T3, T12, IRR, NOI, Cap Rate, Equity Multiple…how to make sense of what’s what.  After you’ve gathered much of your due diligence materials, you need to update your proforma to account for what you’ve learned and how it impacts the transaction.  Stephen addresses these issues along with how to avoid common proforma mistakes, such as underestimating real estate taxes post-sale, adjusting for inflation risks on operating expenses, and the fallacy of using the seller’s insurance premium in your proforma.

Going through the due diligence process during a limited amount of time can be a daunting task, especially as the numbers get bigger and the property complexity rises. Stephen shares more best practices for buyers and their brokers on how to navigate the due diligence process and avoid the distraction traps that can cause problems.

When your client is exchanging their $2,500,000 property up to a $6,000,000 property and they need your guidance during the due diligence property, how are you going to assist them as the buyer’s broker? Stephen has been through this process many times before, and in this podcast, he shares his insights from his years of commercial transaction experience. This podcast addresses many of the traps, oversights, and costly mistakes that a buyer can make during the due diligence process.

When a commercial broker takes on a new listing, they need to do the necessary pre-listing due diligence before taking the property to market. In this episode, Stephen works through the tasks every commercial real estate broker should go through before they bring their client’s property to the market. Stephen addresses some of the mistakes brokers make, and, of course, how to avoid making those same mistakes.

In this episode, Stephen discusses the importance of having regularly scheduled marketing reports that each listing broker should provide to their clients. These reports help to keep the seller informed of the listing broker’s activities, keep the listing broker focused on marketing the listing and engage the client in the sales process. Best practices include defining at the start of the listing agreement when the reports will be provided and having a streamlined process to produce quality updates efficiently.

You can experience the same issues as the sale of commercial real estate when selling businesses. By signing a CNRA, you do the following.  Protect against employee poaching by a competitorProtect tax returns and bank statements (2nd level of the info provided after going under contract)Control landlord conversations, especially when the lease is coming due and the landlord tries to take advantage of the situationPrevent unauthorized disclosure that the business is for Sale

Commercial buyers need to be proactively contacted, gas station owner example, not like residential where you put in the BrightMLS and get calls Create your list before launching your listingGet your list from tax records, CoStar, and research onlineHave your Offering Memorandum created so you can launch your listingCreate a buzz, create momentum

CRE auctions are here to stay, costar buying ten x, you need to have a strategy Our partner is CREXi and our auction coordinator can vet the dealSeller is motivated to sell and will accept a lower price in exchange for a quick close – it’s not always about priceCan benefit from the transparent process to sellProperty won’t get better with time, like a closed restaurantHave a portfolio to sell

It is important to understand the nature of Confidentiality and Non-Reliance Agency.  Specifically, these concepts accomplish as follows,  Meant to protect sensitive and non-public informationMeant to protect broker and seller from third party info that you can’t verify or validate aka financials or third-party reportsStill redact personal id info like SSN, names in residential leases, and contact infoCarefully gather and scrub all infoAutomate the signing process with CREXi, maintain all info there

You want to do the business but you need the business so what do you do?  It’s actually very straightforward.  You just have to decide to do the work.   Know What You’re Doing If you’re going to pursue a specific vertical market specialization, have a strong understanding of the business.  I realize you have to do business to get a stronger experience level but at least invest enough time to have an excellent understanding.  This would include  Property Type KnowledgeValuation KnowledgePlayer KnowledgeRegulation KnowledgeMarket Activity Knowledge To gain this knowledge, you need to read, call, discuss, follow and write. You need to insert yourself into the industry.  So go do it.

Most people think that they need thousands of potential customers to be successful, which may be true with many types of sales positions. Still, you can be wildly successful in commercial real estate with a small loyal community.   Be Recognized as a “Broker” It’s not enough to be smart. You have to be able to connect buyers and sellers.In CRE, buyers are sellers, sellers are buyers, buyers are landlords = repeat business.Work with clients that are in the business of buying, owning and seller CREYour goal is to be a Power Broker i.e. a broker everybody needs to know within a specific vertical market or geographic market.   Quality over Quantity Twenty Five professional CRE clients are better than a thousand wanna be’sFocus on who you need to work for that can change the trajectory of your entire business career.Stop just taking leads and going in every direction. Instead, put most of your effort into developing a specialization that allows you to be the Power Broker.You want clients that know they need you just as much as you need them because you’re influential and connected.   Understand the Numbers Operate under the 5 x 5 programGetting new clients is to time-consuming so focus on repeat clients that have consistent CRE activity.Pursue clients that have their own credibility that you can leverage to get more clients If you have a loyal community of professional CRE buyers and sellers, you’ll be wildly successful.

Your value as a broker is directly related to who you know.  Being a broker means you know people, and can broker deals between buyers and sellers, and you have access to resources and industry contacts to make deals happen. Which investors take your calls, and they will make buying decisions based on your recommendation.Which lenders want to work with your clientsWhich contractors will do work quickly, trust you will pay them, and do a quality job at a fair priceWhich title companies will get you a title search quickly, and handle a complex closing for your clientWho are the most well-connected people you know and are you tapping into their networks?

Have a professional image that matches the business you want to doLearn to write or hire someone to do it for you. Proposals, OM’s, financials. It’s a requirement.Know what you’re talking about. Stay on top of the market, be prepared for appointments, and network with other CRE agents.Have a relationship with at least five, preferably more, investors that will buy from you because you said it was worth buying.Have money to invest in yourself and your marketing. If you want to compete for big commissions, then be ready to invest in the deal.

-There are two types of commercial agents - those that know what they’re doing and those that don’t -One reason why agents don’t do an OM is because they don’t know what they’re doing. They want the buyer to figure it out for them -If you’re not providing enough info for you to buy it, you’re not digging deep enough -If you don’t know it, learn it. Read other agents OM and see what details they provide, rise up to be as good as or better than the best CRE broker in your market -Partner with a broker that does know what they’re doing or at a minimum get solid admin support -Invest in your education. If you won’t invest in yourself, why should someone else?

It’s All About the Financing -Know bankers, lenders, hard money, bridge, and, capital market lenders -Commercial lending has a high level of character associated with it. If you have a reputation that helps a client get a loan, that’s meaningful -The opposite is true - so you have a reputation if only having poor credit clients, that’s not good either -You need to know market financing terms to build a pro forma -You need to know how long it takes to get financing. An SBA 504 loan can take 4 months.

Creating Effective OM's What is an OM and why it’s important Creates credibility in the listing - what would you think of a residential listing with no photos and no description Demonstrates your competence as a commercial real estate broker - which gives the buyer confidence, the buyer’s agent confidence as well as your clientAnswers the buyer's questions so they can easily make an offerForces you to think thru the deal - does it make senseLet’s your market maker focus on buyers and not filling in the blanksShows prospects that you’ve put time into preparing the property for the market so they should take the offer seriously. It gives you the opportunity to vet the deal and flush out any issues before it goes to market (missing financials, missing documents, etc…) What are some of the key characteristics of an effective OM Professional photographs or professional looking photographyComprehensive property level information - size, zoning, features, benefitsAccurate high-level financial information that a buyer’s lender could rely on for a pre-qualification of the dealProfessionally presented and consisted with the C21 Commercial brand The larger the transaction, the more time you put into it.  Some OM’s may take 5 - 10, even 20 hours to create, and that’s okay if it’s going to be a sizable commission transaction.  I believe that if you put in the effort upfront in the OM instead of providing all of the details on the back-end and being reactionary, you’ll be more effective in your marketing and you’ll get the desired response from the right buyers.

Get the Basics Done Have a professional image that matches the business you want to doLearn to write or hire someone to do it for you. Proposals, OM’s, financials. It’s a requirement.Know what you’re talking about. Stay on top of the market, be prepared for appointments, and network with other CRE agents.Have a relationship with at least five, preferably more, investors that will buy from you because you said it was worth buying.Have money to invest in yourself and your marketing. If you want to compete for big commissions, then be ready to invest in the deal

What Type of CRE Broker are you? Success comes from focus, control your business flow to be successful, don’t go in 20 different directions -Vertical market specialist -Deal size within the vertical market - where are you uniquely competitive -Local or regional focus on all community commercial -Sale or leasing - hard to do both with some being very difficult -Buyer or tenant transactions -You need to have access to the data resources to be a specialist If you’re not going to specialize in it, and it’s very unique, don’t do it alone, partner with an agent ex airplane hanger

Winning Bigger Deals – Part 5 – Where Big Deals Fail -To Time Consuming and Interrupt your other business – How does the deal affect your image with your clients? A team image can deflect any concerns. -To great of a financial risk – without guaranty of a sale. All or nothing transaction vs many smaller transactions -You don’t follow your proposal and what your promised – keep referring back to what you wrote -Team Leader doesn’t delegate and the process falls apart – trust your deal partners – they want success too -Underbidding the commission – big deals can feed your ego but they also need to feed your bank account

Winning Bigger Deals Pt.4 -If you’re the deal manager, then be a leader – and allow the agents to do their job when you assign tasks -Weekly deal calls are essential for communication and to keep everybody on task -Only the deal manager makes strategic decisions, not the supporting agents – i.e. do you accept an offer, what should be the asking price, etc..? -Your split on a commission matters less than the dollars being earned – 20% of a deal that’s generating $200,000 is still $40,000 – and for a limited role in a transaction -Follow the process the deal manager sets – if you have to use DropBox, use DropBox. Google Docs, status reports, etc…