Just as the career of commercial real estate agent isn’t right for everyone, the role of commercial real estate owner may not be comfortable to every person who wants to buy a building. By addressing and tackling a client’s fears, however, an agent may be able to move him past the stage of hesitancy and into a new space.
1. Feeling Overwhelmed
Every agent wants to close a sale, but inundating a new buyer with information, statistics and follow-up phone calls can cause the opposite effect. Instead, ease your client into the commercial real estate process slowly, allowing them to dip their toe, and then their foot into the market before you come on strong with your sales pitch and marketing tactics.
2. Not Qualifying for a Loan
Many people who want to jump into commercial real estate turn their desires into fleeting dreams once they think about the finances involved. This is particularly true in a bad economy when unemployment’s high, money’s tight and lending standards are strict.
Do some due diligence with clients to ensure that their perceptions of the market are accurate. Have them obtain a copy of their credit report, and ask about the type, class and size of space they’ll need. Conduct some rough calculations ahead of time to determine whether they will be viable loan candidates before spending your time and theirs researching spaces that are unrealistic for their financial situations.
3. Depreciation
Real estate is an investment opportunity for many. Therefore, it’s not enough for some individuals to simply maximize the use of their buildings for 10 or 20 years – they also want a guaranteed return on them. While you can’t provide that, you can provide solid market data that paints a realistic picture of a property’s viability over time.
4. Vacancies
An empty unit is every potential landlord’s worst nightmare. Aside from building and maintaining a strong tenant base, a landlord must also alter her rates, concession and tenant improvement strategies based on the market. Explain the intricacies of a tenant’s market versus a landlord’s market, and what she should expect from each. You should also discuss emergency funds with your client in the event that rental capital dries up.
5. Taxes
Tax law can be extremely complicated, even for seasoned agents. That’s why you should stay up to date with the latest tax codes, credits, acts and programs. You should also enlist the help of a real estate lawyer, advisor or accountant who can easily be called upon to answer any questions that may come up early in the game. This is especially important if a client shows an interest in 1031 Exchanges.