Why the CCIM Designation Matters in Commercial Investment Real Estate
Real estate investment is about opportunity, but not all investment opportunities offer the same potential or merit consideration.
Imagine you’re considering purchasing an apartment building in the San Francisco Bay Area as an investment. There are buildings in a range of price points, with different numbers of units, and in different neighborhoods. How do you make sense of it all and figure out which ones are good investments that meet your financial goals rather than an investment strategy solely based on hope?
On the surface, choosing the right one to invest in might seem like the toss of a coin.
Instead of leaving your decision to chance, hiring a California Licensed Real Estate Broker with a CCIM (Certified Commercial Investment Member) Designation can help you evaluate properties through the eyes of a highly trained real estate investment professional.
The CCIM helps you see things you didn’t notice before. Is the stated property information accurate, or is it a broker’s estimate with no basis in reality of how the property will operate?
Is there significant deferred maintenance that will impact your future cash flow, or possibly require you to put more capital into the property at a later date?
Is it really a good investment or just a money pit?
A CCIM can help you determine accurate cash flow, the annual return on investment, how that investment will perform over the plan hold period, and compare internal rates of return with other investments. How do leverage, depreciation, and taxes impact your return, and how does that return compare to other investments, say your stock portfolio? Is the market demand growing or decreasing? Is the supply of product types increasing or decreasing?
These are all conditions that must be evaluated. A CCIM is trained in these areas.
While no credential guarantees results, access to in-depth property analysis is what drives commercial investors to seek the help of a broker who holds the CCIM designation.
What Is a CCIM?
A Certified Commercial Investment Member (CCIM) designation is one of the most prestigious designations in commercial investment real estate.
Not all commercial investment real estate brokers and real estate practitioners hold the CCIM designation, but those who do have completed advanced education in commercial investment analysis beyond any state’s licensing requirements. They also have demonstrated extensive transactional experience in commercial investment real estate.
Awarded by the CCIM Institute, this designation confirms that the holder has received extensive training and education in evaluating commercial investment properties. But achieving a CCIM isn’t just about completing coursework. Holders must also demonstrate significant real-world experience closing commercial transactions. Each candidate must submit a portfolio of work for review by the CCIM Institute.
The CCIM designation in commercial real estate can be compared to holding a CPA for accountants, or a PE for engineers. It demonstrates a commitment to advanced investment analysis that goes beyond what is required for a standard California real estate license.
When evaluating commercial real estate investment opportunities, access to that level of experience can mean the difference between a profitable long-term investment and a costly mistake, aka a money pit.
Why the CCIM Designation Matters in Commercial Investment Real Estate
Evaluating commercial investment real estate is fundamentally different than searching for a residential home. When purchasing your own home, you might be concerned about the neighborhood, the quality of the schools, and the home’s aesthetics.
But evaluating multifamily properties, office buildings, retail centers, and industrial buildings for commercial real estate investment opportunities involves a completely different set of qualifications.
Commercial real estate transactions can involve millions of dollars. An overly aggressive low cap rate, unrealistic property cash flow projections, extensive deferred maintenance needs, or inaccurate rental market projections can all significantly impact a property’s long-term investment potential.
To make a sound investment, buyers need access to a complete investment analysis. They need to understand concepts such as cash flow, cap rates, market trends, leasing structures, risk analysis, and loan debt structures, including both positive and negative leverage.
A CCIM isn’t required for a broker to represent a commercial transaction, but those who hold the CCIM designation have training and experience representing commercial transactions that go far beyond what most California real estate brokers can offer.
CCIM training equips brokers with the skills to perform a more comprehensive, deeper evaluation of investment properties. That extra level of insight helps their clients make more informed purchasing decisions.
How Is the CCIM Commercial Real Estate Broker Designation Earned?
The curriculum that a CCIM-designated broker in California studies places a heavy focus on education in investment analysis, but education isn’t the only component. Candidates must also demonstrate significant real-world experience by presenting a significant portfolio of past work for review by the CCIM Institute. In addition, they must also pass a comprehensive final exam.
To prepare, CCIM candidates spend a significant amount of their education learning financial analysis. Core concepts like Net Operating Income (NOI), cash flow, T-charts, Internal Rate of Return (IRR), Net Present Value, and investment return before and after taxes are central to the curriculum.
They also learn to use market analysis techniques to understand local economic conditions, demographic trends, and supply-and-demand dynamics. Candidates also learn to analyze vacancy trends, absorption rates, and the effects of employment growth on a market.
Investors seek out CCIMs because they are also highly skilled at evaluating the overall quality of an investment opportunity and decision analysis. Their training focuses on evaluating risk and return, financial structures, and the long-term appreciation potential of property. These skills are indispensable for helping clients decide whether to purchase, sell, lease, refinance, hold, or complete a 1031 exchange.
Commercial real estate brokers with a CCIM designation are also trained in negotiation. They can help their clients with commercial contract structures, purchase agreements, and lease negotiations. They also play a role in due diligence, uncovering the not-so-obvious details that a broker without the CCIM designation might miss.
How Rare Is a CCIM Certified Broker in California?
Only a small percentage of real estate professionals in California are CCIMs and real estate brokers.
That is largely because obtaining a CCIM designation in commercial real estate requires completing multiple courses that are on par with a rigorous professional education.
Then there are the experience requirements. Candidates must submit a Portfolio of Qualifying Experience, demonstrating a history of meaningful commercial transaction experience.
Lastly, candidates must also pass a comprehensive final exam. Though it is entirely self-paced, completing the track can take anywhere from 1-3 years.
Because only a small percentage of commercial brokers have historically held this credential, CCIM holders represent some of the most highly trained professionals in commercial real estate brokerage.
How to Verify a Broker Is CCIM Certified
There’s a saying in the industry: “How do you know if a broker is CCIM certified? They’ll tell you!”
All jokes aside, CCIM holders are extremely proud of their accomplishments. Still, prudent investors must do more than take their word for it.
The best way to verify that a broker is CCIM certified is simply to search their name in the official CCIM Institute directory. Since the certification began over 70 years ago, only around 20,000 have been issued. If a broker is not listed in the official directory, they are not CCIM certified.
You can also ask the broker directly about their qualifications. They’ll be happy to tell you about them, and if you’re lucky, they might show you the exclusive CCIM pin.
How to Choose the Right Commercial Real Estate Broker in California
Investors aren’t just buying a building for looks. They are buying it for its income-generating potential. While there are thousands of commercial real estate brokers in California, not all can offer the level of guidance a CCIM designee can.
A CCIM doesn’t tell you if you can buy a property; they tell you why you should (or shouldn’t) buy the property.
Most brokers can handle the basics of a commercial transaction, but few can provide the level of investment analysis that a CCIM designation in commercial investment real estate can.
Their knowledge of the local market helps buyers understand cap rates, market trends, and comparable sales that determine the property’s fair market value. They also help buyers analyze a property’s potential rental income, operating expenses, occupancy vs. vacancy, and projected returns.
Commercial real estate brokers with a CCIM designation are also trained to identify hidden risks, such as the impact of deferred maintenance on return and cash flow, declining markets, and unfavorable lease terms.
These skills are all highly sought after by banks, institutional investors, first-time real estate investment buyers, seasoned investors, and anyone who wants to understand the valuation and potential financial performance of their investment.
Edrington & Associates: CCIM – Certified Commercial Investment Member – and Broker in California
Holding a CCIM doesn’t automatically make someone the best broker in their market, but the credential does show that they have proven experience in commercial real estate and the advanced education in financial analysis to help buyers make informed decisions. The strongest commercial brokers bring together real-world experience, knowledge of their local market, and a commitment to helping their clients make informed investment decisions.
Having a broker on your side with the investment analysis training and commercial transaction experience that comes with a CCIM designation gives you a competitive advantage.
If you’re considering purchasing a commercial investment property in California, you need a broker who understands not only the financial side of commercial real estate but also the local market.
Steve Edrington of Edrington & Associates is a CCIM-designated broker with extensive commercial experience in both the Bay Area and Los Angeles markets. In addition, Steve also holds a Certified Property Manager (CPM) designation and is a building code inspector. A real estate broker with both CCIM and CPM designations is a very small club of professionals.
He’s also served the local community as the executive director of the East Bay Rental Housing Association and as a member of the board of directors of the California Apartment Association.
Steve combines the advanced investment analysis training of the CCIM designation with decades of professional experience in California commercial real estate, property management, and multifamily investments. That’s a unique combination that enables Steve to help investors evaluate opportunities from both a transactional and long-term investment perspective.
If you’re looking to invest in commercial real estate in California, contact Edrington & Associates today for a consultation. Steve and his team can guide you through your next commercial investment opportunity.