Commercial Real Estate

CRE Opinion: Progress Toward Making That First Million In CRE

A conversation with a millennial broker who's working towards achieving financial security.

SolenderEliza_SolenderHallIt is hard to believe that I wrote my column “The Millionaire Broker in the Office Next Door” almost three years ago. I still get comments about it and questions which have prompted me to write a follow up.

My inspiration for the original column was a lunch I had with two 25-year-old millennial agents who were seeking my advice about achieving financial security while working in commercial real estate. I thought it might be interesting to follow-up with one of them the see how he has progressed in achieving his goal.

He is still working in commercial real estate for one of the larger regional firms. He got married, and his wife works for a large company in Dallas. His earnings have increased from a draw salary of around $45,000 to a predictable commission income of over $100,000 per year. In addition, he has developed his own “book of business.” That is a lot of progress in short time!

So how does he stack up to the advice I offered three years ago? Below is my advice with a summary of his current situation. He was surprisingly candid knowing that his comments would appear in my column. I have slightly modified some of his information to protect his identity.

  • You don’t get rich fast. It is often said that the first million is the hardest. He understands this advice and realizes it takes time to achieve wealth. It takes hard work and planning. Achieving the success and wealth of his “boomer” role models does not happen overnight.
  • Don’t spend all of your big commission check…keep some in cash, invest some, and put the rest into a retirement account. He has a 401(k) account with his company and invests 10 percent of his income every month.
  • Manage your cash for bad times and big purchases. With cash, try to save at least two to three years of living expenses. He still has a way to go on this goal. However, he has saved enough to cover expenses for at least one year. In addition, he and his wife are putting money aside to purchase a house in a few years. More on that later.
  • Buy insurance. If your company doesn’t offer it, buy disability on your own. In addition, you should have life insurance and liability insurance. He has a high deductible medical insurance plan through his company. However, he does not have disability insurance or life insurance. He realizes he and his wife need to purchase those.
  • Don’t buy or lease an expensive new car. If you want a high-end car, buy a used model. He bought a pre-owned late model German automobile. Good for him!
  • Don’t stretch your finances to buy an expensive house that you realistically can’t afford. We spent a lot of time discussing this issue. He and his wife feel a lot of pressure from their peers to buy a house. However, they believe that the housing market is overpriced and that when they do buy house, they want to have enough money to make a sizable down payment. The plan is to continue living in an Uptown apartment and save for at least another year before they purchase a house.
  • Eliminate debt. College loans and credit card debt mean your valuable income is going toward interest payments. He did not have a college loan. However, his wife does have a college loan and they are working to pay it off now. They also pay off their credit card debt every month.
  • Invest in your career. He is a strong believer in building relationships with brokers and other agents in commercial real estate. He is confident that if he has a strong network, he will be able to outlast his competitors and become even more successful. He still hasn’t gotten his broker’s license. I plan to nudge him some more on that issue.

Overall, I think he is on the right track toward his millionaire goal. He knows it won’t happen right away and that there will be times when he does something extravagant—like buy his now-wife an expensive diamond engagement ring or take an extravagant honeymoon. It is hard to fault him for those expenditures.

If he is persistent in his financial and professional goals, he should be able to thrive even when we have the inevitable downturn in the real estate market. I look forward to checking in with him in another couple of years to see how he progressed toward making his first million. Stay tuned.

Eliza Solender is president of Solender/Hall Inc. and serves on the board of directors of Origin Bancorp.

 

 

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