Commercial vs. Residential Real Estate Careers: A Guide
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The business of real estate can be a very rewarding industry to become a part of. From helping people find their dream homes to locations to start their own company, a career in real estate sales will be full of new beginnings. If you're considering a career as a real estate agent, though, you may have to decide whether you'd like to sell commercial or residential properties. In this article, we outline the differences between commercial and residential real estate licenses and careers, how to choose which field is best for you and answer frequently asked questions.
What is a commercial real estate license?
A commercial real estate license is a certification held by a real estate agent who works exclusively with commercial property. Commercial real estate agents, who often become brokers, specialize in the sale or leasing of property to private enterprises—they help source properties that house businesses and their operations.
To sell commercial real estate, agents need a license. These licenses vary state-by-state: a few states require specialized commercial licenses for agents who become brokers, but most others, like California, require the same license for all realtors, regardless of their property specialization or title.
Related: What Is a Real Estate Broker?
What is a residential real estate license?
A residential real estate license is a certification held by a real estate agent who specializes in the sale of residential property, such as houses and condominiums. They help sell and source homes for people to live in. Also, homeowners sometimes hire residential real estate agents to find renters to live in residential properties.
To sell residential real estate, agents take training courses and licensing exams. Residential real estate agents hold standard state licenses—most times, this is the same license held by commercial agents. Typically, though, residential real estate agents have less experiential training and fewer higher education expectations than commercial agents.
Depending on the state of licensure, residential real estate licenses may or may not differ from commercial real estate licenses—the actual difference is within the realtor's specific experiences and background.
Commercial vs. residential real estate
When entering the real estate business, agents usually choose to specialize in either commercial or residential sales. Many clients prefer to hire agents who have expert knowledge in one field over the other. Therefore, when becoming an agent, it can be beneficial to consider the similarities and differences between the two specializations. Here are a few contrasting factors to help you make your decision:
Uses of license
Because most states require the same license for both commercial and residential real estate agents, the use of each license is usually the same—meaning that commercial agents and residential agents rarely hold unique licenses unless required by state-specific law. Therefore, in most locations, a licensed real estate agent can sell any type of property, either commercial or residential. This can be important to remember if you ever want to switch specializations as a realtor, even though most realtors stick with one type of property and specialize in a certain type of sales.
Read more: How To Get Your Real Estate License
In the field of residential sales, there is always a steady influx of clients looking to buy homes, regardless of the current economic market. Even during times of economic challenge, people are looking for homes to live in, including buyers and renters, as homes are a life necessity. This means that as a residential agent, you'll typically have a steady workflow available to you if there is not an overall market downturn.
Comparatively, the commercial real estate business highly depends on the steadiness of an area's current economic market. Commercial properties are bought and sold by companies seeking profit, so if a specific area is experiencing economic challenges, there is a lower chance that commercial properties within that area will offer investment returns. Therefore, commercial real estate can sometimes take longer to sell than residential, but when the market is steady, commercial properties can offer higher returns.
Education, training and testing
Both residential and commercial agents must undergo training to enter the field of real estate. They typically take the same training courses, which vary state-by-state. The required number of education hours for real estate agents differs in each state, ranging from a minimum of 60 to 180 hours of coursework. Also, both residential and commercial agents typically take the same exam as one another and earn the same licenses, unless otherwise specified by state requirements.
The fundamental difference in the training of commercial and residential agents is their respective on-the-job experiences. Commercial agents commonly work for commercial-focused brokerages who offer specialized training to help them successfully navigate the financial calculations and analysis necessary to work in the commercial field.
It is also common for commercial brokers to hold four-year college degrees where they learn the skills needed to understand higher-level business concepts like profit and loss, tax strategy, return on investment and more. In comparison, residential agents don't usually need college degrees or highly specific on-the-job training to perform their roles.
The yearly salary of a real estate agent—whether they specialize in the sale of commercial or residential properties—is highly dependent on the particular sales they make in a given year. On average, commercial agents have the potential to earn a considerably higher salary because their commissions tend to be higher overall, despite the field of commercial real estate having slower sale turnover. This is because commercial properties typically have higher prices, to begin with. Commissions, or the take-home profit earned by agents, reflect these higher prices since they are percentage-based amounts.
In comparison, the average salary of a residential real estate agent tends to be lower since they earn smaller commissions than commercial agents and commonly work as employees for other brokerages. Regardless of this, though, the residential real estate sales cycle is much faster and there are fewer obstacles to joining the field. This means that if the agent is savvy, they can sometimes earn a higher salary than average.
The job outlook for commercial and residential real estate agents is the same. The U.S. Bureau of Labor Statistics projects that over the next ten years, the national employment of real estate brokers and sales agents will grow by 2%, adding extra 11,300 employed agents by 2029.
The demand for real estate agents—both commercial and residential—will remain relatively stable, as people turn to agents and brokers when looking for homes or to make property-related investments.
Tips for choosing between commercial and residential real estate
For many entering the real estate business, it's challenging to decide which specialization is right for them. While the main difference between the two specializations is the type of property sold by agents, there are a few other factors to consider when making a thorough decision. Here are a few tips for choosing between a commercial and residential real estate career:
Consider your income needs
Because commercial real estate agents typically earn higher average salaries than residential agents, deciding between the two specializations can equate to a big difference in your income. Therefore, you'll want to consider your income needs. For instance, if you have a high-cost lifestyle, a large family or even educational debts, you might want to choose commercial sales, as this may give you a better chance of earning a higher salary.
Figure out if you need flexibility in your career
Residential real estate agents have more flexibility in their careers on a daily basis. They make their own schedules and often work outside of typical business hours, as they're typically handling sales for buyers and renters who work during the day. Comparatively, commercial real estate agents often work a standard 9 a.m. to 5 p.m. schedule, five days per week. When deciding between the two specializations, it's crucial to consider your flexibility and scheduling needs.
Think about what type of environment you want to work in
Commercial and residential real estate agents work in highly different environments due to the clients and properties they handle. Residential real estate agents typically serve in a more casual capacity, appealing to practical homeowners looking to make a responsible property investment. In contrast, commercial real estate agents usually work in a formal, business-like environment that can demand a higher standard of professionalism and order.
Commercial vs. residential real estate: frequently asked questions
Here are answers to a few frequently asked questions and answers about the differences between working in commercial vs. residential real estate:
Can a residential real estate agent sell commercial properties?
Yes—a licensed real estate agent can sell any type of property they'd like, including commercial and residential. Even if you choose to specialize in residential real estate, you can later try selling commercial real estate as well. Because the pre-licensing education for all agents includes the basics for selling both types of properties, agents can cross over into each specialization.
It is important to remember, though, that the on-the-job experiences and educational backgrounds of commercial real estate agents often differ from those of residential agents. Many commercial agents earn their success through years of working in their field. Therefore, when choosing which type of properties to sell, you'll want to analyze whether you have the requisite knowledge to handle a specific transaction efficiently.
How do you get started in commercial real estate?
To get started in commercial real estate, there are a few foundational steps you may follow to jumpstart your career. After completing your pre-certification training and passing your license exam, you can try the following:
Find a job at a brokerage
Unless you're planning on becoming a broker yourself, you'll want to find a brokerage, or commercial real estate firm, to work for. As a commercial agent, the brokerage you choose should be able to support your professional and training needs.
Study the market
Commercial real estate agents are typically seen as experts in their field and area-specific markets. You'll want to study the market so you can work efficiently and advise your clients accurately.
Find a mentor
It can be very helpful for commercial real estate agents to work under mentors or those who are more experienced in the sale of commercial properties. These mentors can help agents hone their skills and give advice on how to be successful.
Network with professionals
You'll want to try to get to know other high-achieving real estate professionals. You can go to events for commercial agents and brokers to interface with experts in your industry. This can help you seek guidance and form lucrative professional relationships.
Market yourself and your properties
Staying up to date on the market's current prices can help you set competitive asking prices for your properties. From here, you can use marketing techniques to advertise yourself and your properties, like publishing web content and launching campaigns.
Read more: How To Become a Commercial Real Estate Agent
How do you get started in residential real estate?
To start your career in residential real estate, you can follow a few basic steps to start selling homes. While the process isn't incredibly different from starting a career in commercial real estate, your start in the residential realm will require you to focus your energy specifically on creating a successful home-selling career:
Find a job at a brokerage. As a residential agent, you'll want to find a position at a residential brokerage firm to start finding clients and earning commissions.
Study the market. Because the residential market is prone to fluctuations, you'll want to study the market closely. You should be aware of market trends, pricing changes and new opportunities to advertise your properties.
Network with peers. Networking with peers can help you meet potential collaborators and clients. Residential agents rely strongly on their relationships to be successful.
Market yourself and your properties. To market your residential properties, you'll want to schedule showings, host open houses and follow up quickly with leads.
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