Commercial Vs Residential Real Estate

The difference between residential and commercial real estate seems simple at first glance. One pertains to houses, the other to businesses. However, it gets a little more nuanced once you start exploring the idea of buying or selling a home or a business.

For example, what if the property in question is both a home and a business? You see these occasionally where there is a storefront or restaurant on the main level and a residential unit on top.

Regardless of what type of investment you are looking to make, it is important to fully understand the financial and legal differences between a house you live in and a commercial or industrial building. In this post, we’ll talk all about residential vs commercial real estate.

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Commercial Real Estate Definition

Exactly what is a commercial property? The simple answer is any building or lot that is primarily intended to earn money. Types of commercial property include office buildings, strip malls, warehouses, and packaging facilities. They can be huge operations on multiple acres of land or a simple house that has been rezoned and converted into a dental office.

Now let’s look at the opposite side of the spectrum. What is a residential property? The residential property meaning is simply that an area is designed to be lived in. There may be a few businesses scattered around a neighbourhood, particularly when it comes to stores and restaurants. However, most of the development will revolve around homes, condos, and apartments.

Do you have questions about commercial real estate in the GTA? You’ll find answers in the posts below:

Financing Commercial Real Estate Vs Residential

Obtaining a commercial mortgage vs a residential mortgage can also be far more complex as the dollar amounts are generally much higher. True, luxurious residential homes can run into the millions of dollars, but those are few and far between. Even so, an expansive industrial operation will typically cost at least as much as or more than the most opulent mansion you can imagine.

As a result, commercial lenders are more strict, requiring as much as 50% for a down payment and charging higher interest rates.

Residential real estate values have also been steadily rising for decades. Again, this means lending guidelines are more stringent than they have been in the past. That said, you can purchase a home with a 5% to 20% down payment, which makes it far easier to obtain financing for a house than for a business.

Whether buying a home or an industrial property, a commercial real estate Toronto specialist who also understands the residential market can guide you through each step of the process.

Residential Vs Commercial Land Use

While mixed-use zones are becoming more predominant in Ontario, there are still areas where residential and commercial land use do not cross. Commercial land use examples include areas specifically designated for manufacturing, processing, storage or logistics.

In addition to heavy traffic and other safety concerns, imagine the noise if we suddenly allowed residential homes in the middle of an industrial park. Areas with large scale office towers and retail centres may also be dedicated to commercial use. However, residential zones are usually not far away since this is typically where the customer base lies to support these businesses.

The GTA isn’t known for farming or agricultural use, however, there are massive amounts of land throughout the remainder of Ontario that is zoned as farmland. Typically, these areas feature very little residential development. A farm house is standard, plus perhaps housing for those who work on the land. However, you will not see much residential land use in these cases.

Keeping a clear separation between noisy industrial areas and residential homes serves several purposes, each designed to keep the peace and maintain the dynamic of established communities.

Thinking about your next investment? The posts below will open up some possibilities:

Mixed Use Zoning

As development of all kinds occurs and land becomes scarce, mixed-use zoning is becoming more popular. This is especially true in highly populated areas like the GTA. Mixed zones create an ideal balance between residential and commercial properties.

When well-planned, the result is an engaging and often highly walkable community. Large skyscrapers in Toronto often feature a variety of shops and restaurants on the ground floor, while the upper levels consist of both office space and some residential units.

These are perfect examples of mixed-use development. Imagine living in an enclave where your workspace was an elevator ride away and all necessary amenities existed in the same building. With a non-existent commute, you could achieve the ideal work/life balance that so many strive for. As commercial and residential zoning begins to blend seamlessly together, this is a dream that more people will be able to achieve.

Do you want advice before making your next commercial property investment? Connect with me at OMarjanovic@kw.com or call 647.620.2882 for personalized guidance.