Do you find that investing in commercial real estate gives you more freedom than residential real estate?
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[{"id": "gta4zyl", "text": "Depends a lot on personality wether you can truly let go or not. But the short answer is, if you have a property manager in place, there\u2019s no reason you shouldn\u2019t be able to let go pretty much as much as you want to.", "replies": [{"id": "gta55bs", "text": "What do you think the number one reason investors can't let go?\n\nHow feasible would it be to go on a 2-3 week vacation at anytime with little advance notice?\n\nWhat would you have to be involved in that your property manager can't handle?\n\nThanks!", "replies": [{"id": "gta7avy", "text": "A lot of investors are typical \u201ctype A\u201d personalities that constantly push further and constantly looking for the next deal. If you have enough income coming in and you don\u2019t need to chase the next deal then it\u2019s much easier for someone to turn off and let go. \n\nIf you have a good property manager in place, you could be gone for months. The only real issues would be if something major happens like a tornado or earthquake, etc.\n\nI hope that makes sense", "replies": [{"id": "gta7sc5", "text": "Awesome. This is exactly what I am looking for - being able to let go when I want, but also the ability to really lock down and work 100 hour weeks when I want. It's all about the freedom for me. I call it the 'painter's business model' - a painter can put down his brush anytime and go travel around the world and....when he comes back he can pick up his brush and start painting again. I realize real estate investing probably doesn't give you this much freedom but it's somewhat analogous.", "replies": [{"id": "gta8369", "text": "One of the beauties of real estate investing is you are not trading time for money anymore. You\u2019re literally making money while you sleep(and vacation). Unlike the painter, who stops making money when he puts the paintbrush down.", "replies": [{"id": "gta9au2", "text": "Yes, that's precisely what I am looking for. Well put.", "replies": [{"id": "gta9kgy", "text": "Let me know when you\u2019re ready to buy property in San Antonio!  Haha", "replies": [], "depth": 7}], "depth": 6}], "depth": 5}], "depth": 4}], "depth": 3}, {"id": "gtbebe2", "text": "As someone who has done a lot of property management, it can be as high touch or as low touch as you want. Most of our clients get a direct deposit, and 1 email a month with a excel spread sheet break down. \n\n&amp;#x200B;\n\nYou could easily sit on the beach in panama and check your email 3x a month.", "replies": [], "depth": 3}], "depth": 2}], "depth": 1}, {"id": "gta5llq", "text": "I am not an investor myself but worked in CRE many years with investors as well as working for a wealth management firm where some of the clients owned real estate as well as stocks and bonds. You can outsource many day-to-day problems as well as many tasks such as working with the accountant at tax time to a reputable property manager, but you will still need to go over reports at least monthly as well as make decisions about capital improvements, financing and refinancing, and buying and selling. If you have enough assets to buy into commercial real estate, you probably have enough or close to enough to invest in the stock market and live off that. Plus it\u2019s a bad time to get into now with office and retail demand down and PE guys buying up whatever makes sense. Commercial real estate is a great diversifier of assets for huge portfolios and for business owners who own their place of business or are at least one of the major tenants.", "replies": [{"id": "gta66gv", "text": "Thanks for the feedback. What is the typical range of cash on cash returns you usually see commercial investors achieving on smaller properties ($1-5M)?", "replies": [{"id": "gta8oky", "text": "No clue. My experience is with much larger properties. Commercial mortgages are typically only 60% LTV and are shorter term (maybe amortized over 20 years with a 7-year term), so different from residential, although I haven\u2019t had a building refi since the pandemic.", "replies": [], "depth": 3}, {"id": "gtadqr4", "text": "Due to shorter amortization and lower LTV on commercial loans you don\u2019t see the outrageous cash on cash that you see people talk about with single family or small multi family residential. Typically I am seeing cap rates in the 7-9% range produce IRR in the mid to high teens with cash on cash positive but usually in the same range as the cap rates. I\u2019m pretty conservative with my estimates though.\n\nFor me real estate only outperforms other investments if you are already at high tax rates and can use depreciation effectively. Also if you\u2019re purely an investor the broker fees and property management has the ability to eat you alive. Have spare cash in reserve because lease up costs between brokers fees and TIA can be north of $40 psf.", "replies": [], "depth": 3}, {"id": "gtath0e", "text": "Probably 5-9% CoC. That\u2019s what I invest in but with a family of 4, I wouldn\u2019t think my sub million of equity can let me coast.", "replies": [], "depth": 3}], "depth": 2}, {"id": "gtas96u", "text": "What or who is the \"PE guys?\n\nI do think your post makes a lot of sense.", "replies": [{"id": "gtaud1t", "text": "Sorry. Private equity.", "replies": [], "depth": 3}], "depth": 2}], "depth": 1}, {"id": "gta71jw", "text": "We have single family houses and some smaller commercial.  The property management for the residential stuff does a great job so we don't have to deal with anything except the occasional email.\n\nThat said, we just bought our first slightly larger industrial building (13,000sf multi tenant), and we'd love to sell half our houses and get another one in the upcoming 12-18 months.\n\nResidential is always gonna be more of a pain in the ass.  But it's nice to have some because that will always stay rented in any market.  I've had to just mentally let go a bit and let the property managers do things their way.  These people do a really good job but it's not always exactly how I might do it.  But in the end it doesn't really matter as long as 95% of what they do works out.\n\nWe leave for weeks or a few months at a time and things more or less roll along.  The money shows up every month.  Theres nothing anyone else can do to make you feel 100% comfortable letting them handle it for you.  It's sort of a mindset you have to develop on your own, that you've hired good managers and you just let them do their job.\n\nGood luck!", "replies": [], "depth": 1}, {"id": "gtac1p3", "text": "I still end up working at least a little every single day when I\u2019m on vacation/away.", "replies": [], "depth": 1}, {"id": "gtacjra", "text": "It depends on what and how you invest. If you don't want to worry about it, just look for long-term NNN with quality tenants.", "replies": [], "depth": 1}, {"id": "gtadgsx", "text": "TeddyKisss, it sounds to me like you are looking to change professions from whatever you currently do to a commercial real estate investor.  If you have millions of dollars in the bank, you can probably make the switch.  However, if you don\u2019t have millions of dollars in the bank, I\u2019m not sure how you\u2019re going to replace your current income with commercial rental income.  I\u2019d say you could expect to get around a 7% return on your money.", "replies": [], "depth": 1}, {"id": "gtairzm", "text": "No, less. No dealing with investors or strict lender covenants when you are in resi", "replies": [], "depth": 1}, {"id": "gtall1m", "text": "Look into single tenant NNN properties: McDonald's, Taco Bells, Dollar Generals, etc etc, if you have money for it. You won't need a property manager and it's all mail box money. Lower cap rates, but seems like it's compatible with your lifestyle.", "replies": [{"id": "gtatmcz", "text": "If he\u2019s not paying cash. Debt service eats a ton of the free cash flow though. Those deals are so dependent on debt terms.", "replies": [], "depth": 2}], "depth": 1}, {"id": "gtammwb", "text": "that is what the property manager is for. Your front man.  Right now most strip mall owner mostly not able to collect rent. Some pay some most are folding and fleeing.", "replies": [], "depth": 1}, {"id": "gtavaa9", "text": "Build up to investing in single tenant assets like fast food chains. They pay decades long lease contracts and take care of pretty much everything themselves. If you have a PM, you\u2019re set to just sit back and collect the rental income.", "replies": [], "depth": 1}, {"id": "gtay2ta", "text": "MFR better for long haul and macro trend over next few decades", "replies": [], "depth": 1}, {"id": "gtbct05", "text": "@Teddykisss. What is the service business you are trying to leave and where are you located? Just curious as to how much you work while on vacation?", "replies": [], "depth": 1}, {"id": "gtcmudj", "text": "Great point!", "replies": [], "depth": 1}]