Advice on defining niche as a beginner

[David Greenberg]

Hi all. 

I'm a mid-career professional with secure W-2 and established equity-based retirement portfolio who's interested in diversifying into RE. 

Am currently doing my due diligence and self-education thru a variety of content/sources but am struggling a bit to define my niche/buy box. 

Specifically, residential MF seems very approachable and a "safe" way to begin small as the financial risk of a duplex/4-plex is relatively small. And while many here at BP have scaled residential, it seems like a lot of management...either of tenants or the PMs managing all your tenants. Risk is spread out but at the cost of lots of moving parts that only increase as you scale.

Versus starting with small commercial (property price under $1M). Perhaps small retail strip, medical office or flex industrial. Not as approachable as there is much to learn about the due diligence/contracts/responsibilities of various parties. As well as concentrated risk...fewer tenants that could result in much higher carrying costs during vacancy/lease-up. Maybe I'm naive, but it seems like there's potential to scale into larger properties with few management moving parts vs apartment complexes. 

I feel like I'm leaning towards CRE, but have only a basic understanding of the subtypes/process/risk. Yet I drive around and look at all the buildings and businesses and think: Someone is collecting rent on that place!

Couple other details about me: Live somewhere expensive, so am targeting various mid-west locations. 

Also, have yet to talk to CPA, but am more interested in equity growth (due to my W-2/tax bracket) vs cash flow currently. Would plan to transition to a cash flow focus 10+ years down the road as I wind down my professional career.

So I'm taking my time to learn without being overcome with analysis by paralysis, but am still in the early stages. I try to find and evaluate deals using my remedial buy box and analytic skills on Crexi just to get feel for what's out there. I'll admit it's both overwhelming and a tad confusing still!

Any advice on how to help narrow down my strategy would be greatly appreciated including how to juggle equity vs cash flow goals that will evolve over time.

Glad to have found and become apart of this community. Thanks in advance!

[Taylor Dasch]

I would say do whatever resonates with you - if you like MFH then start with that, I think its just better to start small when getting into anything because you have the potential to lose a lot and make beginner mistakes that will be a lot more costly on a bigger deal. But also if you have a good broker in the commercial space who is willing to hold your hand a bit the small commercial could work as well.