When people ask me how long I have been a broker in commercial real estate, I say about 30 years. I also add, “And I am starting to get good at it!” After 30 years “I know a thing or two because I have seen a thing or two.” And while that statement is true, I am still learning and new issues crop up all the time. The unpredictability factor of working in this field is one of its main attractions to me.
Reflecting on a career spanning 30 plus years invites lots of pontificating. And I wanted to share what really was fun and not so fun about this adventure.
The first topic that comes to mind, is that each of us in this industry has to create something from nothing nearly every day. It’s not like insurance, where policies renew every year. An insurance agent ought to be able to count on a percentage of renewals every year plus grow the business on top of that. Or stockbrokerage/financial management for that matter, where fees are generated from retaining a book of business, a solid foundation each year. That’s not entirely true about commercial real estate. Each year the dials are rolled back to $0.00 in revenue, and brokers have to start from scratch to generate new business and secure renewal/repeat business as well. There is no base income stream, although a fee earned last year may be paid out this year.
I admire my colleagues for living in this environment, and often times thriving, despite the financial uncertainty we all live with. Anyone thinking about entering the business needs to understand that they need to have about a years- worth of expenses in the bank, to get through the ramp up period with less stress. Spouses also need to be on board, to be willing to live with the feast or famine nature of 100% commission sales. Paychecks don’t come on a steady basis!
Over the years, I developed a pattern that smooths out the ups and downs of commission sales. I pay myself a monthly salary, and then pay out most of my income at year end. My goal is to have a full year of expenses in the bank at the end of the calendar year for the upcoming year. That keeps me sane 12 months at a time.
Products have lifecycles, some fast and some slow. If I have done my job well, most of my clients will not need my services again for 3, 5 or even 10 plus years. After 30 plus years, I am reconnecting with clients who purchased buildings years ago that are now considering retirement, and selling/leasing their properties. I truly enjoy working with longtime friends/clients again!
In addition to a long buying cycle, the time it takes to complete a transaction is often 90 days to 2 years. Brokers may work on a transaction for lease that extends to years, rather than months. Build to suit projects often take 18 months to over 2 years. And working with corporate clients often lengthens that timeframe: strategic planning as well as layers of approvals add to the timeline to complete these transactions. For example, I assisted a company in purchasing a land site 4 years prior to their lease expiration. They wanted a good buy on some land and thought the timing was right to capitalize on the market dynamics. As it turned out, they timed the market perfectly and are just now under constructing with their new building. They are on track to move in next spring, 2018.
I alluded to enjoying the fact that each day is different and life is truly unpredictable in this line of work. When I started my career, I actually held a research position. As such, I called on landlords to learn of their leasing activity (absorption) and vacancies in order to gauge the health of the office and industrial markets. One landlord taught me this phrase, DEFAD, drop everything for a deal. He meant to say that when the iron is hot, you have to strike, and be ready to DEFAD. When the phone rings, you have to jump: I apologize if I cut you short on a conversation! One of my first colleagues used to say that he won and lost several deals each day, a true reflection of the emotional rollercoaster that is commercial real estate.
None of us would still be in the business if we didn’t love it. And love the paychecks. This business has been very good to me, and I have managed to raise two children through college, thanks to this crazy field. The financial rewards are more than I had every anticipated for myself, and for that I am grateful. Working in his field has also introduced me to lifelong friends, who share this love of craziness in what we do.
I will keep working as long as the market indicates it’s worth my while. Until then, give me a call. I always have time for lunch.