Residential real estate is broadly defined as real property (land and any buildings on it) used for residential purposes—the most common example being single-family homes. Commercial real estate, by contrast, includes land and buildings specifically zoned for business purposes only (apartment buildings, office buildings, hotels, etc.). This is not to suggest residential real estate cannot generate revenue. Homeowners can rent out their residential properties for passive income, or live in them and sell the properties for a profit when home prices increase. 

There are a few common types of real estate in the residential sector.

1. __Standalone houses__: Standalone homes, or single-family homes, on their own lots of land are the most common type of residential real estate.
2. __Townhouses__: A [townhouse](https://www.masterclass.com/articles/what-is-a-townhouse-explained), or townhome, is an individually-owned, often multi-level dwelling that shares one or two exterior walls with neighboring real estate.
3. __Condominiums__: A [condominium](https://www.masterclass.com/articles/what-is-a-condo) (or condo) is a privately-owned individual residential unit situated within a community of other units—like townhomes, high-rise buildings, or a condo complex. Condos are often owned by a person in joint sovereignty with a condo owners association (COA) rather than a large corporation or a property management company, as is the case with apartments.
4. __Multi-family houses__: Examples of multi-family homes include duplexes and fourplexes—dwellings with two or four units, respectively. Buildings with five or more distinct dwelling units are typically considered commercial real estate.
Commercial and residential real estate may look similar at times but the difference lies in their primary purposes.

- __Residential real estate__: Consisting of single-family houses, some multi-family houses, condominiums, and land parcels zoned for residential use, residential properties may look different, but they’re all designated for non-commercial purposes only. Depending on local laws, homeowners may lease their homes as short- or long-term rental properties, but zoning laws prohibit large-scale commercial operations. 
- __Commercial real estate__: Commercial real estate is a broad asset class that includes apartments, office buildings, hotels and motels, grocery stores, parking garages, and other public-facing businesses. Factories, warehouses, and other properties used for large-scale business purposes are technically considered industrial real estate but sometimes fall under the wider category of commercial real estate. Many commercial real estate parcels are overseen by property management companies that work on behalf of a property owner.

Keep these considerations in mind when researching residential real estate.

1. __Residential and commercial real estate markets operate independently__. Demand for residential real estate does not always mirror that for commercial property, meaning your real estate investing strategy may look very different depending on the types of properties you’re interested in acquiring. 
2. __Local markets vary__. To understand the real estate market in your area, connect with a Realtor or real estate agent. Attend open houses and browse online listings to get a sense of your local market.
3. __Financing options vary__. If you choose to purchase residential real estate, you may have to work with a mortgage lender. Investigate the lending options available to you, and take note of required down payments, <a href='https://masterclass.com/articles/baking-101-what-is-proofing-learn-how-to-proof-breads-and-other-baked-goods' target='_blank' class='mc-text--link' data-mc-segment-trigger='true' data-mc-segment-event-type='Article Page Click' data-event-obj='{"textTag":"p","href":"https://masterclass.com/articles/baking-101-what-is-proofing-learn-how-to-proof-breads-and-other-baked-goods","linkCopy":"proof","category":"automated-link"}' automatic='true'>proof</a> of income, and interest rates.
All investments, including real estate investments, come with inherent risks which may involve the depreciation of assets, financial losses, or legal ramifications. The information presented in this article is for educational, informational, and referential purposes only. Consult a licensed real estate or financial professional before making any legal or financial commitments.

All you need is a [MasterClass Annual Membership](https://www.masterclass.com) and our exclusive video lessons from prolific entrepreneur Robert Reffkin, the founder and CEO of the real estate technology company Compass. With Robert’s help, you’ll learn all about the intricacies of buying a home, from securing a mortgage to hiring an agent to tips for putting your own place on the market. 
Residential real estate most commonly refers to single-family homes, but there are other types of residential property.

Residential real estate most commonly refers to single-family homes, but there are other types of residential property.


Residential Real Estate Guide: What Is Residential Real Estate?

Residential real estate is broadly defined as real property (land and any buildings on it) used for residential purposes—the most common example being single-family homes. Commercial real estate, by contrast, includes land and buildings specifically zoned for business purposes only (apartment buildings, office buildings, hotels, etc.). This is not to suggest residential real estate cannot generate revenue. Homeowners can rent out their residential properties for passive income, or live in them and sell the properties for a profit when home prices increase.

What Is Residential Real Estate?

There are a few common types of real estate in the residential sector.<ol class="mc-m-4"><li class="mc-my-4"> 1. Standalone houses: Standalone homes, or single-family homes, on their own lots of land are the most common type of residential real estate. </li><li class="mc-my-4"> 2. Townhouses: A <a href='https://www.masterclass.com/articles/what-is-a-townhouse-explained' target='_self' class='mc-text--link' data-mc-segment-trigger='true' data-mc-segment-event-type='Article Page Click' data-event-obj='{"textTag":"p","href":"https://www.masterclass.com/articles/what-is-a-townhouse-explained","linkCopy":"townhouse","category":null}'>townhouse</a>, or townhome, is an individually-owned, often multi-level dwelling that shares one or two exterior walls with neighboring real estate. </li><li class="mc-my-4"> 3. Condominiums: A <a href='https://www.masterclass.com/articles/what-is-a-condo' target='_self' class='mc-text--link' data-mc-segment-trigger='true' data-mc-segment-event-type='Article Page Click' data-event-obj='{"textTag":"p","href":"https://www.masterclass.com/articles/what-is-a-condo","linkCopy":"condominium","category":null}'>condominium</a> (or condo) is a privately-owned individual residential unit situated within a community of other units—like townhomes, high-rise buildings, or a condo complex. Condos are often owned by a person in joint sovereignty with a condo owners association (COA) rather than a large corporation or a property management company, as is the case with apartments. </li><li class="mc-my-4"> 4. Multi-family houses: Examples of multi-family homes include duplexes and fourplexes—dwellings with two or four units, respectively. Buildings with five or more distinct dwelling units are typically considered commercial real estate. </li></ol>

4 Examples of Residential Real Estate

Commercial and residential real estate may look similar at times but the difference lies in their primary purposes.<ul class="mc-m-4 list-styled"><li class="">Residential real estate: Consisting of single-family houses, some multi-family houses, condominiums, and land parcels zoned for residential use, residential properties may look different, but they’re all designated for non-commercial purposes only. Depending on local laws, homeowners may lease their homes as short- or long-term rental properties, but zoning laws prohibit large-scale commercial operations. </li><li class="">Commercial real estate: Commercial real estate is a broad asset class that includes apartments, office buildings, hotels and motels, grocery stores, parking garages, and other public-facing businesses. Factories, warehouses, and other properties used for large-scale business purposes are technically considered industrial real estate but sometimes fall under the wider category of commercial real estate. Many commercial real estate parcels are overseen by property management companies that work on behalf of a property owner. </li></ul>

Residential vs. Commercial Real Estate: What’s the Difference?

Keep these considerations in mind when researching residential real estate.<ol class="mc-m-4"><li class="mc-my-4"> 1. Residential and commercial real estate markets operate independently. Demand for residential real estate does not always mirror that for commercial property, meaning your real estate investing strategy may look very different depending on the types of properties you’re interested in acquiring. </li><li class="mc-my-4"> 2. Local markets vary. To understand the real estate market in your area, connect with a Realtor or real estate agent. Attend open houses and browse online listings to get a sense of your local market. </li><li class="mc-my-4"> 3. Financing options vary. If you choose to purchase residential real estate, you may have to work with a mortgage lender. Investigate the lending options available to you, and take note of required down payments, <a href='https://masterclass.com/articles/baking-101-what-is-proofing-learn-how-to-proof-breads-and-other-baked-goods' target='_blank' class='mc-text--link' data-mc-segment-trigger='true' data-mc-segment-event-type='Article Page Click' data-event-obj='{"textTag":"p","href":"https://masterclass.com/articles/baking-101-what-is-proofing-learn-how-to-proof-breads-and-other-baked-goods","linkCopy":"proof","category":"automated-link"}' automatic='true'>proof</a> of income, and interest rates. </li></ol>

3 Key Takeaways About Residential Real Estate

All investments, including real estate investments, come with inherent risks which may involve the depreciation of assets, financial losses, or legal ramifications. The information presented in this article is for educational, informational, and referential purposes only. Consult a licensed real estate or financial professional before making any legal or financial commitments.

A Note on Real Estate Investment

All you need is a <a href='https://www.masterclass.com' target='_self' class='mc-text--link' data-mc-segment-trigger='true' data-mc-segment-event-type='Article Page Click' data-event-obj='{"textTag":"p","href":"https://www.masterclass.com","linkCopy":"MasterClass Annual Membership","category":null}'>MasterClass Annual Membership</a> and our exclusive video lessons from prolific entrepreneur Robert Reffkin, the founder and CEO of the real estate technology company Compass. With Robert’s help, you’ll learn all about the intricacies of buying a home, from securing a mortgage to hiring an agent to tips for putting your own place on the market.

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Residential real estate most commonly refers to single-family homes, but there are other types of residential property.