Wanting to become a real estate agent but wondering whether to become a residential real estate agent or a commercial real estate agent? What are the similarities and what are the differences between the two? What to consider before getting in the business of real estate? Here are answers to some of your questions.
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Even though both a residential and a commercial real estate agent work with real estate properties, still the main difference is the type of properties they specialize in. There are two types of properties that agents deal with: residential properties and commercial properties. The two types of real estate agents serve different purposes and have a different client base. Other differences between the two are based on factors such as education, sales, earnings, and training. But, in general, both fields require courage, social abilities, and patience.
So, here is a list of some of the major differences that can help you determine which career to choose for yourself:
First: Education of residential vs. commercial real estate agent
Even though both a residential and a commercial real estate agent need to have a license, residential real estate agents don’t really need to have a college degree. On the other hand, a commercial real estate agent is expected to have a college degree in either business or finance. He/she is expected to have a deeper knowledge of the professional terminology, such as capitalization rate, internal rate of return, real estate analytics, and gross rent multiplier. This means that a commercial real estate agent will need to actually apply all that he/she has learned in college in the field.
Second: Training of residential vs. commercial real estate agent
Both a residential and a commercial real estate agent require training to get in the field of real estate. However, being a commercial real estate agent requires more training through mentorship programs than being a residential real estate agent.
Third: Sales/Property of residential vs. commercial real estate agent
Again, the main difference is actually the property that they specialize in. Residential real estate agents deal with residential properties. On the other hand, a commercial real estate agent is qualified to deal with both residential and commercial properties. This means that a commercial real estate agent sells larger properties which could be apartment buildings, shopping centers, or other huge real estate properties. This explains why commercial real estate agents are expected to have a college degree in either business or finance. They constantly deal with properties that require full knowledge of the economic situation, cap rate, internal rate of return, and gross rent multiplier.
Fourth: Earnings of residential vs. commercial real estate agent
It is a fact that residential real estate agents can make good money, but that’s only in perfect conditions. Their earnings and success rely on two conditions: a hot market and clients who are willing to pay. This makes it very challenging for residential real estate agents. On the other hand, a commercial real estate agent makes more annually due to the higher commissions on sales, and the fact that his/her work does not depend on some of the market conditions. Another factor that determines the difference between a residential and a commercial real estate agent is that residential properties are always easier to sell than commercial properties. This, of course, leads us to the next difference.
Fifth: The client base of residential vs. commercial real estate agent
For residential properties, there are always clients, regardless of the economic situation. Tenants are always available, and there are always people looking for homes. Whether they are looking for a property to buy or rent, there are always clients available. They could be families or even new graduates who are just starting on their careers. However, if we look at a commercial property, it takes a bit more time to sell. This is because a commercial property, unlike a residential property, might get affected by the economic situation in the area. A huge part of it is the purpose for which it is sold. Commercial properties serve commercial purposes, which means that they offer steady returns and better cash flow than residential properties.
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Sixth: Working hours of residential vs. commercial real estate agent
So, this might be another factor that determines whether to become a residential real estate agent or a commercial real estate agent. Residential real estate agents are never really off work. They can expect to work any time of the day. However, a commercial real estate agent only works within business hours, five days a week. This factor is very important. So, if you are looking for better time management and better time off work, a commercial real estate agent might be a better real estate career choice for you. However, it is important to take into consideration that there are no part-time jobs for commercial real estate agents. On the contrary, a person can become a residential real estate agent part-time. This can be a better option for those who are looking for an extra income. Becoming a commercial real estate agent requires more commitment and dedication to the job.
Seventh: Tasks of residential vs. commercial real estate agent
Of course, as a real estate agent, you will have tasks to do to make sure you accomplish your job. However, there is a difference when it comes to a residential real estate agent’s tasks and a commercial real estate agent’s tasks. Commercial real estate agents get to do more tasks, again, because their field requires more knowledge and information from them. Unlike residential real estate agents, they are expected to be in constant access to information. This includes the cap rate for the property, periodic population growth reports, and constant visits to different commercial properties. These are among many other tasks of course. So they are required to stay up to date with the housing market and other factors that determine the success or even the failure of their deals.
Related: Why Is the Cap Rate Used in Real Estate? How Do You Calculate It?
In conclusion, one gets to choose whether to become a residential or a commercial real estate agent. It is based on the purpose it serves you. For instance, if you’re looking for a part-time job, more frequent income, or even a job with less academic and training requirements, becoming a residential real estate agent might be the choice for you. But, if you are looking for higher income, and have more educational qualifications and would rather have a full-time job, then becoming a commercial real estate agent might be the answer for you. So, it is really up to the person to determine what to choose depending on his/her goals and financial situation.
Meanwhile, keep reading on Mashvisor for advise on everything related to real estate.