Carefully selecting an experienced, licensed and ethical real estate broker will go a long way in helping you achieve your investment goals. When educating investors, Ron Sparks, MAI, MBA, and Jeff Tolrud, CCIM, managing directors/partners in investment sales for Colliers Arnold, cannot overemphasize these points.
“There really is no substitute for experience,” says Sparks. “Issues will arise during a transaction and a professional broker will have the background and skills necessary to handle them.”
The ability to communicate effectively and uncover your investment objectives and goals are also important factors, adds Tolrud. “The broker’s goal should be to become the client’s trusted adviser.”
Smart Business recently asked Sparks and Tolrud for more details about the intricacies of the investor/broker relationship.
What are some of the most important qualities to look for in a commercial real estate broker?
Sparks: Experience, integrity and professionalism should top the list. A good broker should understand the real estate asset and the marketplace and possess the technical skills to successfully create and execute a marketing plan. Today, the best professionals work in teams. Brokerage teams allow for an improved service offering. Having a quality service delivery platform is also a must.
Tolrud: The broker should understand the needs and risk thresholds of the client, as well as the client’s short- and long-term business objectives. Relationships with other groups such as county/city building departments, architects and attorneys are also important due to the complexities of the many processes involved with commercial real estate transactions.
Why are these qualities so important?
Sparks: Experience is needed to insure that a broker has been through the sales process before. Integrity is an absolute must. A good broker must be able to represent the best interests of his client. The firm should be able to offer a customized marketing approach to meet the needs of each client.
Tolrud: Working with a firm that offers the proper support, research, databases, professional affiliations such as the CCIM network, and if required property management services, offers obvious benefits in terms of expertise and efficiencies. In all dealings, the importance of honesty and ethics cannot be overemphasized. In short, someone you can trust.
What are the most important factors to review when considering a real estate investment?
Sparks: One of the more important, and often overlooked, factors is the level of management or time the property may require of the owner. Some investors just want cash flow and do not want to deal with a variety of tenants, lease turnover or varying occupancy levels. Passive investments, such as single-tenant net leased properties, may be a better fit for this type of owner. Other investors may be willing to accept more risk and may want to consider properties that are well positioned for redevelopment, renovations or conversion to another use.
Tolrud: Investors should consider their objectives. Are they looking for a relatively quick investment or a longer-term investment? What level of management intensity are they willing to take? An exit strategy should be in place as well both for tax purposes and for determining what the investor will do with the profits. A good broker will help the client determine these factors based on the type of property. Does it need to be renovated to add value? Does it need better management to enhance retention? Are there vacancy, maintenance or marketing problems? Is the property being purchased for another use, like redevelopment? You have to evaluate expenses as well as income in order to maximize investment return.
What types of investments are hot right now?
Sparks: Large and small investment properties of all types continue to be in strong demand. We continue to see significant demand for office, retail and industrial properties.
Tolrud: Ron and I primarily focus on non-institutional, private-equity investments that continue to see significant activity.
How can investors get the most out of their relationship with the broker?
Sparks: Clients will benefit most by being honest with their broker (trusted adviser) about their situation, goals and expectations. Once these factors are understood, it is the broker’s job to educate clients on how to best meet their goals.
Tolrud: We strongly believe in setting reasonable and attainable goals in advance of beginning an assignment. We will not over-represent a property to an owner simply to get a listing assignment. We work for clients who we feel we can help the most. In our case, we can provide a tremendous value-add proposition with our firm’s capabilities, history and reputation to an individual’s real estate investment.
RON SPARKS, MAI, MBA, and JEFF TOLRUD, CCIM, are managing directors/partners in investment sales for Colliers Arnold. Reach them at (813) 221-2290.