what defines a commercial property

Question

Hello BP Guros!

I am new to the RE Investing world and am doing some research on buying my first investment property. I am a little confused however by what a "Unit" is defined as in terms of real estate. Is a "Unit" a single bedroom? Or is it each individual housing space in say a duplex, triplex, or fourplex? I have heard the broad term used in both cases. Also, at what point does a property become commercial? How many "Units" would be necessary?

Thank you all in advance!

Stephen Roesler · Answer

There are many types of commercial properties in real estate. The most common types would include, multifamily (5+ units), retail, industrial, office, hotel, and mixed use.

Eric Mayer · Answer

@Mandi Lambert Commercial is anything over 4 units. I would avoid properties with exactly 5 units because they can be difficult to resell (most won’t qualify for the financing.) I made the jump from 4 unit properties to an 8 unit recently.

Mandi Lambert · Answer

@Gaston Barua

Hello, did you ever find out what is considered a commercial investment? I’m asking because I’m looking to purchase a multi family property but if that is considered “commercial”, then the deposit would be 10% as opposed to the standard 20%. Is it the amount of units?

Simon Shih · Answer

It's normally each individual housing space. A four-plex is a 4 unit. In an apartment complex, each apartment is a unit.

I've never heard it refer to each bedroom, however, maybe in a situation where you are renting rooms out in a house in a college rental situation, each room might be considered a unit.