Residential or Commercial?
As a realtor, you will most likely either choose to sell a commercial property or residential property. Some people may also opt to do both.
However, if you realize later on down the line that you were wrong, that is okay. You are not committed to staying in either sector forever. You can always change sides.
In this article, we will look at the similarities as well as the difference between the two types of properties to see which one is the best fit for you. This is something you will have to think hard about to see what works best with your style. That is a decision that we will leave you to make based on the information that we will provide.
What is the difference?
Somebody once said that comparing commercial and residential real estate is similar to making a comparison between apples and oranges. Both are fruits, and that is where the similarities end.
On a more serious note, commercial real estate focuses on business needs. These are properties which are leased, sold, rented out to achieve a business objective. One would call it an investment which is aimed at making a predetermined rate of return.
On the other hand, residential real estate focuses on the needs of a homeowner and his or her family. It includes properties which have been bought or built for family use. It is more so described as the provision of housing to the families.
Now that we have a basic understanding of what each entails, let’s dive deeper.
Whether you want to become a commercial or residential estate agent, you will need a license. However, in terms of education for a residential estate agent, you do not need to have a college degree.
As a commercial real estate agent, you will be expected to have a college degree in business. This is to allow you to have a deeper understanding of the professional terminologies that are used in this sector. Terms such as capitalization rates, real estate analytics, internal rate of investment among others which are used in finance and investment will be the order of the day.
If you do not have a basic understanding of these terms, you may have a hard time working as a commercial real estate agent. Although it is not mandatory to have a degree, it comes as an added advantage. For those who do not have a degree in business or finance, but are knowledgeable in finance and investment terms, they can perform equally well in this field.
Both commercial and real estate professionals need the training to be better agents. However, the level of training is different.
Commercial real estate agents will need more training, this more so if they do not have a background in business and finance. In the course of analyzing the real estate markets, they will come up with terms and ratios which require this knowledge. Without it, you will not make much of that information and may be a barrier when it comes to selling some properties.
If you have a weakness in this area, do not panic as there are people who can help you analyze the information, the catch is that you have to incur an extra cost in terms of the consultation fee.
The amount you earn in any business will depend on several factors. Some people will make more than others. This is the same case with real estate.
Although there is a belief that those who venture into commercial real estate make more money, there are also some who are doing well in residential real estate. It will primarily depend on your strategy, and the type of real estate business you have ventured in will be secondary.
However, with all factors held constant, a commercial real estate agent is likely to make more money given that they are dealing with a large amount of money. In a business which is commission based, the more significant the amount of sale or purchase, the higher the agent earnings.
You can imagine of an agent who sells the property of $50,000,000 in one deal with a residential real estate who sells homes worth $5,000,000 over a period of one year. The difference will be huge, and the residential real estate agent will have to put in a lot more effort to make the same amount.
Earnings will differ due to the amount of money involved or the value of the property, but the effort which has been put towards making such an amount will vary hugely.
Ease of Selling
It has been mentioned before that it is relatively easier to sell a residential property than a commercial one. Some of the factors which have been given around include the amount of money involved. Also, the fact that we have more people looking for homes for the family than those who are in it for commercial reasons.
I think I will have to end the article with a disclaimer, these are not the only differences and similarities between these two sectors in real estate, we have just looked at a small part of it, but the information can be enough to help you make a decision on where to fall.