Difference Between Residential & Commercial Real Estate
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When a person decides to get into real estate brokerage they need to determine whether they want to be a residential or commercial real estate agent. Both initially require the same course work and real estate license however there are dozens of differences between the two fields of interest.
- Commercial real estate is more business focused – It mainly involves the leasing and sales of properties that are used to run a business or as investments. The end result is almost always based on investment-centric numbers. Commercial realtors must learn how to leverage business terms and market conditions during lease and purchase negotiations.
- Residential focuses on the needs of homeowners – Mostly properties are purchased for housing for families and individuals and purchases involve more intangible qualities such as emotions.
- Commissions – There are many residential realtors that make very good money however commissions can typically be higher in Commercial real estate
- Hours – If you want to work “normal” business hours then commercial is the way to go. Residential realtors typically have to work weekends and evenings. Keep in mind that doesn’t mean you don’t have to work non business hours in commercial real estate. Depending on the scope and timing of a deal you may have to work after typical business hours
- Training – There is typically more training required for commercial realtors. Within the commercial real estate realm there are other categories that you could specialize in such as office, warehouse, retail, multifamily, etc. Each one requires a certain level of knowledge and training.
- Showing Space – Residential agents are able to show clients houses at any time as long as they have a lock box key and the listing agent does not have to be present. This means you can schedule tours at any time you feel like it. In commercial the listing agent almost always have to be there which means if you have to show 10 properties then the agent has to contact 10 different listing agents to schedule a day/time to see the spaces.
- Access to data – If you are in residential you have access to better data. Most markets are governed by an MLS. If an agent lists a property on the MLS they are required to report when it sold and for how much. The commercial real estate world is the wild west. We are not governed by an MLS. Our data is run by 3rd party companies that charge a premium for access to the data……and the data is not very accurate since agents are not required to report how much properties sold for.
- Time to close – Commercial properties can sometimes take 6-12 months or longer to close. Residential properties typically close within 30 days from the time the property goes under contract.
- Commercial investments hinge more on the numbers and return on investment calculations. Residential real estate is more of an emotional investment.
- Types of connections made – When residential realtors work with families in the purchasing and moving into a new home they typically engage inspectors, mortgage lenders, appraisers, residential attorneys and subcontractors. When a commercial realtor works with a company to find and lease office space they would be connected to movers, architects, contractors, commercial attorneys, IT vendors, furniture vendors, phone and data cabling companies, etc.
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Source: Austin Tenant Advisors