Buying Smaller 4+ Unit Properties
I'm looking at two separate properties one of which has 5 units and the other 6. As I was sitting here thinking about these two opportunities, I started wondering about whether it's worth it at all buying these smaller commercial properties. 1-4 unit properties are great because you can get residential mortgages on them. Larger apartment properties are also great because although they force you into uncomfortable commercial mortgages, they can still be very profitable. But in cases of these smaller properties that are too big to be residential, and are just barely commercial, I wonder if it's worthwhile. Maybe instead of buying these two properties, I should be looking for a single 11-12 unit property. What do you think? 
[addsig]
I am currently contracted on 2 complexes. One is a 20 unit (four 4-plexes) and the other is 16 townhouse units (four 4-plexes as well). I was able to go either way with the financing. The only problem going residential is that most lender, in my case anyway, will only do one or two loans at a time and some will not do more than two loans with one borrower period. I ended up applying with a lender that would do both under a commercial program.
As far as the income, there is a much greater profit margin on larger units, but the key is to buy them right. My mentor kept stressing one thing as most pros on this list will agree, You make your money when you BUY and not when you SELL.
my two cents
Jonathan
I guess it's different for everybody, but I'm just wondering at what point do the higher interest rates and shorter length of commercial mortgages become worthwhile? Is it 6, 10, 20, 100, etc. apartments? Is it purely a cash flow question or am I missing something else in this equation?
[addsig]
I think it also depends on where you live. I live in CT. I wanted to buy a 16-unit, which was hard enough for a newbie. Then the seller sold it with 4 other properties in a package. Then I bought a 6-unit. You won't believe what I had to go through to get the mortgage, the appraisal, the insurance because it is "commercial". Since then I bought 3 4-apartment units and got residential loans at a much lower rate. They have all positive cash flows. I looked at some 20+ units but they seemed too pricey to me. Am I not looking at the right places then?
"you make money when you buy, not when you sell". Do you mean you have to get a great deal to make money? But in this hot market, getting a great deal is not easy. As a newbie landlord, I wanted to buy something safe and turn-key.
Best thing to do is to shop it both ways if "residential financing" is a possibility.
In general, I'd lean towards a lender that likes apartments and does commercial deals, assuming that you have 25% to put down.
Look for reputable lenders and compare based on time it takes to close, what they will require of you, points, rate, calls, and interest rates.
I'd look for commercial lenders that will give you 30 year Ammoratizations.