Investment Sales Brokers

by Derek Loosvelt | March 10, 2009

The Scoop

This type of broker represents a real estate investor who is looking to buy, sell or finance a real estate asset. It applies to all real estate asset classes -- apartments, office buildings, industrial, hotel and others. Investors hire these brokers to provide strategic advice, market knowledge and access to capital. Note that many owners, such as REITs, have their own acquisition and disposition groups and often handle this function in house rather than hire a third party.

Investment sales brokers deal with more complicated issues than residential or commercial brokers. The clients are very sophisticated and the finance involved can be complex. Over the past twenty years, there's been an influx of foreign capital into the real estate market so brokers now have a healthy roster of international clients. Most of the people in this business have a balance of analytical and people skills, therefore, good investment brokers are personable and understand how financing issues will impact investors.

On the Job

Marketing makes up a large part of this business. Brokers are always pitching real estate investors for assignment. They identify opportunities by networking with investors and anyone else that may provide leads. They aren't making as many cold calls as tenant reps, but definitely have to be aggressive. Once a broker identifies the opportunities he must still convince the investor that he's worthy of the assignment. This job involves doing (a lot of) presentations, entertaining, correspondence and endless number crunching. Typically, an owner interviews multiple brokers for an assignment. Like other brokers, these separate themselves with their market knowledge and are generally chosen for it, as well as their track record.

Once a broker gets an assignment, he needs to execute the sale, purchase or financing. The sale of an asset involves putting together detailed property information that will help an investor make an educated decision. The marketing material includes pictures, financial analyses and information about the local market. In a property purchase, the broker helps the investor digest the marketing information and provides a frame of reference for similar transactions. The broker may have to determine which financial structure meets the investor's goals when the deal involves financing an asset.

Investment sales brokers tend to work in teams. Those new to the field come in as associates. This person is the junior on the team and is responsible for marketing material, creating the financial analyses, and any other paperwork linked to the deal. Above the associate is a vice president, who is expected to bring in business, supervises the transactions and has the majority of client contact. He's versant in all aspects of financing and market dynamics. The managing director heads the office and is the ultimate decision maker, responsible for managing all of the transactions as well as the office.

Compensation

Investment sales brokers are very high profile operators in the real estate industry and usually make attractive salaries. Although some do get paid salary, most earn the bulk of their salary from commissions. In today's market, the total commission is roughly two percent of the total sales price (e.g. a $100,000,000 sale has a gross commission of $2,000,000). Unlike residential real estate, the commission is not paid entirely by the seller. For example in the sale of a large industrial park the seller and the buyer may each pay their respective brokers one percent. Commissions are split among the team and the company.

Filed Under: Finance


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