Is a career in commercial real estate a good long-term investment strategy?

The speaker theorizes that commercial real estate may not be a strong long-term investment due to the rise of online retail impacting brick-and-mortar businesses, leading to less demand for commercial spaces.

What factors make residential real estate a potentially better investment than commercial?

Everyone needs a place to live, making residential demand more stable. Commercial spaces, especially retail, face significant competition from online shopping, making their long-term viability uncertain outside of essential services like restaurants and grocery stores.

How important is it to understand the local market when investing in real estate?

Understanding the local area is crucial. It allows investors to see changes, demographics, and potential issues (like crime or zoning) that might not be apparent from cap rates alone. This makes you more knowledgeable and confident in your investment.

What advice is given for new real estate agents who feel stuck or hopeless?

The speaker suggests focusing on taking one step at a time, networking by talking to agents at open houses, and gathering information without the pressure of finding a mentor immediately. Building relationships organically is key.

Should first-time investors rely on FHA loans or creative financing?

If available and with sufficient reserves, these options can work. However, in competitive markets like LA, FHA loans are often not considered serious offers. It's important to understand the risks and market conditions.

What is the best way for new agents to find a mentor?

Instead of actively seeking a mentor, focus on gaining experience and building relationships organically. As you talk to agents and brokerages, genuine connections will form over time, leading to mentorship opportunities.

What is the value of following up with people you've interacted with in real estate?

Following up with people you've met or who have shared their progress is highly valued. It shows engagement and allows the creator to see the outcomes of different strategies, providing valuable lessons for everyone.

Snapchat Q&A Part 2: Commercial vs Residential Real Estate - which one is better?

Graham Stephan

Education4 min read24 min video

Oct 13, 2017|15,458 views|514|92

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Key Moments

TL;DR

Graham Stephan differentiates residential and commercial real estate, discusses future commercial RE outlook, and offers career advice.

Key Insights

Commercial real estate is primarily numbers-driven, conservative, and involves complex legal negotiations, making it less personality-focused than residential.

Residential real estate offers a more personal and emotional connection with clients, aligning better with Graham's personality and preference for client interaction.

Graham theorizes that the future of commercial real estate may be challenged by the rise of online retail and remote work, potentially leading to reduced demand for office and retail spaces.

Investing out of state is feasible if one thoroughly understands the local market, though proximity allows for greater personal oversight and immediate presence if needed.

Feeling stuck after getting a license is often a self-fulfilling prophecy; the key is to take small steps forward and focus on learning rather than seeking a mentor immediately.

Practical advice for new agents includes talking to many agents at open houses and brokerages to gather information organically, rather than actively searching for a mentor upfront.

DIFFERENCES BETWEEN RESIDENTIAL AND COMMERCIAL REAL ESTATE

Graham Stephan breaks down the fundamental differences between residential and commercial real estate. Commercial real estate is characterized by its conservative, numbers-driven approach, where deals are analyzed strictly on paper based on returns, expenses, and tenant profiles. It often involves lengthy negotiations with lawyers, complex legal aspects, and triple net leases. In contrast, residential real estate is more personality-driven and emotional, focusing on aspects like lease duration, move-in dates, and the client's personal satisfaction, offering a more direct and engaging client interaction.

PERSONAL PREFERENCE AND CAREER PATH

While initially aiming for commercial real estate due to perceived strong training programs, Graham found it wasn't the right fit for his personality. He discovered that the emotional and personal connection inherent in residential real estate better suited his traits, leading him to find more fulfillment in helping individuals find homes. This aligns with his observation that commercial agents are often older, more suit-wearing, and adhere to a strict 9-to-5 schedule, which contrasts with his more flexible and client-focused approach.

THE FUTURE OUTLOOK FOR COMMERCIAL REAL ESTATE

Graham presents a speculative theory about the long-term viability of commercial real estate. He believes the increasing prevalence of online shopping and the shift towards remote work could significantly impact brick-and-mortar businesses and office spaces. This trend might lead to an oversupply of commercial properties and reduced demand, making it a potentially less robust investment compared to residential real estate, which caters to a fundamental human need: housing.

NAVIGATING INVESTING OUT OF STATE

Investing in real estate outside of one's immediate geographic area is discussed as a viable option, provided a deep understanding of the chosen market exists. While Graham prefers investing locally due to his familiarity with neighborhood changes and development plans, he acknowledges that remote investing can work if one relies on trusted local contacts. The key is thorough due diligence to avoid pitfalls like undesirable neighborhood shifts that could impact property value and tenant quality.

OVERCOMING FEELINGS OF BEING STUCK AND HOPELESS

For new agents feeling overwhelmed and hopeless after obtaining their license, Graham emphasizes that these feelings can become a self-fulfilling prophecy. He likens the journey to climbing a mountain, suggesting that success comes from taking one small step at a time. The advice is to focus on the immediate next action rather than getting paralyzed by the enormity of the task, fostering a proactive mindset to counter feelings of being stuck.

PRACTICAL ADVICE FOR NEW REAL ESTATE AGENTS

Graham's practical advice for newcomers involves actively engaging with established professionals. He recommends visiting open houses and brokerages within a desired working area and asking questions to experienced agents. This approach is about gathering information organically rather than immediately seeking a mentor. Building relationships gradually and learning from multiple sources is presented as a more effective strategy than initiating a formal mentor relationship from the outset.

BROKERAGE SELECTION AND ORGANIC MENTORSHIP

When selecting a brokerage after getting licensed, the advice is to engage with different offices to understand their offerings and culture. Graham stresses that mentors are rarely found by direct request but emerge organically through consistent work and relationship building. Instead of searching for a mentor, new agents should focus on getting their license, talking to various brokerages, and absorbing knowledge from many experienced professionals along the way.

EMBRACING INDIVIDUALIZED CAREER STRATEGIES

The importance of finding a real estate strategy that aligns with personal preferences is highlighted. Graham himself dislikes door-knocking and cold-calling, preferring to focus on other aspects of the business, like leases, even if it means potentially earning less. He emphasizes that effectiveness varies by individual, and while some methods like prospecting work for others, personal comfort and enjoyment are crucial for long-term career satisfaction and sustainability.

THE VALUE OF FOLLOW-UP AND SHARING PROGRESS

Graham expresses a genuine interest in hearing from those who take his advice, particularly about their progress in the real estate business. He notes that while many people reach out with initial plans and aspirations, few follow up to share their outcomes. He encourages viewers to share their successes, such as securing their first lease, listing, or sale, as these updates provide valuable insights and reinforce the impact of the advice given.

Mentioned in This Episode

●Software & Apps

●Companies

●Books

Common Questions

Residential real estate typically involves simpler transactions focusing on lease terms and personality fit, while commercial real estate is more numbers-driven, with complex legal aspects and longer negotiation periods for leases.

Topics

Commercial Real Estate Residential Real Estate New Agent Advice Financing Options Online Retail Impact

Mentioned in this video

locationVenice Boulevard

A street mentioned as having many tile stores, serving as an example of brick-and-mortar businesses that could be impacted by online shopping.

locationFairfax

A street or area mentioned as an example of a commercial location where selling goods like socks might become less viable due to online retail.

companyMarcus and Miller Chap

A real estate company in California that the speaker initially aimed to join for their training program. The speaker was unable to secure an interview with them.

bookFlorida Real Estate Principles Practicing Law

A book related to real estate principles and law that the speaker was reading, humorously interpreted as a sign in response to the question about feeling stuck.

conceptFHA Loan

toolFlorida