Are 5-6 unit properties worth it if I want to finance?

[Kelly Byrd]

I like the idea of a small multifamily for my first rental property. I'm looking at around 2-6 (maybe up to 8?) unit properties. I'm limiting it to this size because of the purchase price and not wanting to bite off more than I can handle for a first investment.  It feels to me like there there is very little on the ground difference between operating a 4-plex and a 5-plex, but I know the world doesn't agree with me when it comes to appraisal and financing these small commercial properties.

My RE investing goals are to build a buy-and-hold portfolio with solid cashflow in a few years while leveraging as much as I'm comfortable with while financing is still cheap and my wife and I have W-2 jobs to provide savings for reserves and down payments. I plan to make a cash offer using a HELOC, close quickly, pull most of the cash back out in a refinance and repeat.

I'm comfortable with residential mortgage financing but I needed to learn about commercial loans so I have just started reaching out to folks to learn about CRE loans, and I'm wondering how "the pros" hand the interest rate risk of the typical 5yr or 7yr balloon? To be clear, I expect to have to run my own numbers with estimates for interest in 5 and10 years. But I'm wondering now if the extra income from a 5-8 unit property justifies the complication and risk in financing. How do you folks deal with this on these smaller units?