Types of Real Estate: 5 Categories of Real Property

There was an episode of Three and a Half Men where Charlie is trying to convince his brother (and himself) that the woman he was dating was nothing like their mother. Aside from the fact both women sold real estate; Charlie insisted that there was a difference. After all, his mother specialized in high-end homes in Malibu, while the woman he was dating specialized in high-end homes in Hollywood.

It is common for real estate professionals to specialize within their industry. The two women in Charlie's life had a territory specialization, which is common. Often a real estate sales person might focus on a specific housing track, becoming an expert on the neighborhood and the available properties. But, real estate professionals also specialize according to the different types of real estate.

There are five categories of real property, they are: residential, commercial, industrial, agriculture and special-purpose.

Defining residential property is fairly straightforward. It includes property that serves as housing or a dwelling, such as single-family homes, duplexes and other multi-family homes. These properties might be located in urban, rural or suburban areas. It is important to remember that while some real estate laws and practices might classify a property in a particular category, the same may not be true for the lender. Multi-family properties of 5 or more units are often considered commercial property in the eyes of the lender, making them ineligible for residential loans.

The next category is commercial property. Many of us think of commercial property as a site where business or commerce takes place, such as shopping centers and malls, office buildings, parking facilities, hotels, motels or theaters. A buyer seeking commercial property has a different set of questions than the residential buyer. There will be concerns on zoning, parking and cap rates. It is in the best interest of a buyer to seek a real estate professional who specializes in this field, as opposed to a residential specialist.

Industrial property is sometimes confused with commercial property, after all, it has a commercial use. Yet, agriculture and special-use properties also have commercial uses, and they too are distinct categories. Industrial property would include factory and warehouses, power plants or land located in industrial districts. It is not uncommon for industrial property to be used in a manner we might classify as commercial. For example, a retail store might set up shop in a property that is considered industrial, providing local codes allow the use.

Agriculture property includes farms, ranches, orchards and timberlands. Churches, cemeteries, schools and government held land are considered special-purpose.

Before buying, it is often in the best interest of the buyer to seek out a tested real estate professional who specializes in the category of property they are seeking.