Residential or Commercial Real Estate For My First Investment - Which Is Better?

[00:00:00] This week's listener of the week is Daniel Schulman. Daniel, please DM us your home address so we can get you a gift. And for all of those listening, if you leave us a five star review below, you might be next week's listener of the week now. The almighty question, should I buy residential real estate or should I buy commercial real estate?

I'm gonna tell you a story. I went under contract to buy a residential property a couple years ago. I had experience in commercial, but I really liked the property. I liked the location, and I figured, why not diversify? So I, uh, go under contract and I go in and I, I, I bring a mentor in with me during inspections.

And very long story short, [00:01:00] uh, the inspector tells me that, that the furnace is built into a, into the wall, and that this house is a flaming death trap. And when I tell you that I couldn't have run out of that property faster, I mean it. And my mentor as I was running outta the property, looked at me and said, why in the world are you buying residential properties?

You know, commercial, you know, in triple net investments and you know the benefits? Why in the world are you dealing with literally the house over a family's head that is so dangerous. You could kill them all and the blood would be on your hands. Right. That's a big, that was a big awakening for me, that my mentor was right.

I should [00:02:00] not be buying residential real estate. I am not Okay. Having the. Overwhelming maintenance necessary for residential. I'm not okay dealing with properties where I've the liabilities of a family's life, right? There's liability in commercial, but this furnace built into the wall was bad and it was scary.

And what I learned in that moment was it's commercial and nothing else. And so, Let's get into why for your first real estate investment, it's easier to get into commercial. Now, I hear this all the time, uh, commercial real estate, it takes so much more money or it's takes so much more time or, uh, every iteration of an excuse as to why you should go into residential real estate first.

And the mistake [00:03:00] that you are making when you say it's too much money, it's too much time, is that you are dealing with residential real estate. You're dealing with the fiery death trap furnaces, you're dealing with the maintenance calls on Thanksgiving. You are dealing with vacancy and painting and carpets.

These are all things I don't deal with in commercial real estate. Right. I. But the mistake a lot of people make when they make up these excuses about commercial real estate, right? It costs more, it's harder, takes longer. I can't do it, is that you get comfortable with residential. All you want to do is residential and then you never level up to commercial.

And when you don't level up to commercial, you're just letting go of an element of financial freedom and frankly, an element of. Just pure income in the future that [00:04:00] you would be recouping if you stopped listening to the media and the voices in your head that are saying It's too big. You can't do it.

You'll get stuck in the competitive high uh, maintenance. It's just a pain in the butt, residential real estate, and it's competitive, and you are already clued into the fact that. Commercial. There's something to it because you're here and you're listening and you're with me, so I know you know that you, it's not too much money for you.

It's not too much time for you. I don't want you to regret never trying it and look, it's fine if you haven't. So far it's human nature to be intimidated. It's human nature to be scared, right? But there's a reason why commercial real estate is this. NPO baby industry of white male [00:05:00] gatekeepers. Not that there's anything wrong with white men, but it was because in the past it was so convenient for the owners to only teach their sons and their sons to keep the money in the family and to keep you afraid of commercial real estate to hold you down thinking you can't do this.

Right. Thankfully we have the internet and we can talk and finally step outside of our comfort zones, right? Because that's ultimately what the difference between residential and commercial is. If you've never done commercial and you've done residential or just going with commercial in general,

if you want to live a 1% life, you need to do what? 99% of people will not do. And that's take risks and that's to do something that you know, might seem too hard or [00:06:00] too big or too expensive, but you're educating yourself. That's really not right. Diamonds are made with pressure, right? Commercial. Real estate legacy, generational wealth.

This is, it's not made without difficulty. It's not made without risk and pressure and uncomfortability, but addressing that head on and seeing it through is the difference between you and 99% of people. And, and how you're gonna do this is you're gonna start small. You do not need to go buy the Eiffel Tower.

But if you are buying Gfl Tower, hit me up. Just kidding. Start small. One time I sold a warehouse condominium for a hundred. Like, it was like $105,000. It was bonkers. I should have bought it. But, [00:07:00] uh, we joke all the time, you know, you drive by properties. I should have bought it. I should have bought it. I should have bought it.

I don't want you to have that regret. I mean, it's inevitable, but, There are small commercial properties, and that's how you should start buying. Pick a product, type in your city and study it. Study the numbers, study the owners, study the buyers. Study the sellers. Study the brokers. These all play into your eventual ability to go from smaller to medium.

To syndicating with other people's money, you're compounding your power, your money, and your capabilities to grow a portfolio so that you can hang out with me in the Cayman Islands in 30 years and on the first of the month, we can look at each other and high five because of [00:08:00] what just hit our bank accounts.

My cat just jumped up onto the window ledge and fell. So if you heard that, that was kind of funny. Now I also suggest working with professionals your first real, uh, real estate investment. Don't work with a residential broker. Don't work with any Joe Blow off the street. You'd want to have a professional spearheading your transaction.

1. There are people who specialize in product types. I specialize in warehousing. You're not gonna call me to sell your office building jk, do it. No, I'm just kidding. And I have sold office buildings. But you're gonna call an office broker. You're gonna call me to sell your warehouse. Okay. Come a team of qualified individuals [00:09:00] for your transactions.

And the last thing I'm gonna leave you with is you need to be buying triple net properties. Do not buy properties where the landlord is responsible for the maintenance. Why would the landlord ever be responsible for the maintenance? Well, in residential, that's the industry standard. In commercial specifically, triple net, it's not, it's so much easier on the landlord when you're dealing with triple net properties because the tenants take responsibility.

And care for their units better than residential. Residential, it's, they don't care. They're slamming, they're breaking because all they have to do is call the landlord, and the landlord will fix it. So now, now that we've decided that investing in commercial real estate is so much more profitable, easier.[00:10:00] 

You could sleep better at night. What questions can I answer for you? Head over to Aviva Real Estate and DM me any questions you have on this episode. If you wanna get started in commercial real estate today, head down to my show notes. You're gonna see my freebie, how to get started in commercial real estate, and next week we will be talking about how in commercial real estate a shift.

Does not mean a crash. A lot's happening in the wild world of commercial real estate. Don't miss out on next week, and I'm looking forward to seeing you then to.