Episode
369. Stop Buying Rental Houses. Start Buying Commercial
- Published
- Apr 2, 2026
- Duration seconds
- 2544
- Processing state
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- https://www.tylercauble.com/podcast/episode369
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Summary
Key Takeaways: Residential rentals are squeezed Average profit is only about $713/month per house. Rising interest, insurance, and maintenance costs are outpacing rent growth. ~ 80% of landlords self‑manage , effectively creating a low‑pay second job. Residential is hard to scale Short 12‑month leases mean constant turnover and risk of bad tenants. Property value is based on comparable sales , so you’re largely “praying for appreciation” and dependent on neighbors and timing. Commercial real estate advantages With triple net (NNN) leases , tenants often pay taxes, insurance, and maintenance . Longer leases (3–10+ years) with built‑in rent bumps = more stable, predictable income. Forced appreciation : raising rents or filling vacancies directly increases value via higher NOI . Better tenants, better risk profile Tenants are businesses , not individuals: rent is a business expense . You can get financials, personal guarantees, and corporate backing , and freely say no to weak applicants. Same purchase price, very different returns A $500k house example: ~ $45/month net, ~ 0.4% cash‑on‑cash . A $500k small NNN commercial building example: ~ $825/month net, ~ 7.9% cash‑on‑cash , plus upside from forced appreciation. Transition strategy Don’t fire‑sale your portfolio; stop buying new weak residential deals . Sell problem properties first , use 1031 exchanges into small commercial buildings. Start with smaller commercial deals ($300k–$1M) to learn and scale.