Real Estate vs. Real Estate Development vs. Commercial Real Estate? What’s the Difference?
Hi everyone. I am a young professional (early 20’s) from Toronto, Canada hoping to transition from architecture to real estate development. I won’t be able to start studying for the real estate exam until the summer so I am hoping to pass by the end of 2022.

Anyways, I have been looking for advice on how to transition my careers. Everywhere I ask, most of the advice I get is targeted towards residential real estate and selling houses. That’s not exactly what I envision myself doing but I understand that it’s what most people in the industry do. I want to ask what the difference is (beyond the obvious…) between residential real estate, commercial real estate and real estate development, and is it a different path to get to each? (Different licenses I have to acquire? Different courses to take? Etc.)

To get to commercial real estate, property development, and other fields in the industry, does everyone have to go through residential real estate too? Because that is currently the impression that I am getting but I am not exactly sure. Thank you all! I hope this wasn’t too confusing.
[{"id": "i1kuhg7", "text": "I'm just a property owner, not a guy with a career in CRE.  But residential experience is unnecessary for commercial.  Residential is like selling retail.  It's a lot of fluff.  Commercial is very numbers-based.  We buyers are either looking for a property for our business, or property which will generate a rate of return on our money, or both.\n\nOthers will have more relevant experience for entering CRE but in my opinion you'd want to take one of the online courses which teach you financial modeling (I think Adventures in CRE is one, and there are others.)  Also you'll learn about how to research local/state/national data to form actionable opinions on what areas are more or less likely to be better to invest in long term.  Development is another whole layer which requires even more financial modeling and job costing to be able to figure out whether a development makes sense to build.\n\nOther people will chime in about how you learn all that stuff.  Getting your residential license to start with is good but if you want to work in CRE you don't need to actually work as a residential agent.  It's totally different.  Good luck!", "replies": [], "depth": 1}, {"id": "i1kwbby", "text": "I would say a relatively few professionals in commercial real estate or land development start out in residential. Not that you can\u2019t, but there\u2019s a fairly broad set of information related to each that doesn\u2019t overlap. \n\nAnd note \u201ccommercial real estate development\u201d is very different from \u201ccommercial real estate,\u201d and even from \u201cresidential real estate development\u201d. \n\n\u201cDevelopment\u201d generally involves moving a parcel or parcels of land through the rezoning and site preparation process (ie deep utilities and permitting) to prepare it for construction. This can be applied at large commercial scale (master-planned communities or major rezoning and site remediation of a former industrial site to become residential dwellings) or at a very small level (subdividing a single family lot in an existing residential neighbourhood). \n\n\u201cCommercial real estate\u201d is typically involved in transacting on already developed parcels with or without improvements. However often the Venn diagram of \u201ccommercial real estate developers\u201d and \u201ccommercial real estate investors\u201d overlaps significantly - because a large portion of the value of a commercial parcel is what you *could* do with it. The same can\u2019t usually be said about residential real estate purchasers or even investors - often these are people looking to acquire as-is properties for buy and hold scenarios. \n\nAs far as licensing, to be a real estate agent in either path there are licensing requirements, but there is no licensing requirement to *become* a developer. But there are courses you can take to get better at it. \n\nHope that helps!", "replies": [{"id": "i1m7y04", "text": "Commercial real estate and multifamily have a completely different sets of code, project schedule, engineering used, etc. than home development. Our firm have done a couple small home and condo projects by way of getting stuck with the zoning. We are bad at it lmao. We do decent work but we do phenomenal multifamily and mixed use projects. It\u2019s just a completely different skill set and way of doing things. Even the work force you have has a hard time because the rhythm of building it is different. Hard to explain.", "replies": [{"id": "i1mdzrk", "text": "The \u201chard to explain\u201d thing hits home for me too. It just\u2026.is haha", "replies": [], "depth": 3}], "depth": 2}], "depth": 1}, {"id": "i1kxxh6", "text": "No, res and CRE are two completely different fields and you do not need res experience to get into CRE. Why exactly do you want to do in CRE? With some Architectual background it works very well in \u201cdevelopment\u201d (at least in BC) and currently there is a very high demand for development managers. DM me I\u2019m in CRE industry in Canada.", "replies": [{"id": "i1m865j", "text": "Yes I did reply with some information but I forgot to mention construction management. That\u2019s really the only schooling that will be super beneficial to real estate development outside of his architecture background. Other than that, experience with construction projects and business acumen is all you need.", "replies": [{"id": "i1mjw00", "text": "Yea with architectual background knowing the financing side of real estate and a bit of construction training will be a big plus for any developer\u2019s career path; and the financing stuffs aren\u2019t so difficult anyway (relatively speaking).", "replies": [], "depth": 3}], "depth": 2}], "depth": 1}, {"id": "i1m7e3j", "text": "Okay, so I can answer any question you may have. Second generation real estate developer with a lot of experience. Know most developers in California. The bad news is your on the wrong path if you want to be a developer. The good news is having your real estate license is super beneficial going forward. You will save yourself thousands of dollars Here and there by just signing your own name. The path your in now that leads to lucrative earnings is a commercial broker. But that\u2019s sales and you either got it or you don\u2019t.\n\nFor real estate development architecture is a decent background. Your gonna have to learn every part of getting a building done so having one piece is great. What you need to learn now is construction. And your going to want to learn commercial construction. You want to be a developer, not a home builder. Residential code is different from commercial and apartments and any other big project will be commercial, so going into residential is frankly a waste of time. Home flippers don\u2019t often turn into developers, at least not good ones.\n\nBest thing to do if your serious and want to dive in is start with flipping commercial real estate. Find an old shopping center, something neglected or missing tenants. Clean it up and give it a face lift. Remodel units. Put in new flooring. Lease it out and sell the building. Your return is decent but this is mostly about you being their every day and managing the project. Watching every worker and learning there skills, asking them to show you stuff so you can keep the next guy honest. This is when you will learn how to work with this culture. Build a network of honest workers who do good work and you can trust. You\u2019ll also filter out the bad ones. You learn to be on their ass to get things done and how to manage a project. After some flips you need to get land and build your your first commercial project. Something like a 3 unit strip. Managing the whole project from the ground up. The pain of working with code, getting permits, dealing with zoning and nimbyism. All in a small scale. Then after years of this and growing funds and a track record you can start to manage bigger centers and strips. When you have a couple million saved AND can find an investor to pony up the rest and qualify for a loan, you can build your first mixed use or multifamily project. These projects involve hiring outside architects sub contracting everything to the network you built so your build cost is half the big guys and your ROIs for investors are crazy high. You should be able to get your contracting license by now and then you can start your own construction firm.\n\nEach project has a developer fee of ~3% and contractor fee of ~3%. If your okay with the ten year liability window you can be the contractor and double your fee.\n\nSorry if This is rambling on it\u2019s hard to type all of this out. This is what most successful guys have done or something similar. Real estate development is the Wild West. There are no real rules of business. Everyone does it different but construction back ground is the best way to lower your costs and make sure your not getting taken advantage of. You will work your as off but you will be wealthy.", "replies": [{"id": "i1mpn95", "text": "I\u2019ve worked for other developers/investors and been strategizing on how get my own first deal. Curious why you recommend starting with strip retail? I never would have thought of that but I\u2019m guessing it\u2019s less headache to lease a unit every 5-10 years rather than every 1-2 years for an apartment?", "replies": [], "depth": 2}, {"id": "io2cy2n", "text": "amazing response. Random question, do you do residential real estate too? I would like to pick your brain on a dm..", "replies": [{"id": "io2k00w", "text": "We are actually about to break ground on first residential project. Doing it a bit different though. They will all be rentals and we are building them fast and will sell them off in phases.", "replies": [], "depth": 3}], "depth": 2}], "depth": 1}, {"id": "i1m98xe", "text": "Real Estate - A broad category, including all types of real estate, land, buildings, both commercial and residential.\n\nReal Estate Development - Companies who specialize in improving real estate. This could be buying land and adding new buildings on top of it or buying old buildings and fixing them up.\n\nCommercial Real Estate - This is a slightly narrower subset of \"Real Estate\". Commercial Real Estate includes Industrial, Office, Retail, Apartments and more specific categories like Self Storage, Medical Office, Hotels, etc. It does not include the sale or leasing of one residential home at a time or one residential condo at a time, that is Residential Real Estate, as opposed to Commercial.", "replies": [], "depth": 1}, {"id": "i1mktbn", "text": "Not to hijack, but I would like to know which field makes the most money on average?", "replies": [], "depth": 1}, {"id": "i1mnysy", "text": "I\u2019ve been in the real estate business for a long time in different capacities. \n\nWhen you say real estate development, I\u2019m guessing you\u2019re envisioning a project management role? By that I mean a \u201cpost acquisition\u201d role that generally shepherds a project through the entitlement/zoning, AE design, construction, and certificate of occupancy phases. Or are you picturing more of a construction project management role, where you\u2019re focused specifically on the construction phase but you\u2019re employed by the landlord or possibly the builder/contractor? I know architects who have done both and can suggest some next steps if that\u2019s what you\u2019re looking for. \n\nAs for the specific terms, \u201creal estate\u201d is the umbrella term. \u201cDevelopment\u201d captures the activities I described above, but can also refer to the greater overall process including acquisition/financing at the beginning and activities like sales/marketing, leasing, and property management on the tail end. \n\n\u201cCommercial real estate\u201d is usually used to make the distinction from \u201cresidential real estate\u201d but is sometimes used to indicates business at \u201ccommercial scale\u201d that is beyond the level of individual single family homes. Offices, stores, ski resorts, hospitals, warehouses are always considered commercial real estate but so are apartment buildings and home building when it\u2019s done at the community/subdivision level. So the definition can be a little contextual. If it has to do with one individual\u2019s home, it\u2019s probably not \u201ccommercial\u201d. \n\nIf you still only have a fuzzy sense of what you want to transition into, I\u2019d ask what stage of the process do you want to focus on and what kind of properties do you want to work on? Also, what is your income goal vs. if you\u2019re considering additional schooling? Happy to chat in private.\n\nEdit: I just noticed you mentioned the real estate exam by which I\u2019m guessing you\u2019re referring to some sort of broker\u2019s license? Unless you want to be a real estate broker, it\u2019s not necessary. It won\u2019t hurt but in a lot of job functions it won\u2019t help either.", "replies": [], "depth": 1}, {"id": "i1p319r", "text": "I\u2019ll let the others definitions speak for themselves and just give my 2 cents. As someone who works in all 3 fields (plus contracting) you want to focus on RE development if possible.", "replies": [], "depth": 1}, {"id": "i1teiif", "text": "I don\u2019t know any *real* developers that spent time selling single family homes. All came from finance/law/GC. That said we\u2019re at the point in the cycle when I get SF realtors who want me to co-develop a site for them and their contribution consists of assigning an overpriced parcel and them willing to pledge their sales commission into the deal. If you\u2019re an architect I\u2019d suggest spending some time working for a large met GC and then pivot to development.", "replies": [], "depth": 1}]