As a licensee, real estate agents can sell residential properties while helping commercial clients. In fact, it’s one of the few industry crossovers that does not require further licensing or permits, just a broker’s blessing.
But, it is an industry crossover. And, like most things in life, just because you can do something doesn’t mean you should. Residential and commercial real estate are specialized fields that each demand a special level of attention, focus, and dedication.
As we delve into the nuances, attributes, and intricacies of both, consider which industry best fits your personality, work style, and overall lifestyle. Since on the topic of crossover industries, this post briefly touches upon the often-overlooked arena of Property Management, providing a holistic perspective for those charting their path in real estate.
Residential Real Estate
With over 119 million residential units in the US, REALTORs® benefit from the commissions of a trillion-dollar annual industry. Big numbers, yes, but with more than one million agents splitting a continuously shrinking fee, the average REALTOR earned $56,000 in 2022.
Is residential real estate for you?
Nature of Work for Residential REALTORs®
In the residential real estate sector, homeowners and shoppers entrust professionals with the profound responsibility of guidance through one of the most significant decisions of their lives. It’s a domain where personal aspirations, familial needs, and financial considerations intersect, necessitating a delicate balance of empathy, market knowledge, and negotiation skills.
Residential real estate is a people’s business.
Daily Processes
A typical day for a residential real estate agent is multi-faceted. When you aren’t showing homes to buyers or taking listing appointments, there’s paperwork to catch up on and lenders and title companies to update. Free time is constantly updating oneself on neighborhood trends, mortgage rates, and regulatory changes.
ALL while marketing and networking.
While technology has introduced tools like virtual tours and online listings, residential real estate’s core remains deeply personal, requiring face-to-face interactions and relationship-building.
Benefits of Being a Residential REALTOR®
The world of residential real estate offers numerous advantages:
- Flexibility: Unlike many traditional 9-5 jobs, agents have the autonomy to schedule their appointments and commitments.
- Relationship Building: The bonds forged with clients often extend beyond a single transaction, leading to referrals and a trust-based reputation.
- Varied Transactions: From high-rise condos to sprawling estates, the variety ensures every deal is a unique experience.
Economics of Residential Deals
Financially, residential real estate operates primarily on a commission basis. Depending on the region and the deal’s specifics, agents can expect commissions ranging from 2-6% of the property’s selling price. Many residential brokerages charge agents a transaction fee or keep an agreed-upon percentage from each commission.
While the absolute value might seem modest compared to commercial real estate, the frequency of transactions and the potential for dual representation can accumulate to significant earnings.
Process of a Residential Sale
- Listing Consultation: Agents meet with sellers to discuss their goals, provide market analysis, and establish a listing price.
- Property Staging & Marketing: Preparing the home for viewings and leveraging various platforms for maximum visibility.
- Negotiations: Upon receiving an offer, negotiations commence concerning price, contingencies, and terms.
- Entering Escrow: Typically, once an offer is accepted, a 30-day escrow period begins. Clients complete inspections, an appraisal, and secure financing.
- Closing: Keys are handed over once contingencies are met, documents are signed, and funds are transferred.
Commercial Real Estate
Nature of Work for Commercial Agents
Transitioning from the familial to the corporate, commercial real estate revolves around businesses, investors, and developers. Agents here deal with office buildings, warehouses, retail spaces, and more business properties.Â
Success in this arena demands a robust understanding of market dynamics, zoning laws, and a keen business acumen.
Daily Processes
Structure and strategic planning characterize the typical commercial real estate professional’s day. Much time is dedicated to market research, analyzing potential investment returns, and understanding client business needs. Negotiations are extensive, often involving legal counsels, financial analysts, and stakeholders.
Commercial agents spend a lot of time on the phones, making introductions through cold calls and finding deals for interested buyers. As careers grow and agents take on lease listings for large developments, fielding inquiring questions can take up much of your time.
Benefits of Commercial Real Estate
The commercial sector brings its own set of rewards:
- High Stakes, High Rewards: The sheer scale of commercial deals means that a single successful transaction can yield substantial commissions.
- Long-Term Engagements: Commercial leases and contracts typically span years, ensuring sustained relationships and repeat business.
- Specialization Opportunities: Agents can niche-down into areas like industrial real estate, retail spaces, or office buildings, becoming experts in their chosen domain.
Economics of Commercial Real Estate deals
In the commercial real estate world, earnings can vary widely based on the nature and magnitude of the deal. While residential agents focus on volume, commercial agents often bank on the size and complexity of transactions.
A major office lease or a prime retail space agreement can generate commissions that eclipse multiple residential deals combined.
Process of a Commercial Sale
- Property Evaluation & Market Analysis: A comprehensive analysis to set the right price based on location, usability, and market demand.
- Marketing Strategy Development: Tailoring strategies to target businesses or investors looking for such properties.
- Negotiations: Given the complexity, these often involve multiple stakeholders, including legal and financial experts.
- Due Diligence Period: Unlike residential escrow, commercial deals have an extended due diligence period ranging from 30 days to several months, allowing the buyer to assess the property’s financials, structural aspects, and legal standings.
- Closing: Upon successful completion of the due diligence, contracts are finalized, and the property changes hands.
Key Differences Between Residential & Commercial Real Estate
At their core, residential and commercial real estate serve different audiences and purposes. While residential real estate prioritizes personal needs and lifestyle choices, commercial real estate is a business driven by financial objectives and profitability metrics.
The clientele, deal intricacies, and even the pace at which transactions progress are markedly different.
Bonus Section: Property Management
Navigating the Balance
Property management strikes a unique balance between real estate and operations. While it involves handling physical properties, it also necessitates dealing with tenants, maintenance, and regulatory compliance.
Often seen as walking a tightrope, property managers try to satisfy property owners’ expectations while addressing tenants’ concerns and needs.
Challenges and Considerations in Property Management
- Constant Communication: Managers are the primary contact point for property owners and tenants, making effective communication crucial.
- Maintenance and Upkeep: From minor repairs to major renovations, ensuring the property remains in prime condition is paramount.
- Regulatory Adherence: Keeping up with housing regulations, safety standards, and local laws is non-negotiable.
- Conflict Resolution: With the dual responsibility of ensuring on-time rents are delivered, and tenants’ needs are addressed, property managers often find themselves mediating conflicts.
In property management, making both sides happy is nearly impossible. Search “property managers near me,” and you’ll likely find many low-star reviews. So be cautious about reputational risk when adding property management to your existing successful real estate business.
Conclusion
Ultimately, you don’t have to decide on a career in residential or commercial today. The flexibility of the real estate industry allows agents to specialize in one avenue or many. But, while some residential brokerages allow commercial transactions, most established commercial real estate firms do not allow agents to sell residential.
With a quick search through Agent Nook, you can find and introduce yourself to residential brokerages that allow commercial near you. Introduce yourself and ask how many full-time commercial agents are at the firm and if they provide mentoring.
As real estate agents, we have a fiduciary responsibility to our clients. You can build a successful hybrid real estate career if you can provide the knowledge, diligence, and dedication your clients deserve in both industries.
If you’re unfamiliar with selling large industrial aluminum plants, don’t try to figure it out alone. Find a specialist, partner, and learn.
Author: Travis French
Hi, I'm the founder of Agent Nook and a licensed REALTOR® and owner in Las Vegas. Finding great partners became my career cheat code, but it took years and happened by luck. So I started asking agents and continued to hear the same story: I can't find the right partners. So I started thinking, where do we even search? If there were a way to search, how can you warmly connect? Agent Nook is the only answer, so we built it. A place for us. Dedicated to real estate professionals and growing our careers. I'm unbelievably proud of the outcome and excited you're here.
