Commercial vs. Residential Real Estate: Which is Right for You?

The real estate industry is an attractive career niche for entrepreneurs. Both residential and commercial real estate offer lucrative income opportunities, low start-up costs, and long-term growth potential. If you’re considering a career in real estate, explore all your options before you dive into classes.

Commercial vs. Residential Real Estate

While both commercial and residential real estate agents work on commission, there are key differences.

Property Type and Environment

The most obvious difference between the two is property type. Consider the two property types and step back and picture yourself working in each of these areas. Choosing the niche where you have the most real-world experience and feel the most comfortable will give you a head start on your new career choice.

Commercial Property Type & Environment

• Office space, apartment buildings, store space, warehouses, retail centers and other corporate property types.
• Work in a more corporate environment than residential real estate agents; they meet with CEOs, business owners, and key corporate decision-makers.

Residential Property Type & Environment

• Houses, townhomes, condos, and land for occupancy or investment.
• The overall property and transaction type is more casual. It’s not uncommon for a residential real estate agent to show up for an appointment in jeans or work-casual clothing.

If you come from a business background or you have a startup venture in your past career history, you’re more likely to be comfortable talking about and advising on commercial property types.

If you have little to zero experience in business startups or commercial property types, are you drawn to residential property? Do you find different floor plans, neighborhoods and community amenities interesting? Do you have in-depth community knowledge? If you’ve answered yes to any of those questions, you’re more suited for a residential real estate career.

Education, Knowledge, and Expertise

Commercial real estate involves more than helping people buy, sell, and rent commercial property. Consider if you have the following skills and/or background:

• Analytical and accounting skills are necessary to help clients understand and negotiate commercial real estate contracts.
• Analyze and discuss business financial outlook goals, growth projections, and long-term maintenance budgets.
• A background in finance, business management, or an advanced business degree is well-suited to the requirements of a successful commercial real estate career.

Residential real estate agents act as an intermediary in negotiations between buyers and sellers over property prices, inspections, and settlements.

• While they help buyers and sellers crunch numbers, the mortgage loan officer and closing company are primarily responsible for ensuring the numbers line up at the closing table. Are you comfortable with negotiations that tend to be more emotional in nature?
• Advanced social and negotiation skills. While commercial real estate brokerages look for agents with experience in business or finance; residential real estate brokerages will train new agents with minimal industry experience as long as they have good communication skills.

Salary and Income

Commercial Real Estate

• Most sources identify an average annual income of $85,000 for commercial real estate agents, depending on market type and location.
• A commercial real estate transaction can take months to close, delaying payment for six months to a year.

Residential Real Estate

• A NAR survey shows that residential real estate agents earn an average of $42, 500 per year.
• Earning a commission for a residential real estate transaction can take as little as 45 – 60 days.

Before you sign up to take real estate education courses, make sure your background and experience reflect the area of study you have chosen. Speak with some professionals who are already working in the industry and ask for opinions. Consult with brokers who own each type of real estate company and ask them to identify the top skills and backgrounds of their most successful agents. With a little research and planning, you’ll identify the real estate industry path that is just right for you.