Looking at my first property larger than 4 units, but finding it very difficult to cashflow with a commercial mortgage set-up.  Especially the smaller 5-10 unit properties.  I am currently looking at a 7 unit property (1- 3bd/2bth home, 3- 2bd/1bth, 3- 1bd/1bth).  The lender I usually work with said it would be a 5 yr loan amortized on 15 yr schedule and then renewed at Prime+1.25% after 5 years, and so on.  This results in a -$350 cash flow.  I think I could make it cash flow neutral in about 2-3 years.  Or immediately if I tried managing it myself.  I've been purely in the mindset of cash flow positive only properties, but seeing a principal payment of over $1,000 on the first month makes me wonder if this is a decent option.  Financially I'm in a position where having to pay a few hundred dollars each month would not be a problem, but I can't warp my head around whether it's a good financial decision.  Would love feedback.

You are going to encounter a lot of different opinions on this website.  I personally do not put a lot of stock in a Day 1 cash flow number provided you have the means to carry the investment through a dry period.  I focus on total return: value add and market appreciation, third-party debt reduction and cash.  Is the property located in a growing market with potential for further growth?  What is the tenant base like?  Is this an investment you intend to hold 5 years? 10 years? Pass on to your kids?  A lot of important variables other than simply Day 1cash.  

Ask yourself a few questions:

Why is this an opportunity?  

What is the current valuation of the property?  What are projected market trends in appreciation and rent in 1,3, and 5 years?

What investment will it take to maximize the property potential?

If you're just buying doors, that's a rookie mistake.  If it is truly an opportunity, it's because of valuation, rental/cash flow potential, condition, more.  The owner is selling it for a reason...what can you do with it that he/she did not.

And, I think you're smart for looking beyond the first year cash flow; the most successful investors I know are interested in performance improvement year-over-year and are confident in their skills to "create" a winner.

Hope this helps...what little you shared didn't scare me in the least.