Before comparing these two, first we have to define commercial and residential real estate.
Commercial real estate
This type of real estate property is exclusively used for business purpose, so intensified commerciality is on its core. It doesn’t connect with living place. This type of places are mostly leased to some tenants who use it for conducting their business. A gas station, hotel or rented shop can be taken as examples. Industrial areas are taken as commercial real estate. Commercial real estate properties are classified into four categories: industrial area, office, multifamily & retail shop. These are divided into three classes: Class A, B & C. Class A refers to the best building depending on the structure and facilities. Class B refers to the older and less competitive buildings than Class A. Class C refers to the oldest buildings in less attractive or backward places.
Residential real estate
This is what you call home. An investor purchases it, people rent it and live there till shifting to other places. Rented houses are very popular in this era as many people don’t stay at a place very long time due to their career. So, building home for other people is the main ingredient of residential real estate. This is clearly for habitation.
Commercial VS Residential real estate
These two types are clearly different from each other as you are comparing a mango to an apple. They belong to the same genre- Real estate, but depending on the purpose of building and using them, the differentiation gets crystal clear. We are pointing some characteristics for you to get a transparent view of the comparison.
- Commercial real estate focuses on business purpose and residential one puts personal features at the center of the structure. Commercial properties are built to fulfill some pre-planned business objective and residential ones are to fulfill someone’s long cherished dream.
- People earn from residential properties too, but it’s indirect business, not direct as the commercial properties.
- Individual use is the main perspective of residential property and it’s for providing housing facilities for family or an individual person depending on the lifestyle.
- Selling and buying of a commercial property depends on numbers and investment calculation, whereas residential ones depend not only numbers, but also emotions.
- People seek ‘home’ from residential properties when they see commercial properties as ‘office’ or ‘factory’.
- In commercial real estate property, there’s often a lessor who owns the property for lease. There are also developers, syndicate providers, who connect through the whole procedure.
- The highest possible price is always the goal for selling a commercial property. Lowest risk and fulfilling the purpose on the most favorable terms are also required in this case. But as we have said before, in residential real estate properties, the owner-buyer-seller does not only think of money, they follow their hearts too.
- Residential property can be very attractive as an investment, they would not be like stock or share-market.
- Residential properties mostly offer monthly payment, long lasting appreciation and one time investment. There are some expenditure like maintenance, but it’s less costly than maintain commercial properties. And looking after residential property is also easier than the other one.
- Getting out of the business related to residential real estate properties are more difficult than the commercial properties because the terms and conditions are rare to fulfill, there are less customers for it. Whereas, commercial properties are almost similar depending on the category and buyers are more available.
- Being landlord is sometimes a pain if your tenants are not so co-operative.
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