Making the jump from residential to commercial multi family?
New investor here looking for advice on moving to commercial multi family for our next property. We started out with a 4 unit last year in HCOL that has been going extrmerly well.
I was hoping to try and go 8+ units for our next property this year but am finding the terms of commerical loans very prohibitive.
We did our first deal FHA 3.47% down which made it extemely affordable. With much higher minimums, and different loan terms (balloon payments etc), how are people making that jump to commerical? I feel like the ROI on small Residential multi family is so good in our area (for us at least), with such little capital up front, that I don't see how going commerical would be more lucrative besides being a strategy to aquire more units more rapidly in a single deal.
The additional upfront cost seems to outweigh the extra units and lower cost per unit, in my calculations.
Ant advice is greatly appreciated.
4 unit @ 800k @ 3.5% down = $28k
8 unit @ 1.5mm @ 20% down = $300k
Just looking at cost to get your foot in the door, the commerical option is almost 6x the price. I could 3 or 4 residential buildings in the time it would take to save for the commerical building.
I know I'm taking a narrow view on the upfront cost but please enlighten me! I know commerical real estate is the way to go eventually, and all roads lead there, but how do I overcome this intiial cost barrier?