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The difference between a commercial and residential development

On Behalf of | Oct 4, 2019 | Development |

When Orange County entrepreneurs decide to get into real estate, they may find themselves deciding between residential and commercial property. Understanding the differences between the two could help make the decision. The disparities in how such a development would be handled could affect the bottom line for these entrepreneurs.

Commercial property is most often comprised of retail establishments, restaurants and office buildings, just to name a few. Obviously, this is different from residential property, but the variations do not stop there. Commercial tenants can negotiate their leases, including tenant improvements more often than a residential tenant. Customizing the space for a particular potential tenant’s needs is part of the leasing process for commercial properties but not often for residential ones.

The leases themselves are also different. Many of the risks associated with the property fall to the tenant for commercial property. Many of the factors involved in a commercial property are more straightforward than in residential property. Rental property for businesses also tends to bring in more revenue than residential leases do for comparably sized properties. In some cases, it may cost more to get a commercial property up and running, but it could be worth the initial investment.

The only way to know for sure is to run the numbers. This involves considering a variety of factors specific to a particular development. While many business, construction and other considerations affect the decision to invest and develop commercial versus residential property, Orange County entrepreneurs also need to look at the legal considerations as well. Making sure all bases are covered often requires consulting with a real estate attorney who can answer any questions a future developer and investor may have.