Before starting or joining any new venture, Tom Bilyeu (co-founder of Quest Nutrition) makes sure to have this one question answered: “Tell me why I’m going to fail."
They say that millennials are entitled and want everything right now. They call it the “microwave society.” If that is true, it is not our fault. Our environment taught us to think this way and we are ultimately a by-product of pop culture conditioning. I believe we are entitled because we are constantly told that “anything is possible.” We want things right now because we grew up in an age of iPhones, high speed internet connection, Amazon two-day deliveries, and Postmates. According to the movie The Social Network, we can become billionaires by the time we graduate from college. We even have an 8-year-old and his father making $10M a year from YouTube as I write this post.
The argument I am trying to make is that most millennials believe in instant gratification and this idea had led us to become impatient. If you are looking for a get-rich-quick scheme, then commercial real estate is not for you. I cannot tell you how many times I have told a new hire, “It will take on average about twelve months before you close your first deal.” They respond by telling me, “Yeah, I will do it in 4 months.” Then, when the new hire does not close a deal in 4 months, he/she ends up leaving the industry.
I am not here to squash anyone’s dream—be ambitious and be optimistic, but also manage your expectations. More importantly, be patient and trust the process. You must remember that the agents that established themselves in the business are 10-20-year veterans. These brokers are the type of professionals you are competing with. You are trying to eat their lunch—do you really think it is going to be that easy?
I sincerely hope you do not care what people think about you because if your self-esteem is based on what others think, you will not make it in this business. I cannot tell you how many times I have had this conversation when I first started:
Friend: So, how is that real estate thing going? Have you sold any houses?
Me: It’s going ok. I haven’t closed anything yet and I don’t sell houses, I sell apartments.
Friend: Yeah, same thing. But dang you haven’t yet? Why not?
Me: I don’t know, it just takes a while.
Friend: My friend Gilbert already sold a house and he got started 3 weeks ago!
Me: I do not sell houses, dude.
Friend: And you’re not getting a salary?
Me: No, it is all-commission.
Friend: Maybe real estate is not for you.
Me: Hmmm...
Friend: Bro, they are hiring at my company right now. I made $190K last year. $60K base pay plus commission.
Me: I’m good man, but thanks.
Friend: Really? You are going to say no to money?
Yeah. THAT conversation. Sometimes it is difficult to explain your decisions to people that do not have the same long-term vision that you have for yourself.
Commercial real estate is very mundane. This is what our daily routine looks like.
We cold-call. We meet clients. We draw up contracts. We underwrite.
Rinse and repeat. Cold calling takes up 70% of your activity. It can be boring! It is not sexy! It does not look anything like the Wolf of Wall Street. We do not get to close someone over the phone and immediately receive a commission check for $54,000. And it does not sound cool to brag about an 8-unit property you sold in South Los Angeles. It sounds way better to talk about a $7,000,000 house you sold in the Hollywood Hills. Even the marketing looks better. If you fall under this category, then commercial real estate is probably not for you. Why do you think they have not made a reality TV show about commercial real estate yet?
Lower your overhead and get on a frugal budget because it is going to be a bumpy ride. It is hard to weather the initial storm if you do not have any savings to keep you afloat. It also makes your job a lot more difficult when you are worried about where your next paycheck is going to come from. Save up at least a years’ worth of expenses to get you by. But remember, I said it takes approximately a year to close a deal—it may take longer.
It is a grind. If you take rejection personally, then you’re going to have a tough road ahead of you. You may do all the right things and say all the right things, AND still get rejected again and again. You are going to put in 700 calls in a week, and zero meetings. You are going to come into the office everyday at 7:00 am for the first several months and possibly see no results.
You may finally get a listing within the first several months but cannot sell it and end up losing it to someone else. Look I get it, it is tough. It does not make our job easier to know that we cold call every day and it never stops. Here is what the average numbers look like when you are first starting out. On average it takes about 12 calls to get ahold of one person. It takes about 60 phone conversations, to book one meeting. It takes about 2.5 meetings, to get one underwriting analysis. And it takes about two underwriting analyses, to get one listing. Then, depending on the listing probability, you will have a 50% close ratio.
So, by these benchmarks, it will take approximately 7,200 phone calls to close a deal. To add insult to injury, the tough part is not even making 7,200 calls, the tough part is the 599 rejections you must go through to find the one person that will be your first client. Think you have what it takes?
You think you are smarter than everyone and you are looking for shortcuts. I know this one from experience. Now, the industry veterans will tell you to specialize and to focus on building relationships with clients, but the new hire/rookie will respond with something along the lines of:
New Agent: That sounds good but there must be a faster way.
Mentor: Good things take time.
New Agent: What if we build a website and execute digital marketing and build a sales funnel campaign?
Mentor: I’m not sure how that works.
New Agent: Or what if we open a cold-calling center in Thailand to make calls for us?
Mentor: I mean…
New Agent: Or maybe… just maybe… I mean hear me out. Text message blasting every 4 weeks! With links for people who are interested in a pricing evaluation.
Mentor: We have a proven method that works.
New Agent: We should be focusing on all the owners that are in REAP! I mean, they are super distressed….
Mentor: I feel like you are not listening to me.
New Agent: You know what we should do? We should get all the buyers from CoStar and build a super buyer database. And work the buyers and bring them deals.
Mentor: It is better to build that database organically over time.
New Agent: I just want all the leads coming to me rather than me chasing them, you know? I want inbound leads!
Mentor: I think everyone wants that.
New Agent: The numbers in this database suck! We need dialers! I’m tired of only reaching 7 people a day. I want to talk to 40 people a day!
Mentor: It takes a while to research the database.
New Agent: I’m going to cold-call the neighbors of every deal on the market and pitch the deal.
Mentor: You’re just going to do whatever you want huh?
New Agent: I just want to sell one of these big $40M buildings in Downtown LA already you know? That’s all I want. Is that too much to ask?
Mentor: Tell me how you really feel.
New Agent: We should create an algorithm that underwrites all the properties and allows us to send offers in the mail!
Mentor: How many calls have you made today?
New Agent: Calls? Pfft! It is time for lunch, see ya.
In case you have not figured it out yet, the new agent was ME. These were all ideas I had and all the things I would say because I was looking for a shortcut. Unfortunately, it hindered my success and I had to learn the hard way. Now, before you misunderstand what I am saying here, I am not discouraging innovation by any means. Processes can change and systems can improve.
But what I would suggest before you try to disrupt the industry and change the game is take care of the essentials first. Then work on your side projects afterwards. The easiest recipe for failure I see in this business is when I meet a new agent that thinks he/she knows better/more than the senior. The senior makes money when you do, so do you really think they would mislead you and give you bad advice?
If you were thinking about doing commercial real estate and I talked you out of it, then I have done my job. Not that we don’t want you to join the industry, but we would rather you know the truth now, than waste 6 months of your time and find out later. But, if after reading this you are still interested and even excited like I was when someone first told me this, welcome to commercial real estate.
If reading this gets you excited, it is because you vibrate at a higher frequency. You hold yourself to a higher standard. You were born to push boundaries and test limits. You do not want it to be easy because you know if it is, it is probably not worth it. You would rather choke on greatness, than nibble on mediocrity. You realize that you are a shark, and you belong in a shark tank.
Commercial Real Estate is the Navy Seals of sales, and you want to be a part of that. You want to align yourself with the best and compete with the best because you are the best. You are a gladiator, and you were born to fight—and this is Sparta. If this is you, then welcome home.
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