Multi-Family First Deal: Commercial or Residential?

2 Replies

I'm beginning my real estate investing career this year, and want to go straight into multi-family income property investing.  My goal is to double my units each year for the next 5 years with the long-term goal of reaching a property size where an in-house staff can be utilized and take advantage of the economies of scale that offers. 

Knowing I'll have to utilize commercial loans in the future anyways, I'm considering going straight into the commercial space, albeit the smaller end to start (5-8 units).  My thought process is to go as big as I can (safely), and while going with a larger property to start will have a steeper learning curve than a residential loan on a 3-4 unit place, I figure it can help me learn the commercial space from day 1 and grow my portfolio faster.  I plan on utilizing property management anyways, so besides the additional diligence up-front on a commercial loan, and potentially having to bring in some outside investor money, any insight or advice on my strategy would be greatly appreciated.  Thanks in advance.

@Matt Sullivan   

You need to have a really solid plan to 1. source deals 2. operate the property/execute the business plan. 3. source equity.  I have found that it is best to have a team approach to these 3 activities with one or more partners to ensure you execute at the highest level.

I think that focusing on commercial multifamily in the beginning is the fastest route to success over the long term.  Educate yourself and build relationships with those who are executing your business plan.  Success leaves clues.

Can you partner with someone with experience to help you navigate the learning curve?

@Ryan Cox

Thanks for the response Ryan.

At the moment I do not have anyone lined up that can show me the ropes and make the learning curve a bit easier, but I'm still fairly early in this process.  As I continue doing research on going direct to  commercial multifamily properties, the more going in on a deal with an experienced investor is clearly presenting itself as the safer route with a higher chance of success.  Easier said than done, but nothing some old fashioned hustle can't overcome.

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