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Key Differences Between Commercial and Residential Real Estate

September 14th, 2021

As you build out your real estate portfolio, the time may come to diversify by adding a string of properties you don’t typically invest in. For example, you may enjoy taking a raw piece of land and developing it or prefer apartment buildings or single-family residences. Swapping between two property types (commercial vs. residential) can increase your portfolio. Still, there are some differences that you should understand that will aid you in making the best decisions for your financial goals. A trusted commercial real estate broker in Jackson, MS, can assist you in developing your overall portfolio.

Understand What’s Different When Buying Commercial vs. Residential Real Estate

Residential and commercial properties vary in almost every way. It starts with the building materials and moves on to the way each type is used. Each class has its place depending on your priorities. Here are the main differences between the two:

  1. Uses: Residential properties are designed to be lived in. They include single-family, detached homes and also duplexes, triplexes, fourplexes, townhomes, and condominiums. Large apartment buildings are designed for residential use but are considered commercial property because the space is leased out to others as part of a business. Now, commercial properties are used for business enterprises, such as medical clinics, assembly plants, warehouses, shopping centers, and office space.
  2. Building Materials: All projects require specific materials for their designs; however, there are differences between commercial and residential jobs. For example, homes use timber frame construction as it is considered cost-effective and appropriate for smaller-sized buildings. Commercial buildings are larger and more complex, requiring more substantial materials such as steel.
  3. Codes and Permits: Commercial projects are built under stricter regulations than residential jobs. While they both have to adhere to specific codes and obtain permits from the area’s municipality, commercial properties have additional rules for building materials, electrical systems, plumbing, construction techniques, design, and size. There are additional standards for elevators, accessibility for the disabled, parking lots, and other areas.
  4. Costs: There are more overhead costs involved in a commercial project. The expenses include building materials, but there are also compliance standards to uphold and specialized workers and equipment. Residential jobs have similar costs, but because of the scale, it isn’t a fair comparison.
  5. Financing: Most residential homes are secured through bank loans, insurance loans, cash, or assistance from a government agency or non-profit. Commercial properties require more intense scrutiny for funding from bank financing, a government agency, or a wealthy owner or developer.

Work with Jackson’s Premier Commercial Real Estate Broker – The Estes Group

You want a dependable and proven broker when you want to jump into the commercial real estate investment scene. The team at The Estes Group believes in an investor-focused approach to doing business. We listen to your goals and work with you to find the best solution to accomplish them. Look to us for many services, such as acquisitions, dispositions, leasing, 1031s, multi-family, property and asset management, and much more. Talk with us about all your commercial investment needs in Louisiana, Alabama, Mississippi, and Tennessee.

Call us at 601-362-9633 or contact us online to discuss your real estate goals with our knowledgeable and experienced commercial real estate brokers in Jackson, MS. We’ll

help you find the best choices that will deliver the best return on investment.