Commercial vs. Residential Property Management

Different types of real estate require different management styles, and it pays to know how those differences work.

There are two types of property out there: commercial and residential. Each requires speaking a unique management language, and making an impact in the competitive CRE realm means mastering either (or perhaps both) of those languages.

Here’s a rundown of how commercial property management compares to residential property management.

What is Commercial Property Management?

Commercial properties serve as a place of business for their tenants. These properties range from office spaces to hotels and can serve anywhere from one to multiple businesses at once.

Managing these properties involves a combination of marketing, rent collection, regular maintenance, tenant screening, and preserving positive tenant relations. Each duty must be performed on a much larger scale when compared to residential management. Commercial properties are larger and involve more moving parts, including traffic flow, different accessibility requirements, operational hours, and much more. Bills will likely be higher and depending on how the property is being used, more entities (including multiple businesses and business owners) will be involved. The upside to this larger scale is a greater return on your investment. Rent for commercial space often exceeds that of residential properties, meaning you will likely earn more.

Types of Commercial Properties

Here are some common types of commercial real estate:

• Office
• Retail
• Industrial
• Hospitality/hotels
• Warehouse
• Medical

What is Residential Property Management?

As the name implies, residential properties serve as the primary residence for their tenants. These can range from single- to multi-occupant residences and typically involve shorter leasing terms. Also included is the occasional owner-occupied property that’s cared for when an owner is unable to care for their property themselves (typically due to extended travel or a medical condition).

While many of a residential property manager’s duties are the same for commercial management (tenant relations, marketing, building upkeep, etc.), the scale of what’s required is much smaller and more focused. The end goal of a residential property manager is to ensure their property stays profitable and appealing to both current and prospective tenants. This means staying up to date with building improvements, keeping the property attractive and functional, and making themselves available to address tenant concerns.

Types of Residential Properties

Residential properties come in a variety of distinct types. They include:

• Single-family homes
• Condominiums
• Mobile homes
• Townhomes
• Duplexes
• Apartment complexes

Key Differences Between Residential & Commercial Management

Despite some surface similarities, commercial and residential property management are different beasts altogether. Here’s a guide for some of the most important differences:

Maintenance responsibilities: Maintaining a residential property is a 24/7 job; someone will constantly need to be on call to address quick fixes and emergencies. Commercial property managers typically don’t need to be on site once the property has closed down for the day, but they will need to remain reachable should an emergency arise.

Tenant obligations: The responsibilities placed on commercial renters are far greater when compared to residential renters. A tenant in an apartment complex might only need to worry about paying utilities, while a commercial tenant will need to navigate property taxes, maintenance, insurance and more. These factors will impact management’s ability to keep and attract tenants, and depending on the type of lease, management may need to pick up a few of those bills.

Earnings: Commercial properties will typically generate high income, but the tradeoff is a higher upfront purchase cost. This makes residential properties a more manageable investment for those new to the real estate game; apartments and condos might generate lower earnings, but the upfront costs are far less prohibitive, lowering your risk and keeping more money in your pocket.

Occupancy: Residential properties tend to have a higher demand than commercial properties, but this constant need is usually balanced out by vacancies. Commercial renters typically stay longer and sign longer-form lease agreements, keeping your income steady.

Legislation: Residential properties come with a slew of legal requirements, including payment rules and anti-discrimination statutes. Commercial properties have fewer legal requirements, which can benefit both tenants and management.

Conclusion

Understanding the key differences between commercial and residential property management is crucial for your success as an investor, a landlord and a trusted resource for your tenants. Deciding which management style fits you best is, by extension, an indicator for which property type is most suited to your personality, goals and budget. By taking those factors (and the knowledge of what each property type will require of you) into your decision-making process, you’ll know which direction will benefit you and your future tenants the most.

If you’re preparing to invest in either commercial or residential property, talk with the experts at DRK. Our team will answer your questions, help you weigh the pros and cons and guide you through every step of your journey.

Take a look at the purchase-ready commercial properties available in the Columbus, Ohio, area right here.

 

Until next time,

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