in life, success means taking responsibility for yourself and success comes to those who make the extra 10-per-cent effort.

Dan Bates is the president/broker of record for Binswanger Hectare Commercial Realty in Mississauga, a boutique commercial brokerage with a global platform with Binswanger USA, since 1978.

13 COMMENTS

  1. someguy333
    All Realtors choose which areas they want to specialize in. Our associations provide us with the training and courses we need to help us do our job efficently. It is very common to find Realtors ( especially Veterans) having multiple areas of specialty.
    Sincerely,
    Rita Giglione,
    Broker of Record/Owner
    GREEN PINE REALTY LTD
    http://www.ritagiglione.com

  2. One does not just become a commercial real estate agent. You need to have knowledge and expertise in a related industry in order to gain a foothold in this industry and residential real estate experience doesn’t count for anything.

    • How is residential real estate sales not a related industry? Although very different, there are several similarities between the the two. They’re both dealing with the sale of real property, contracts, clients, and negotiations. Coming from residential, I was hired on to one of the largest commercial real estate brokerages in the world beating out several competing applicants from other industries largely because because of my experience in residential.

      • Sorry but if you sell houses that is not a legitimate segway into the commercial real estate industry. I understand that may sound snobby but it’s true. Residential transactions are very basic and usually consist of the same 2-3 conditions of financing, inspection, and insurance. There is little creativity and knowledge required to pull that off. The vast majority of residential sales tactics stem from using pressure tactics based on sellers/buyers emotions.

        The knowledge required for commercial real estate stems from shadowing other brokers in the field for extensive periods or knowledge in a related industry such as commercial financing, real estate law, commercial construction etc.

        I am yet to come across a residential agent that can write/negotiate a 30-50 page lease, use BOMA standard of measurement, properly calculate monthly rent, understand the complexities of commercial financing, have a realistic perspective of build/retrofit costs, understand the correct approach to determine correct value of income properties, and grasp the importance of environmental contamination and its impact. And more…

        So if you think trading in residential real estate qualifies you to be knowledgeable enough to do a commercial transaction I sincerely feel sorry for your clients. You are in fact misrepresenting them.

        • someguy333
          You sound as if you are new to the industry.
          I Listed a Commercial property in Burlington at $1,200,000. The property sold in less than 3 months for almost full price due to my strong marketing plan.
          Previously to me listing it, a so called Commercial Realtor refused to List the property for over $650,000, and I told the Seller I will list it for what he wanted ….$1,200,000.
          I made the Seller over $300,000 more profit, and he was so pleased with my efforts he bought a $500,000 Residential property from me.
          I was also pleased with my Commission :)
          I suppose hard work, great ethics, listening to your Client, long time experience nets great results.
          Seems like you need to become more informed about our industry.
          Sincerely,
          Rita Giglione,
          Broker of Record/Owner
          http://www.ritagiglione.com

          • LMAO
            WOW
            You sell ONE commercial property and use a line like, “You sound as if you are new to the industry.”
            I didn’t know that is all it took to be an expert on commercial real estate! Thank you so much for weighing in your opinion because you lengthy experience speaks volumes!

            So you list a property for $1.2 million and sell it in the $900,000’s? Wouldn’t that mean you over priced the property? Hey, I’m glad you sold it! Rather, this sounds like a shameless plug for yourself to claim you have done something magnificent and can pull it off at the drop of a hat then back link it to your website. Classic bad SEO agent move. Brilliant! I hope that brings all sorts of commercial clientèle to your website.

            Now that you have sold one commercial building you should put that on your business card! I bet you can write a lease blind folded.

            Funny you mention, “New” to the industry. My previous post mentions several areas of knowledge a commercial agent should have to properly represent a client…yet you ignore all of them and plug your single commercial sale instead. So are you stating that knowledge of BOMA, leases, environmentals, investment analysis etc. are not important topics in commercial real estate?

            Ignoring those topics shows who is new to commercial real estate.

          • Even a blind squirrel can find a nut. Selling a million dollar property does not entitle an agent to say they are a commercial broker anymore than an agent who writes a contract can call themselves a lawyer. Anyone can list a property and get lucky but true commercial professionals are 100% focused and dedicated to knowing everything possible about the market. It is simply impossible for someone who is also showing houses. Without question, these “resi-mmercial” agents are doing a disservice to someone.

          • Realtors are licenced by RECO to practice Real Estate in Ontario.
            This industry has various areas within Residential and Commercial where opportunities come along.
            In my experience Realtors work carefully to ensure they serve the best interest of their Clients ( as our Rules and Regulations dictate ), and often team up with another Realtor to ensure proficiency.
            All Realtors have access to Commercial and Residential Data through our Real Estate Board allowing them to have a diverse sales background.

    • Many Residential Realtors work with Commercial Realtors and vise versa. That is the best way to acquire a strong knowledge base, so that we can better serve our Clients.

  3. This article is ridiculously biased. How convenient that your explanation of the boutique business model doesn’t have any disadvantages.

    This nonsensical drivel is based used as their own promotional material and should not be confused with actual advice.

    • I have found bias exists in many forms (articles, meetings, organizations….) and with experience one can filter it, and make informed decisions.
      Sincerely,
      Rita Giglione
      Broker of Record
      Green Pine Realty Ltd, Brokerage

  4. Very insightful article, thank you.
    Your comment:
    “Also, within the large brokerages there is often competition between agents, which can lead to in-house situations where some agents may not be able to go after certain accounts or opportunities because a senior agent may have already claimed stake to the account.”
    Would having a Buyer Agency Agreement signed by Client, not help prevent that?
    Sincerely,
    Rita Giglione
    Broker of Record/Owner
    GREEN PINE REALTY LTD, Brokerage

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