Starting with SFR vs. Small Multifamily vs. Small Commercial

[Kyle Neff]

Hello BP Family!

I have been researching for months now on the various ways to start investing in Real Estate. I asked the question in my last post regarding out of state investing and received a tremendous response with some very helpful feedback - thank you everyone!

To take this a a little further, I have also been wondering whether I should start with Single-Family, Multi-Family Residential, or if I should dive into Small Commercial (somewhere from 5-10 units). 

I know a lot will depend on the market and cost barrier to enter, but I am looking in both my home market of Atlanta, GA and surrounding area, as well as in Ohio - Cincinnati, Dayton, Columbus, Cleveland. 

I am curious to hear whether it is even possible for me to get a small Commercial loan because it is my first investment property, or whether I should dip my toe in with a smaller property and let the experience teach me, then expand out later.

Looking forward to any insight the BP family has to share...thanks in advance!

[Anthony Gayden]

Originally posted by @Kyle Neff:

Hello BP Family!

I have been researching for months now on the various ways to start investing in Real Estate. I asked the question in my last post regarding out of state investing and received a tremendous response with some very helpful feedback - thank you everyone!

To take this a a little further, I have also been wondering whether I should start with Single-Family, Multi-Family Residential, or if I should dive into Small Commercial (somewhere from 5-10 units). 

I know a lot will depend on the market and cost barrier to enter, but I am looking in both my home market of Atlanta, GA and surrounding area, as well as in Ohio - Cincinnati, Dayton, Columbus, Cleveland. 

I am curious to hear whether it is even possible for me to get a small Commercial loan because it is my first investment property, or whether I should dip my toe in with a smaller property and let the experience teach me, then expand out later.

Looking forward to any insight the BP family has to share...thanks in advance!

 When I went out to get my first commercial loan I found out that banks required me to have net worth equal in value to the purchase price of the property. They also required at least 25% down and had 15 or 20 year amortization. Finally there was a balloon after 5-7 years. 

The banks also wanted me to have experience in multi family.

Basically the terms made cash flow more difficult and qualifying for the loan nearly impossible for a beginner. 

Since I had been a landlord for years and owned multiple properties and had the net worth, I was easily approved, but I can see it being more difficult for beginners.

For this reason I suggest starting the same way I started, with 2-4 unit small multi family properties.