Commercial Or Residential Real Estate, Which One?
One of the reasons so many people choose a profession in real estate is because it so easily diversified. There are so many different types of real estate to buy.
Each type has its advantages and disadvantages, as well as different strategies, guidelines and ways to measure success. Here are a few things to consider when deciding whether commercial or residential real estate is right for you:
Commercial Real Estate
Commercial real estate is defined as real estate rented out to tenants for business purposes. This type of real estate typically sees fewer vacancies and turnovers than residential real estate, and term lengths generally are longer as well. Success in commercial real estate comes down to an in-depth understanding of the market, the risks, the numbers, analytics, and statistics.
The value of commercial real estate is not based on similar surrounding properties like residential real estate is. Instead, the value of a commercial property is based on past profit history. It is critical that commercial real estate investors understand the current market and factors that will influence potential income when determining the value of a property.
Commercial Real Estate Focuses on Business
Commercial real estate involves property that is sold, leased, or used to achieve a p
redetermined business objective. It is used as an investment to achieve an anticipated rate of return on the funds invested. Because commercial real estate often requires a comprehensive understanding of real estate law and the local market, many Realtors choose to get to know the residential real estate market first. They they will consider venturing into commercial real estate afterwards. Part of the draw to commercial real estate comes from the wide range of sectors within the commercial real estate field. This includes land, office, property management, retail, development, and investment. Another reason realtors make the career switch from residential to commercial real estate is the income potential. Bigger, more complex properties mean bigger commissions for commercial Realtors.
When it comes to training, all professionals will need to go through intensive training to earn their Realtor’s license. Commercial real estate professionals have to go through all of the general education classes, and then take a step further to earn their commercial real estate license. They need to have a college degree and be proficient in areas such as finance and property management. Furthermore, they need to have a solid understanding about things like the internal rate of return and the gross rent multiplier.
Commercial Realtors working in this specific market have more responsibilities than a residential real estate agent. Commercial real estate professionals are expected to have constant access to the latest market information, and understand cap rates for properties and population growth reports.
Success For Commercial Realtors Is Based More on Quality
Some may argue that residential real estate is in higher demand, thus a more lucrative option than commercial real estate. However, although commercial Realtors do have fewer transactions per year than a residential real estate agent, the sales that they do close are worth significantly more than a typical residential sale. Commercial property is right for you if you are:
Not afraid to hustle. There is tough competition between commercial Realtors. Those who want to be successful need to be creative to stay ahead of their competition
Familiar with what constitutes a particular type of commercial property
Knowledgeable about the various types of property in the area
Good with numbers and statistics, and can balance building professional relationships with clients with quick analysis and strategic planning
Confident with technology and utilize both traditional and non traditional marketing techniques
Experienced in the residential real estate industry and are looking for a new challenge
Residential Real Estate
Residential real estate revolves around the wants and needs of a homeowner and his family. It involves property purchased for individual use, most often to provide housing for families.
Many new real estate agents enjoy residential real estate because of the flexibility, unlimited income potential, and diversification opportunities. It is a training ground for new agents to learn the ropes. Also, the large real estate market and high demand for residential properties gives Realtors the chance to perfect their skills. Residential real estate requires more of a personal connection with clients than commercial real estate. And the success depends on your people skills, the ability to communicate well, and your overall knowledge of the local market. When it comes to income potential, there is no doubt that Realtors can be wildly successful with residential real estate, as long as the conditions are right. Residential Realtors work best in a hot market and a high demand for property.
Residential Real Estate Focuses on People
The draw to real estate is a flexible schedule and the ability to work when you want and as hard as you want. But a flexible schedule does not always mean an easy schedule. Commercial Realtors typically work during regular business hours because they are working with business owners. Residential real estate agents are always working, scheduling showings after hours or over the weekends.
When it comes to education, residential real estate professionals do not need to have a college degree as a requirement. This opens up the field to anyone who is willing to go through the training required to earn a Realtor’s license. Thus, this is why many people start out in residential real estate. It is a lot easier to get your foot in the door than commercial real estate.
Residential real estate is for you if:
You prefer working within a broader market
A more hands approach is appealing to you
Having a flexible schedule is a must
A clear understanding of the local economy, demographics, school districts, local shopping and restaurants, traffic patterns, etc.
Building relationships is important to you
You feel confident handling many different clients and properties at once
Whether you are interested in jumping into real estate for the first time or are contemplating a career switch, it is important to weigh all of the pros and cons and determine which one is the best fit for your lifestyle and career path.
Need some advice about your real estate career path?
One of the best things you can do to launch your real estate career is dive into comprehensive training programs like Jovi Realty’s Real Estate Training Academy. This extensive, hands-on training program equips Realtors with the knowledge, tools, strategies, and networks they need to dominate the local real estate market. If you need help deciding which career path is best for you, contact Jovi Realty today!