A 6-unit I'd own or an LP slot in a 180-unit. I keep flipping.

Two corrections on the setup. A 6-unit is over the five unit line, not under it, so you'd be in commercial financing already, income-underwritten with a balloon. That's the education you say you want and it's the reason this option is more interesting than you're describing.

Second, no obvious value-add at 720k with rents at market means you're buying a bond with a leaky roof. 6 to 9k on 215k in is 3 to 4 percent cash on cash, and one boiler eats two years of it. If the pitch for the 6-unit is learning, fine, but be clear that's what you're paying for, since the return sure isn't paying you.

Ask what the 6-unit's expense ratio actually comes out to, and whether the 8 percent management quote includes leasing fees. It usually doesn't, and that's another half month of rent per turn.

The LP slot and the 6-unit aren't the same kind of risk and I'd stop comparing them on returns.

As an LP you're buying a set of documents. Read the operating agreement for who controls a capital call, what happens if you can't fund one, how the pref accrues and whether it compounds, what the waterfall promote is, and who can sell the asset and when. Then read the subscription agreement and the PPM risk factors, which is where the sponsor tells you the truth in the most boring possible language. A securities attorney reviewing that package costs a fraction of 200k and it's the only way I'd write that check.

On the 6-unit you're buying control. You can decide to renovate, you can decide to refinance, you can decide to sell. Nobody can call you for more capital. That's worth something real and it doesn't show up in a cash on cash number.

What I'd ask the sponsor: what's the debt on the 180-unit, what's the maturity, and is it fixed or floating? Bridge debt maturing into an uncertain window has ended more value-add deals than bad renovation work. Bramble's boiler is a 14k problem. A floating rate loan maturing in the wrong year is a total loss of the equity.

You'd have the headaches either way, they're just different headaches. The 6-unit calls you at 11pm and the LP deal ignores your emails for a quarter.

If what you actually want is to sponsor eventually, the 6-unit teaches you things no LP report will. How long a turn really takes, what a manager hides in the monthly statement, how a lender behaves when occupancy dips. I've watched people go straight from LP checks to raising money and they don't know what any of the operating lines mean.

But do the 6-unit with a value-add case in it. Buying a stabilized building at market rents to learn operations is paying full price for a lesson you could get cheaper.