newbie questions on multifamily apartment investing

[Jerry Jones]

I am a buy and hold investor. In the past couple of years, I have bought some SFR and 4plexes in phoenix with 30 years fixed rate residential loan. With the leverage, I am able to get ~15% cash-on-cash return. Now I want to get into the larger scale multifamily apartments. I have a few fundamental questions:
1. Financing and risk
After talking to a loan broker and us bank, it look like I can only get 5 or 7 year fixed rate commercial loan for multifamily apartments. While the rate is super low now, it's going to be reset after 5 years, to a higher (more likely higher) or lower rate. This uncertainty definitely presents huge risk with a big loan amount. It's possible that the future mortgage rate will eat up big portion of the return. How to reduce such risk?
2. Equity build up
With a 5 or 7 year ARM, most of my mortgage payment will go to interest with little equity build up. Then after 5 years, I repeat this process with a new loan again. Intuitively, it will take much longer to pay off the loan compared to a 30 years fixed conventional loan. So is buy and hold a good strategy for multifamily apartment investing? If not, what's the best strategy.
3. price/unit and ROI
I looked into MFA in the phoenix market. The price/unit is much higher for buildings with more than 4 units (>$40K/unit),compared to 4plex buildings(~$30K/unit). I just couldn't figure out why is that. We all know that costco has a better unit price that target! And I would expect a lower wholesale price for bigger buildings! Is this the case for other markets? With this high price per unit and generally higher interest rate of commercial loan, I would expect the apartments will offer a lower ROI compared to 4plexes. So what's the common ROI for multifamily apts those days?

Thanks in advantage for all your inputs!

[Brian Burke]

Jerry, the commercial lenders like shorter term loans because it reduces their interest rate risk. Multifamily borrowers can usually live with it because in many cases they plan to hold the properties for just a few years. Why? Because depreciation is heavily front-loaded (if you use cost segregation) and there are benefits to exchanging out into larger property after the value rises. Since this business is about maximizing IRR, it makes sense to buy, get some appreciation and take accelerated depreciation, then sell (1031 exchange if possible), buy a larger property, and repeat.