RESIDENTIAL AND COMMERCIAL BUILDINGS

Residential and Commercial Buildings

Residential and Commercial Buildings

A building classified as residential is one which is used as a dwelling by an individual or group of individuals and provides separate family living quarters for less than four separate family units. Garages, barns and storage buildings located on a parcel with a residence and used in connection with the residential use are classified as residential. An apartment building or other building with four or more family living units is not classified as residential. Hotels and motels subject to license are not classified as residential builders (Frank, 2004).

Residential vs Commercial; as building designers we always want to make the best out of our investment in building (Handy, 2006). Before knowing the techniques. The term commercial building refers to buildings or land intended for commercial usage to generate a profit, either from capital gain or rental income. Commercial building includes office buildings, industrial building, medical centers, hotels, malls, retail stores, shopping centers, farm land, warehouses, and industrial properties. Commercial Building is commonly broken up into three categories:

1) Retail,

2) Office,

3) Industrial (Dannenberg, 2006).

Many people start out investing in residential building simply because they're more accustomed to buying homes, but commercial real estate can be a great way to balance your portfolio. You just need to get educated on the different rules and terms in the commercial market

Purchasing a building to enjoy rental income can prove to be one of the most important assets of an investor's portfolio, but what kind of building is best for you? Most designers will tell you commercial properties are the best real estate to invest in because of their unique advantages.

Following are the differences between commercial and residential building investments (Frank, 2004).

Commercial building is valued differently. The income that a piece of commercial building produces is directly related to its usable square footage. This isn't always the case with residential. Commercial building helps diversify risk. For example, if you own a 5 storey shop lot and you lose one of your 5 tenants, you only lose about 20% of the income for that building, instead of the entire rent as you would if you lost a tenant in a single-family house. Cash flow is often greater with commercial building. The yield is often higher per square foot and on an initial investment basis than it is in residential. If you lease or rent a multi-unit commercial building, you have more tenants to generate income than you do with a single-family dwelling. Commercial building leases are generally much longer. This helps with the stability of your cash flow. Commercial building is valued by the bank differently. You'll need to find a bank that works with commercial real estate (most major banks do), and it'll want a higher down payment than for residential building--usually 20 percent or more (Handy, 2006).

Building permits differ between residential and commercial buildings. Although many of the modifications are the same in both types of buildings, because they are used for different purposes, different ...