Lessons from 18 years in Commercial Real Estate

This is a list distilling some of the things I have learned over the years. This is not intended to be all encompassing nor should it be looked on as definitive lessons. Just my hard earned knowledge laid out in brief in the hope it may help others.

(Many of these are written from the perspective of a commercial real estate broker.)

  1. You will find out who you’re really dealing with when there’s money at stake. Platitudes disappear real fast when there’s a $100,000 fee on the table.
  2. There are two types of people in the world: those who see every dollar as something to grab for themselves and those who believe there will always be more. The latter are very very rare and worth everything.
  3. Brokers are not some ethically elevated class of person. They are, just like everyone else, motivated by money. To think otherwise is to delude yourself.
  4. At the end of the day commercial real estate is about relationships. Neglect them at your peril.
  5. Every deal has its own timeline. It may be quick or it may be slow but you can bet it won’t happen the way you want it to.
  6. In a commercial transaction the hardest work is in waiting. The silence. The wait for a call back. Nothing you do will ever be more difficult than the radio silence that happens – sometimes for days – in the middle of a deal.
  7. Every deal is like a miracle when it closes. The number of obstacles that need to be overcome would crush your hope if you outlined every one. The unforeseen ones you’ll have to scramble and find a solution to are brutal.
  8. There are deals that will fail – through no fault of your own – that will put you on the floor of your bathroom in the fetal position. The pain can be soul crushing and leave you empty for days.
  9. There is nothing in the world quite like successfully negotiating a multimillion dollar deal and seeing it move ahead. The rush of endorphins is unrivaled.
  10. You are going to find out exactly what you are made of. You are also going to glimpse into the soul of others and it is going to make you uncomfortable. People can be awful.
  11. Every year you start over. From zero.
  12. You eat only what you kill. If you miss the shot you don’t eat.
  13. In 18 years I’ve had three where I closed no deals for the calendar year. I still worked everyday. I just didn’t get paid.
  14. Yes you can also make half a million in a year
  15. You’re going to work with a lot of people you do not like.
  16. As a broker you are not a party to the deal. You are a facilitator. A shepherd. A manager. But you lack the forced perspective of being a principle.
  17. As a broker you have no leverage in a deal. No real power to make anything happen unless the other parties agree. You may feel like a player but the buyer and seller are the players. You’re just along to file the paperwork.
  18. You will be cut out of deals. Many many deals.
  19. You will have your fee renegotiated at the closing table. You will have clients refuse to pay you. You will have things go sideways and you will not get paid – even though the deal closes. Get ready for that. It’s worse than being knocked out in a fight.
  20. You will be disrespected by nearly everyone in the real estate business. They’ll accuse you of doing nothing for your fee; of being a paper pusher who gets in the way and adds no value. Get ready for the push back.
  21. Your sense of value is going to become warped. Spending your time around the wealthiest people will make you think you are. Long before you actually are. There is substantial risk of ruin in acting rich before you are.
  22. You’re at the mercy of the markets. If the lenders stop lending there’s not much to do until they decide to lend again. It’s like holding your breath until someone else says breathe.
  23. If you work at one of the named brokerage firms they will take an outsized portion of your fees when you’re getting started. Think 50% of everything you make for your first two years at least. Until you produce you’re a liability to them. You have to beat the odds and prove yourself before they’ll back off that number.
  24. Commercial is nothing like residential. Residential properties can be shunned because no one likes the paint; or the kitchen is outdated; or the lighting is bad. Commercial is far more analytic. The building either produces the cash flow or it doesn’t. It either meets the business need or it doesn’t. It’s either in the ideal location or it’s not.
  25. Commercial and residential are very similar. They’re both about ego. Residential is just more pervasive so we’re more acclimated to it. It’s the ego of what someone wants their ideal home to look like. Commercial is the ego of what someone thinks the building says about them.
  26. If you held your own on the playground you’ll get by in the commercial world.
  27. When buying and selling always, always, always have a lawyer who knows what they’re doing. A general practice attorney will bury you. Get a commercial real estate specific attorney. A deal making attorney with a decade of commercial transaction experience can be worth everything.
  28. For every clause in a contract you can be sure there is a way to twist it around. Read and learn a blank contract well before you are going to be involved in a transaction. You will not understand a good portion of it but as things come up in negotiation you will recognize things from the contract and can go back and review.
  29. Learn what an estoppel is. It’s like a password into the commercial transaction world.
  30. Everything is for sale. The only work to do is come to agreement on price.
  31. Everything is negotiable. If you don’t ask you’ll never know.
  32. If it’s not in writing it never happened.
  33. Everyone is in this for themselves. If you don’t cover your ass someone else will take it home as a trophy.
  34. In an industry where the barrier to entry is lower than a drivers license you need to have a good way to distinguish yourself.
  35. If you sell houses then sell houses. If you sell buildings then sell buildings. Don’t try to do both. They’re totally different and you’re looking for trouble to try and do both.
  36. Its real estate with a lot of zeros. Get ready for a cast of characters you’d think could only exist on a Netflix series. They’re all real and a good number of them make a ton of money.
  37. It might take you a decade of trying to gain the respect of a potential client and it can be gone over dinner if you blow it. Relationships and trust are critical in commercial.
  38. In residential transactions one out of ten deals don’t close. In commercial one out of ten deals DO close. Do the math and figure out how much work you have to do on things you’ll never close in order just make that one fee. It doesn’t look like so much all of a sudden.
  39. Just because a potential client shows up to your all important pitch meeting in jeans and boots caked with mud doesn’t mean he didn’t just roll of his 20,000 acre ranch to talk with you. You’re going to need to learn to read people to survive.
  40. Business partners can make and ruin you.