Commercial Vs Residential Real Estate – What is the Difference?

commercial vs residential real estateIf you are getting your real estate license and not sure if you want to have a career in commercial real estate vs residential real estate then you will want to read this post. There is a difference between the two and it's important that you be aware of them. 

Below we will touch on some of the main differences of commercial vs residential real estate however keep in mind there are many more.

Education

In Texas anyone that wants to represent buyers, sellers, tenants, landlords, and tenants whether commercial or residential has to get a real estate license. The basic education requirements for this are the same for both.

The core curriculum of the Texas real estate license weighs heavily on the residential aspects of real estate. If you want to get more commercial real estate education you will have to pay for 3rd party courses through CCIM or others………..and good ole on the job training. Finding a good mentor is key.

Also there are many types of commercial real estate to learn and the nuances of each are different. 

Having a college degree may help you get your foot in the door with some commercial real estate brokerages however it's not necessary. Some will say that you have to have a college degree to be a commercial real estate agent however I know plenty of commercial brokers that don't have degrees. However if you want to increase your chances of being hired by a big commercial real estate firm then get a college degree.

Type of Clients You Deal With

In residential you are mainly working Business to Consumer (B2C) with individual consumers who want to buy, sell, or rent homes as your main point of contact. 

In commercial real estate you are working Business to Business (B2B) with your main contacts being business owners, CEO's, CFO's, COO's, Operations Managers, and in many cases office managers and/or administrative assistants.

If you don't like cold calling businesses then you might stick with residential.

How Long Deals Take

The sales cycle is much longer in commercial real estate.

In residential once you find a house you like, make an offer that gets accepted, you will typically close in 30 days or less. Also depending on the market you are in you only get 3-7 days for due diligence to complete and review the inspection report and get pricing on any repairs needed.

Depending on the type and size of space, market, scope of work needed, zoning requirements, etc., commercial real estate transactions can take anywhere from 30 days to 12 months or longer. In most cases the minimum due diligence time frame is 30-45 days. A more complex transaction could require many months of due diligence

Ramp Up Time to Start Making Money

In residential you typically get paid commissions at closing. Because of the shorter sales cycle you are able to make money more quickly.

Because the sales cycle is longer in commercial real estate it will take you much longer to make money than in residential. In commercial leasing you typically get paid half of the commissions within 30-60 days of lease signing and the other half when the tenant moves in. If buying commercial you would get paid at closing however keep in mind how long the deal takes to close from start to finish. I'm not saying it's not possible to make money sooner in commercial however in most cases it's a good idea to at least have 6-12 months of living expenses set aside. If you are a quick learner and diligent about prospecting you have a better chance of making money sooner.

Work Hours

Commercial real estate agents mostly work during business hours. Yes there maybe times where you work after hours or on weekends………however most work is typically done during the business week days.

This is because you are working with businesses.

Residential agents work with consumers who may not be available to see houses until after work or on weekends. So if you don't want to work a lot of evenings and weekends then residential real estate is not right for you.

How Much You Can Make

You will hear people say you can make more money in commercial real estate than in residential. I don't think that is totally true as I know people who do very well in residential.

I think selling residential properties is easier than commercial however regardless of which you choose you still have to prospect and generate leads. No leads, no sales or leases. 

Most people are lazy. If you work hard every day to continuously learn your craft and are constantly networking, cold calling, prospecting, and work in real estate FULL time, you will do well.

To make good money in real estate as a broker or agent you have to be in and around the business FULL time. You will not make good money being a part time agent.

Conclusion

Above we have only touched on some of the main differences of commercial vs residential real estate. 

Commercial real estate transactions can be more complex and take longer to close from beginning to end, which means it takes longer to make money.

However you have to decide for yourself which is the best route. Becoming a commercial real estate agent does not mean you will make more money. No matter which you choose you can make good money…………ONLY if you work hard at it!

 

 

 

 

 

 

 

 

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