In 1803, the United States purchased 827,000 square miles of land from France, doubling the size of the U.S. The $15 million transaction known as the Louisiana Purchase was negotiated by Robert Livingston and James Monroe. The pair went to extraordinary lengths to close the deal, traveling nearly 4,000 miles by boat to France and amending the U.S. Constitution to enable a successful purchase. According to an account of the events, James Monroe had extensive property holdings in Kentucky and had been outspoken about a U.S. westward expansion; one might suggest he gained greatly from the execution of the acquisition. Fortunately, after more than 200 years of technological and societal advances, the barriers of entry to real estate brokerage have diminished, yet those who execute the negotiations can still profit as a result of their efforts.
Real estate brokerage continues to be a significant contributor to the development of the United States and is a great avenue a young professional can take toward realizing a successful real estate career. Brokers learn to cultivate in-depth market knowledge with an undying persistence, skills that often differentiate between success and failure in the real estate business.
Step 1: Licensing — It’s Easy
The licensing process for both residential and commercial real estate is the same and being a licensed real estate salesperson enables one to execute both the sale of a $500,000 house and a $500,000,000 office building in Manhattan. In New York State, the licensing requirements consist of a 75-hour course and a relatively simple state test. (Learn the specifics from the NYS Division of Licensing Services.) To put the task in perspective, it would take eight days to watch every episode of Game of Thrones assuming eight hours of viewing in a day. At that rate, it would take under 10 days to be ready for the state test.
Step 2: Find A Mentor, Find A Firm
Congratulations, you’ve passed the licensing test! The next step in achieving your real estate investing dreams is to find a mentor and a brokerage firm. While there are many brokerage firms offering 100% commission and/or pay as you go services, they may not offer you the insight, experience and knowledge that a real estate broker mentor can offer.
Ultimately, in my opinion, it is worth receiving less commission initially, in exchange for a mentor who can teach you to specialize and negotiate a commercial transaction. Finding a mentor is easier than you may think: You are offering them your time and energy to aid in soliciting listings and selling properties; they need you to expand their business and look forward to your call. Searching for a mentor can be as easy as calling nearby brokers that have listed properties for sale on LoopNet or CREXi. Find someone who has multiple high-value listings, which often indicates that sophisticated investors value their skills and trust them to sell their properties.
Step 3: Cold Call, And Cold Call Some More
At 18, with the help of my mentor, I closed my first real estate brokerage transaction. We sold a grocery-anchored shopping center for more than $23,000,000. I knew little about business and had learned most of my real estate financial analysis skills on YouTube. The key to executing the deal was a savvy mentor and a deep desire to succeed, exercised through cold calling. I found the deal by cold calling real estate owners, and although the company we represented in the sale was a publicly traded REIT with endless broker relationships, they appreciated and valued my persistence in cold calling their Director of Acquisitions and Dispositions and gave me a shot at selling the property.
Furthermore, property owners of commercial assets are almost always looking to purchase similar assets to the ones they own. So while many owners will tell a broker who is cold calling that they aren’t selling their property, you may gain a potential purchaser by maintaining contact and asking for an in-depth understanding of their acquisition criteria. The next owner of a similar asset you call may agree to sell and you will then have a potential purchaser to contact with the property details. The more cold calls you make, the larger your contact list of buyers and sellers grows.
Step 4: Invest In Deals You Broker, Or Buy Your Own
According to the latest report by CBECS, by 2012 there were 87 billion square feet of commercial real estate in the United States — plenty of opportunity for you to conquer. Assuming you have successfully transacted on multiple brokerage transactions, you will have accumulated enough funds and are ready to begin investing in real estate. While many real estate brokers pivot their careers to become full-time property owners, others invest portions of their commissions with investors they’ve transacted with. A good broker spends a significant amount of time understanding each asset they sell and the markets they serve and often knows just as much about the properties as the purchaser. As a courtesy to the broker, property owners will often allow brokers to invest some or all of their commission into the transaction, thereby allowing the broker to begin creating further wealth as a real estate investor.
In closing, becoming a real estate broker is often one of the simplest and smartest ways to begin a real estate investing career. You no longer need to travel to France to negotiate a sale. As a real estate broker, you’ll invest time, energy and patience to become an expert in your markets, which enables you to accumulate the capital, deal flow, experience and market knowledge required for a successful real estate career.
- Originally posted on Forbes