What Exactly Is Commercial Real Estate

When I told my friends that I was now selling commercial real estate, some of them asked the question, "What is commercial real estate?" Most people know what residential real estate is - the buying and selling of homes, but there are actually those who have some misunderstanding about what is included in the buying and selling of commercial properties. see our site

The first thing you want to know is what sort of property can be named commercial real estate. The basic rule is: if you live in it, it is residential, otherwise it's commercial. To put it in economical terms, any building where commercial transactions take place is commercial real estate. However, the reality in the field is more complicated than this. A building with three rooms and two bathrooms is definitely residential; a building that houses three shops is by all means, commercial. But exactly how about a building which has five shops and five living apartments? Here's the catch: every building that has four or even more commercial units is categorized as commercial real estate.

The term "commercial real estate" is quite broad, so you might find out the apartments building you are living in is advertised as commercial real estate. This is because there is certainly a different way to classify these properties: by the amount of income they offer to their owner. If you own a duplex or another multi-family building you are the proud owner of commercial real estate, because the property brings you an income on a steady basis. This makes all rented buildings commercial buildings and there is a reason for that: if you buy a property with the purpose of turning it into a source of income, you are in fact buying commercial real estate, not residential. Another example of ambiguous commercial real estate is the houses occupied by elderly people. Their main purpose is to offer a shelter for elders, but the owner of the facility is earning money off the property. So, you will need to categorized it as commercial real estate, even if people live in it.

If you buy a house with the only purpose to generate money off it, you can actually file it under commercial real estate, even if it is not a shopping center, warehouse, manufacturing unit or rental apartment's complexes, which are definitely commercial. It is important to classify a property because there are different rules that apply to each category. The most important one is the mortgage and the rules you need to comply when you have to qualify for this loan. When you ask for a personal mortgage the final reply is influenced by your income, while commercial mortgage will depend on the income your property can produce. When it comes to taxes, there are also different rules and when you file for bankruptcy, commercial properties receive different treatment, in comparison with residential properties. Before you take the decision on investing in commercial real estate you have to know what benefits you can reap from this transaction.