Transition from 3-4 units to 5 units+???

[Ki Lee]

Hello BP!

I've had 2 rental properties for 10 years. One SFR and one 3 units. I had no idea what I was doing when I bought them and pretty much left them in autopilot for the last 9 years or so. Lately I decided to learn more about investing and took a closer look at my properties. Both are under-performing, but they have appreciated. Breaking even is partly due to inefficient management, but also high taxes(Chicago) and the age of the building.

I'm looking to do a 1031 exchange on both of them to trade up for a better cash-flowing properties ($500-$600k for one and $180-$210K for the other one).  Initially I was only looking at 3-4 units because 5 units+ becomes commercial and I need to get a commercial loan. But it seems like I'm also limiting myself this way.

What are some of the challenges for 5 units+ for a novice investor?  Is it going to much different than investing in 3-4 units?  What are the best resources to learn to do it?  Books?/blogs/podcasts?  Are the loan rates much higher and difficult to qualify for?

I'd imagine that the cost of loan and also the cost of management/vacancies are going to be higher for 5 units+..  What kind of cap rates should I be looking for?  And other metrics that are more relevant?

Thanks in advance