Differences between Commercial and Residential Real Estate Investments

Experienced entrepreneur and real estate professional Stephen J. Izzi is the owner and operator of several companies operating in New Jersey and Pennsylvania. Through his venture SJI Jackson Real Estate, LLC, Stephen J. Izzi sells both residential and business properties to clients.

Buying commercial real estate is different from buying residential real estate in several ways. First, while residential property owners can generate a profit by renting out the home, a large percentage of residential property buyers make the purchase for their own personal use. In commercial real estate, buyers are more likely to make an income-motivated purchase, and have a potential for higher returns on the investment.

Another difference between the two types of properties can be found in the way that they are evaluated by banks. Unlike a residential building, which is measured in total square feet, a commercial building’s size is determined by the usable amount of space. Additionally, the lease terms established between commercial real estate owners and their tenants tend to span a longer time period than those between residential landlords and their tenants.