Start at 6 units or stretch to 14? The per unit economics say one thing and my nerves say another
I have enough down payment for a 6-unit comfortably or a 14-unit if I bring in one partner and keep almost nothing in reserve beyond the required escrows.
The 6-unit is mine alone, the mistakes are cheap, and if I lose a tenant it's one sixth of the rent roll. What bothers me is that it can't carry professional management. At 6 units and 900 rents, a management fee eats most of what's left after debt service, so I'd be managing it myself while learning commercial operations for the first time.
The 14-unit spreads fixed costs over more doors. A manager, a landscaper, a real accounting setup all become affordable per unit. One vacancy is 7 percent of income instead of 17. But it's a partner, a bigger loan, and every operational thing I don't know yet happens at more than twice the scale.
Everything I read says this tier rewards operators who think like operators, and the 14 forces that faster. It also punishes them faster. For a first commercial deal, does the scale that makes the numbers work outweigh starting somewhere the mistakes are survivable?
First commercial deal
25 votes