Small Commercial vs. Resident Rentals

[Kevin T.]

Hello everyone,

I currently own a rental property that is a SFH and the lease expires at the end of April this year. I am very passionate about being a landlord and want to pursue more rental properties as soon as possible. I have been reading through two very informative real estate investment books. Based upon this research, I see a large push toward purchasing commercial property using "Other People's Money (OPM)". This can be accomplished several ways, but apparently the most desirable is 100% owner financing (Wishful thinking, I'm sure). For the sake of clarity, know that when I say commercial property I am referring to a property with at least 5 rental units.

One of the largest benefits that I see from owning a commercial property is that all of the units are typically located in a smaller geographic area. On the flip side, owning a bunch of single family homes all over the map is not as convenient. I'd much rather have a property management company deal with 20 units in one centralized area versus all over the map. With a commercial properties, such as a small 20 unit apartment, even a rent increase of $50 per unit x 20 units yields $1,000/mo. In a sense, this would raise net operating income (NOI) as a type of forced appreciation and increase passive income.

Given all of this information, and provided I've been a landlord less than a year, what is YOUR opinion on getting started with commercial properties versus single-family homes to rent? Have you any success or horror stories to share?

Thank you for reading this miniature novel.