Unless you have taken real estate schooling, bought an extensive amount of real estate or closely know an agent or broker, you probably don’t understand the differences between commercial and residential real estate. While the occupations share similarities, they are dramatically different positions. Let’s take a look at the distinction of the two roles and the differences in selling commercial versus residential properties.
First, let’s tackle the names of each position. The terms realtor, broker, and agents are widely known, but each holds its own meaning. An agent refers to anyone who practices real estate. A realtor is a broker or agent that is a member of NAR, the National Association of Realtors. In Commercial Real Estate, the agents are referred to as brokers, whereas Residential Real Estate agents are called realtors. Typically, however, even when commercial real estate agents are members of NAR, they aren’t referred to as realtors.
As mentioned before, commercial real estate and residential real estate are very different positions. Comparing the two is something like comparing peaches and apricots. They are both from the same family but are also strikingly different. A look at the general descriptions of each position helps give a better idea of the contrast between the two careers. Commercial real estate focuses more on the business side of real estate. A broker’s clientele consists of business, large or small. Brokers do sell office space and buildings, however, a lot of the time, a broker leases property to clients. Residential real estate tends to focus more on the needs and wants of a homeowner and her family. Residential sales have more to do with the emotions of clients, whereas commercial sales are cut and dry, relying on numbers and calculations for sales.
Now that we have an understanding of the two positions let’s take a look at the disparity of the two properties. Residential properties are easier to sell because the demand for a home is always there. Residential properties can also be leased, usually with a contract of one to two years. The leases are reasonably easy to read and should be understood by each party. If the renter decides not to renew the lease, the realtor can begin looking for a new client. The downside, however, is that some tenants do not pay rent on time, while others refuse to leave the home when asked making the eviction process more difficult. Commercial properties tend to be more profitable due to more cash flow and steady returns. The leasing for commercial properties is typically longer leading to higher cash flow. The leases for these properties are far more in depth discussing pricing, value, and commercial rents. Commercial real estate can also experience unfavorable tenants. However, it is far easier to evict than in residential real estate.
Residential real estate and commercial real estate both have strengths and weaknesses, although it is tough to discern which is the better position. Typically an agent starts with residential and moves into commercial over time. Before deciding which position suits you best, look at your goals and see which role aligns better in the long run.