Residential SFR vs Commercial Condo Warehouse

[Nathan Knarreborg]

My wife are looking to get into real estate investing to eventually build enough cash flow in 20 years to have the option to retire. We are currently not dependent on the real estate cash flow it just helps us reinvest in more properties. Our target cash flow per property is ~$3k/yr. We are looking at two different deals/scenarios.

SFR 3/2 $200k, 20% down ($40k), 5% int, 30 year fix, $5k initial expenses, $45k cash to purchase, rent $1650, NOI $1106, cash flow $247/mo $2,969/yr.

New Commercial Condo 1100 sqft, $143k + $10k mezzanine + $23k build out finishes ($176k total), 25% down ($45k), 6% int, 25 yr amortization 5 year term, annual total rent $20.18/sqft, rent includes $8/sqft NNN (includes roof, parking lot, landscaping, common area property tax, unit property tax), NOI $1093/mo, cash flow $240/mo $2,884/ yr.

Both scenarios exist in growing high demand markets near Denver.  We have more experience with SFR because of our primary residence.  However my wife owns a small family owned business that would rent out the commercial condo.  The business has been stable and profitable for the last 20 years, although we think we could rent the commercial space to someone else in the future if necessary.

Please correct me if the following assumptions are grossly wrong:

The SFR has a more potential stability in terms of demand and fixed interest rate, however there are more opportunities for unexpected expenses. I'm setting aside $280/mo for CAPEX and repairs to mitigate these expenses. I'm also pretty handy and feel I can leverage my time to reduce expenses.

The commercial condo seems relatively stable in terms of expenses. The NNN covers most items and there isn't much else in the warehouse that can fail. The big risk to me is demand for the space based on the economy and increasing interest rates when the loan term is up.

I appreciate any insight into pros and cons of residential vs commercial investing.

Thanks