Real Estate 101 Can Residential be Commercial?

How many times have I heard, ?Residential, commercial, industrial, duplex, all these property types are so confusing.? Not anymore.

First what is the definition of ?commerce?? Dictionary.com defines it as ?a buying and selling of goods or services?.

Here?s the deal. There?s only one question to ask concerning a property, ANY kind of property, when determining whether it is or isn?t a commercial property. And that is, is the property owner being compensated in exchange for the use of that particular property? If he is, then, yes it is a commercial property. There is commerce going on. Something (money, services) is being exchanged for the use of that property.

But what about Industrial type properties, Warehouse, apartments, office buildings. What are they? Commercial or Residential? Here?s the problem. We have two separate issues that people want to mix together.

The first issue has to do with how your local planning authority has ?ZONED? that particular area. Zoning means, ?An area or a region distinguished from adjacent parts by a distinctive feature or characteristic?. Most cities and counties have a local government office that you can go to and find out how a specific piece of land is zoned.

Residential, Commercial, Industrial, Multifamily are types of zoning classifications. Might there also be commerce going on? Probably, but that?s not the issue when differentiating what zoning type that property is.

The second issue is might there also be commerce going on? Is money or a service being exchanged? The yes, it is a commercial property.

Now, that being said, let?s go back to the original question. Can a residential property also be a commercial property? There are really two answers. One, for zoning purposes, a residence will not be allowed to be built in a commercially zoned area. So for ?zoning? classifications, no, a residential property will never be considered ?commercial.?

However, for investment purposes, then yes a residential property can be a commercial property for a individual property owner. If he is renting out the property and receiving rent, then it is an income producing property and if he were to attempt to get a loan on the property, the lending institution will use their guidelines which have to do with those types of property, not owner occupied residential.

So when talking with someone concerning residential property being used as commercial, make sure you and the person your conversing with are on the same page. Zoning or commerce.

Tom Bruner is President of Bruner & Associates, Inc., a full service California commercial property brokerage since 1989. Tom spent four years teaching students Real Estate Principals for Kaplan Schools.

?By spending time with my clients, I?m able to help that investor buy or sell an income producing property by maximizing that information. Visit me at http://www.brunerandassociates.com.?