How Country Commercial Properties Require a Different Skill Set
By Gary Hubbell, ALC
Accredited Land Consultant
Broker/Owner/Auctioneer, United Country Colorado Brokers & Auctioneers
When people think about commercial real estate, most often they think of an urban or city setting. When you walk down a city street in Manhattan or downtown Denver, Chicago, or Dallas, you’re surrounded on all sides by commercial real estate. Banks, office towers, high-end retail stores, hotels, law offices, ad agencies. When you move out to the suburbs, you see a lot more commercial real estate—strip malls, chain restaurants, tire shops, car dealers, motels, warehouses, fast food restaurants, and dentist offices.
Commercial brokers are a different breed of real estate broker
The properties described above are almost always handled by commercial brokers, who are a different breed of cat. In contrast to “high touch” residential agents who like to coo about evening verandas and mint gardens, they’re pretty dry and matter-of-fact. It has been said that as a group, they’re not very nice. They talk about triple-net leases, cap rates, flex space, NOI, CAM, Internal Rate of Return (IRR), cash-on-cash return, and other stuff that leaves most people bewildered. Commercial agents are a very unsentimental group of people. They sure don’t care about mint gardens. They’re used to negotiating long-term leases on commercial spaces and working with large corporations and real estate managers. Very few big-city commercial deals involve personal residential spaces, and only rarely do residential agents venture into the commercial space.
Commercial real estate is much different in rural markets
The type of commercial properties that we serve, however, are much different than big-city commercial properties. The biggest difference is the personal involvement of the property owners. While many urban and suburban commercial properties are held by investors or corporations who rarely visit the property and certainly don’t want to live there, many property owners in rural areas live and work on their properties. Imagine a 40-space RV park with 12 cabins; a country store with a home out back; an outfitting business with 13,000,000 acres in public land special use permits; an event center with 8 hotel suites, a sporting clays range, and a released-bird pheasant hunting preserve; a tree farm with a standing inventory of $1 million in trees with a classy new home; or a hunting property with an outfitting business, owner’s home, and bunkhouse. These are all commercial properties, but they’re also residential.
Rural commercial real estate demands a dual skill set and a personal touch
These mixed-use rural properties require a different skill set from agents and brokers. We have to understand all the same terms and components as the big-city guys and gals, but we also have to relate to home-town clients who live and work on their properties. While big-city brokerage is matter-of-fact—a corporation wants to rent or sell and another corporation wants to lease or buy—rural commercial properties often involve much more emotion. Many of our clients have spent many decades building their businesses and acquiring properties, and it means a great deal to let go of all that they’ve built. While an urban investor with multiple properties may be willing to take a haircut while divesting one of his holdings, for the rural commercial property owner, the proceeds from the sale may be the biggest part of their retirement. Every last dollar matters. As rural commercial agents, we simply can’t be the like the brass-tack big-city agents. It takes much more understanding. We must align our sales approach to their goals of retirement, finding a replacement property, possibly re-investing the proceeds in a 1031 exchange, or helping to begin the process of planning an estate or a new investment portfolio.
The Accredited Land Consultant designation is very helpful in understanding rural commercial properties
Jake Hubbell, ALC, and I (Gary Hubbell, ALC) are proud members of the Realtors Land Institute. The Accredited Land Consultant designation is one of the most difficult and prestigious designations in real estate. It involves 104 classroom hours involving land use, recreational properties, 1031 exchanges, and one particularly useful course called “Land Investment Analysis”. I’ve taken quite a few college courses over the years, and I have to say that Land Investment Analysis is the most challenging course I’ve ever taken. It shows the formulae that savvy investors use to analyze investment decisions. It’s a very complex, difficult course, but wow, is it ever enlightening. It has helped us tremendously in our commercial brokerage. In fact, commercial brokers strive to attain the CCIM commercial designation, which is also a difficult achievement, but if you already have the ALC designation, you only have to do half the coursework to attain the CCIM designation because the ALC designation is so valuable for commercial purposes.
Rural commercial properties are part lifestyle, part income-producing
Lifestyle is a huge part of the appeal for many of our commercial listings. For example, some folks live and breathe to go fly-fishing, but it’s right out the door at our Kebler Corner RV park listing. Anthracite Creek has excellent fishing for rainbow trout, and the RV park is also right in the middle of some of Colorado’s best big game hunting in GMU’s 521 and 53. Because the winters are cold and snowy there, you may not make as much income there as you would in a park in warmer Southern climate, but man, the lifestyle for those spring, summer, and fall months is out of this world. If you don’t like hot, muggy, humid summers, Kebler Corner is an excellent place to be, but the numbers aren’t as strong. Make your choice.
Explaining the income stream is part of our job as rural commercial agents
Many of our commercial clients make a fine living on their properties, but the reason for selling is often because they just want to kick back, relax, and retire. Explaining the income streams is one of the most important aspects of brokerage, because our clients really don’t like the tax man and they’re taking advantage of all legal strategies to avoid paying taxes. We often end up working with clients to build new spreadsheets to present income scenarios to interested buyers. If you haven’t heard the term “Seller’s Discretionary Earnings” or “SDE” before, it’s a way of explaining the actual income earned by the business. For example, let’s say an orthodontist owns the practice, “ABC Smiles, LLC”, and also the building, “XYZ Smiles, LLC”. The practice (ABC) pays a high rent—let’s say $10,000 a month—to XYZ. The practice writes off $120,000 a year in rent, which brings down their taxable income, but in actuality the orthodontist is paying himself $120,000 a year that shows up as a write-off. You would add that to the seller’s SDE. Or let’s say an outfitter has a $90,000 F350 King Ranch pickup and he’s writing off $1,500 a month in truck payments for his outfitting business. That’s an awfully nice truck for that kind of work, and he could just as well drive a 2012 XLT model instead. That $18,000-a-year write-off would be added to his SDE to show that it’s actually income produced by the business. The SDE number often looks far more attractive than the net income number. Once a buyer understands what the business actually earns, he’s much more likely to pay more for it.
Commercial real estate has a barrier to entry that keeps most residential agents out
You know the saying, “If you want to run with the big dogs, you have to get off the porch!” Well, commercial real estate is running with the big dogs. There is a barrier to entry to list and sell commercial properties. There are several commercial websites such as LoopNet and BizBuySell that are a go-to marketing strategy for commercial properties. If you don’t post your listings on those sites, you’re not doing the job for your client. But they’re expensive! Minimum monthly fees can be $1,000 or more. For a residential agent with one or two commercial listings, the juice is just not worth the squeeze to pay full freight on several commercial sites. It’s a “Go big or go home” strategy, and unless an agent is willing to seriously invest in becoming a commercial agent, it’s not worth it. Plus, many residential agents are simply uncomfortable with commercial properties. They haven’t invested the time to understand the commercial business model, learn the terminology, and understand the mindset. They may have dipped a toe in the water with a listing or two and then got burned. The old standby strategy of “put it in the MLS and wait for the p
hone to ring” just doesn’t work with
commercial.
Here’s how we market commercial properties—it’s a very thorough approach
As mentioned above, it’s important to belong to all those expensive commercial sites. Do we pay those exorbitant fees? No. We don’t have to. Our
United Country franchise has corporate accounts with all of them. We contact our national ad manager and he posts them for us. Because our listings always feature outstanding photography, listing descriptions, and offering memoranda, we seem to get preferential treatment because our listings always look great. But we have other great platforms as well. I have accounts with several other highly effective commercial sites, and then we have UC Commercial. United Country has done the work and expense of building a national commercial property network specifically for small, rural real estate markets. We make great photography, engaging videos, and detailed property descriptions, and we present the numbers in detailed spreadsheets (all of which are protected by non-disclosure agreements).
We are rural commercial property experts—vineyards, wineries, outfitting businesses
We are recognized as national experts in selling rural properties with a commercial component. In 2023, Jake and I were invited to speak at the National Land Conference about this topic. With 600 agents and brokers present, it was the most popular breakout session of that year’s NLC. No other team has sold more Colorado wineries (7) than we have. No one in North America has sold more outfitting businesses (33) than I have. No one is even close. We’ve sold B&B inns and AirBnB short-term rentals; restaurants; income-producing ranches, farms, and orchards; motels and hotels; a grocery store and strip malls; and I even sold an RV park in Fairbanks, Alaska right from my office in Hotchkiss, Colorado. 
Some agents don’t like commercial properties—we do!
While some agents like the “hearth and home” aspect of residential real estate (and we do, too), we enjoy the challenge of brokering commercial properties. We enjoy crunching the numbers, establishing valuations, explaining other business alternatives and future potential, and marketing to the right audience. Commercial may seem dry to some folks, but we find it to be more complex, more challenging, and ultimately more rewarding. Do you need a consultation on selling your Colorado or Utah commercial property or business? Feel free to give us a call and let’s talk about your future.
Gary Hubbell, ALC, is the founding broker and owner of United Country Colorado Brokers & Auctioneers. He is an Accredited Land Consultant and also a Graduate Personal Property Appraiser, as well as an experienced auctioneer. Gary lives on a ranch in Crawford, Colorado, where he and his wife, Doris, raise hay and Labrador retrievers. He is an avid elk hunter, fly-fisherman, horseman, and upland game hunter. He helps provide security at his church.