Advice for College Students Looking to Get into Brokerage Part 2

6. Build your own model

I am a bit of a math nerd, so in my mind, the next step is the “fun part”. It is now time to build your own financial model. Each OM you have will likely include operating projections — also called a proforma — for the asset as well as a rent roll. Do not copy their model, but using the information, build out your own functioning proforma. Do not try and build a “master model” that you can re-use in the future and will apply to all different types of investments. Start from a blank excel sheet and build a model specific to your deal. After starting from scratch 20+ times (or 100+ times) you will have a better sense of a layout you like, formulas and shortcuts you like to use, and what information and model “features” are or are not important. This experience will come in handy in the future. Your model should be dynamic and respond to the various inputs you have for inflation, leverage, interest rate, acquisition price, exit capitalization (cap) rate, and so on. Also, you should go ahead and model out leveraged and unleveraged cashflows. At the end of the day you should have determined a price that you think makes sense for the asset. Take your model and price and call back the broker. See what they think of your offer and compare notes to see how your analysis compares to theirs. Your analysis will likely be “wrong”, and that is OK. This exercise forces you to think critically about a real deal, and there is no better experience than that! Also, if you have questions about debt or other assumptions, make some phone calls. Use this as an excuse to build your network further, call a banker or mortgage broker to get debt information. Call people in property management to ask questions about operating expense assumptions you have made. The list and opportunities go on and on. When you are finished with your model for deal one, move on to the next one! Remember, a lot of the information in your model will remain confidential, so make sure not so share you model with anyone outside of the brokerage that gave you the OM.

7. Write your own original OM for your favorite asset in town

Now that you have read and analyzed a handful of OM’s, the next step would be to write your own. Think about the various categories of data that the OM’s present to a potential buyer. Why is that information important? Do you notice any trends across asset class and size? Do you find that some asset classes or brokerage shops require or provide information different from others?

To write your own OM, the most important step is to pick the asset you are going to be “presenting to the market”. My advice would be to pick any building in your market that is publicly accessible, and you might as well make it your favorite building because you are about to spend a lot of time educating yourself on every aspect of the building.

Now comes the fun part, research. You will likely have to get creative in your research but try to have as few assumptions and guesses in your data as possible. Need to know what tenants are in the building? Go to the lobby and read the Tenant Directory. Need photographs of the building? Look online or take your own (be warned most skyscrapers with lobby security will not like people taking photographs in the lobby, so be sure to get permission first). You can base some of the details off of what you know of the market, such as prevailing rental rates and operating expense line items. Building information such as parcel size, building size, and tax data can be found on iMaps if you are in wake county. Your local county tax office will likely have a similar resource.

Once you have compiled the OM, send it out to the brokers in your network to reviews and get feedback. Having a tangible asset to share and get feedback on is a great “excuse” to get in touch with the folks in your network. In general, people like helping other people. Always ask directly for ways you can improve, and when they give you advice, make the updates and send them back the revised edition. People appreciate when their advice is taken to heart.

8. Get certification/training

Certifications not only look good on your resume, but I find that having an educational structure also forces you to broaden your experience. You can go online to get certified in Argus Enterprise, which is the software that is used by almost every brokerage shop to underwrite deals, as well as take supplemental training in excel and financial modeling specifically. When I was in grad school, I got Argus Certified as well as took excel training from Training The Street. The TTS training was more general focused on finance and banking, was helpful in teaching shortcuts that I still use daily. There are other online courses provided by folks like Adventures in CRE that will give you specific real estate modeling help. One bit of training and certification that I wish I completed when I was in school but didn’t was getting my NC Brokers License. If you plan on staying in North Carolina (or whatever state you are currently in) then I highly recommend getting your license. You might not need it right away, or you might never use it, but if you are in a position where a license is required, you will be glad you went ahead and got it. The training is not terribly expensive, but it does require time. If you don’t get your license now, you will have to take weeks off of work, or nights and weekends away from family and friends when the job requirement comes up. As I said earlier, the opportunity cost for your time will only go up from here. The financial opportunity cost of your time — when you could otherwise be making money — or the personal cost of your time — when you can otherwise spend time with your partner, kids, or friends — only goes up as you age. Also, since your license is good for life if you keep up with CE and your fees, you will never lose it. As of this writing, the brokers 75-hour course in NC is not available online, but that may change in the coming months.

9. Help a small LL broker update flyers

Working on real deals and projects that provide tangible value to your broker network is a great way to not only learn the market, but also build relationships. One way to do this would be to help update flyers for a local landlord rep broker. There are two ways you could go about this, the direct ask, or completing the work on spec. Any large brokerage shop is going to have an in-house graphic design department, but small 1 or 2 person shops may do the work themselves. For the direct ask you find a broker who mentions doing the work themselves, ask if you can help out. Explain why you want to help — to learn the market and sharpen your skills — and offer to update one or two properties no strings attached. The “on spec” strategy is a bit riskier because if forces you to make some presumptions and you need to be careful to not come off as judgmental on their current marketing collateral. That said you should be fine by updating a flyer and sending it to the broker and asking for their thoughts and feedback. Again, simply explain to them what you are hoping to do, learn the market and sharpen your skills.

To do the actual work, I would download a program called Inkscape. Inkscape is comparable to Adobe Illustrator, except is open source, and therefore free. There are plenty of YouTube tutorials on Inkscape to teach you even the most advanced techniques. I like the tutorials by TJ FREE and Logos by Nick.

10. Learn online data resources

One last area of learning is data. Understanding market data will be a never-ending quest. Not only because the market and therefore the data is always changing, but also because landlords, tenants, managers, and investors are always tracking new metrics. Wake County does a fantastic job with their GIS portal, called iMaps. iMaps provides free parcel level data across the county. This is a great resource for all kinds of information about ownership, tax history, and parcel details. Another free source of data is Loopnet. Loopnet is the free/public arm of Costar, the largest commercial real estate data shop in the country. Loopnet provides listings of properties for sale and lease. It is a great way to find properties, brokers contact info, and get a point in time snapshot of where the market is pricing wise. If you have access to a Costar account, I would learn everything you can about that platform as well, but Costar is expensive and therefore out of reach for most students. The last resource is one that is the newest to me. Landgrid is a pay by the month service, but at $10 for an individual account, it is quite affordable. You can choose to only subscribe for a month if you choose. Landgrid provides a national repository of parcel level data. One of the main advantages to Landgrid is that you can filter and search parcels.

CLOSING THOUGHT

Wherever the market heads in the future, one of the first segments of the market to start moving will be asset sales. People will be buying and selling buildings and or land. This article is targeted to undergraduate students who are currently navigating the new-normal of schooling from home. That said, many of these educational and network building opportunities can be utilized at any point in your career. In fact, as I mention above, you should always be building your network. I strive daily to increase the strength and breadth of my network. It is a never-ending process.