The most common response I hear when I ask why someone decided to pursue a career in commercial real estate, is ‘the money’ – more specifically, because there is no ceiling to an individual’s income potential. However, most commercial real estate professionals make less than they would if they simply had a job. In fact, the most recent national commission survey suggests the average CRE professional grossed about $120,000 last year. That’s an average $60,000 net income.
One of the greatest benefits of being a commercial real estate professional is that you own your business. It’s not a job, and for most there is no salary – you earn what you deserve (not what you want). There is also no limit to what you can earn. From a pure income perspective, commercial real estate is one of the most rewarding professions you can pursue.
So why do most commercial real estate professionals continue to live deal to deal, commission to commission, and year to year?
Treat your profession as a job. Commercial real estate is a profession. There is no 9 to 5 schedule, bi-weekly paychecks, or 2-week vacation policy. However, many of the brokerage owners and managers I speak with consistently, share with me that this is the mentality of their brokerage staff. Even worse – they look to their broker of record as an employer, and themselves as an employee.
No financial plan in place. Living commission to commission is the same as living paycheck-to-paycheck, but even worse – at least paychecks are consistent. Parallel to this approach is spending every dollar that comes in – first on expenses, then on material items. Back to my broker of record insights – most share with me that their team members are more likely to go out and buy a new set of golf clubs or a new car then set up a 401K, Roth IRA or Defined Benefit Plan.
Keeping Up with the Joneses. As commissions increase and income rises, there is an equal proportionate increase in expenses. Bigger house, newer car, club memberships, and miscellaneous material items – without regard to personal investments and savings. The “McMansion” quickly becomes the “Money Pit” as soon as the market shifts and the commissions dissolve.
Being in the 90% entrepreneurship zone. Think of every business owner you know: the dry cleaner, the McDonalds franchisee, your dentist, or the person who cuts your hair – and everyone in between. They are all entrepreneurs. Author Dan Sullivan wrote about the three tiers of entrepreneurship – 90% simply look to pay their bills, 9% look to significantly increase their quality of life, and only 1% looks to achieve profound, exponential growth. This is also true with commercial real estate professionals; the vast majority acts as if all they wish to do is pay their bills.
Never invest in themselves. This last barrier is an accumulation of the first four – most commercial real estate professionals simply don’t invest in themselves. A new set of golf clubs, yes – but a course on presentations, an industry designation, or aligning with a coach – no way. The problem is, unless you increase your value – you will never become more valuable than you currently are. Your competition, at least those that are becoming wealthy – they consistently invest in themselves.
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