33 Rental Houses vs. 1 Commercial Property (The Math Will Shock You)
Most residential investors are grinding toward financial freedom one door at a time and nobody's telling them there's a ceiling. Today I'm pulling back the curtain on exactly where that ceiling is, why it exists, and what the move looks like when you hit it. Including the deal where I changed one piece of paper and made almost $200,000 in profit. What you'll learn:
The real math behind single-family rentals (and why $300/month per door is a trap)
Why you'd need 33 rental houses to hit $10K/month — and what that actually costs you
The single biggest advantage commercial has over residential: forced appreciation
How commercial property values are calculated — and why YOU control the number
Why every skill you built in residential transfers directly to commercial
Get commercial real estate coaching, courses, and community to jumpstart your investment journey over at CRE Central: www.crecentral.com
Key Takeaways:
Single family rentals are a great starting point, but they have a ceiling: cash flow is modest, costs (insurance, repairs, management) keep rising, and scaling requires lots of doors and capital.
To reach something like $10k/month, you might need 30–40 houses, plus all the headaches of managing them, which often feels like a second job.
Commercial real estate scales better because property value is based on income, so you can use forced appreciation (improving leases, income, and expenses) to create big jumps in value from one asset instead of dozens.
Your residential experience is not wasted—skills like market analysis, tenant management, and leverage transfer directly into commercial.
The big idea: residential is the on-ramp, commercial is the highway. Once you feel that ceiling in single family, it may be time to transition into commercial to actually reach financial freedom.
About Your Host:
Tyler Cauble, Founder & President of The Cauble Group, is a commercial real estate broker and investor based in East Nashville. He’s the best selling author of Open for Business: The Insider’s Guide to Leasing Commercial Real Estate and has focused his career on serving commercial real estate investors.
Episode Transcript:
Tyler Cauble 0:00
You've been told that if you just buy enough rental houses, you'll eventually hit financial freedom. But have you ever noticed that it's getting harder with every house you add, not easier? Well, there's a reason for that, and nobody's really talking about it. The problem isn't that single family rentals are a bad investment. They're not. The problem is that most investors treat them as the final destination, when they're actually just the on ramp, and if you don't know when to merge onto the highway, you're going to spend the next 1015, 20, plus years stuck in the slow lane, grinding for a couple 100 bucks a door, wondering why the math never quite works to get you to freedom. Today, I'm going to show you exactly where the ceiling actually is with residential rental properties, why it exists, and what the next move looks like once you've hit that.
Tyler Cauble 0:57
I'm Tyler Cobble, founder and CEO of cre central.com, and I've been in commercial real estate for over a decade. I've personally built a portfolio worth over $75 million now I went straight into commercial. That's been my world from day one. But I've watched a lot of people that I care about, friends, families, investors inside my community, grind through the residential rental game, and I've seen the same pattern play out over and over again. They start out strong, they learn a ton, and then they hit this wall that nobody really warned them about. So this isn't me looking down on residential This is me telling you what I tell the people closest to me, that the skills that you're building right now are valuable. They do transfer, but the vehicle that you're using has a speed limit. And once you understand that, everything changes. And later in this video, I'm going to show you a commercial deal where I made almost $200,000 in profit, and the only thing that I did, that I changed on that property was one piece of paper. That's the kind of math that's possible when you understand what I'm about to break down for you. So let's give credit where credit's due. Residential rental properties are the best training ground in real estate. My own family invests in single family homes. I've got friends who have built and sold portfolios of duplexes and small rentals, even multifamily and those first deals teach you everything, right, how leverage works, how cash flow actually shows up, how fast it can disappear when your water heater breaks or a tenant stops paying those first one or two rentals, they're invaluable, seriously, but the issue is, what happens after that? Here's where most single family rental investors start feeling a squeeze, and they can't always put their finger on why. I've had this exact same conversation with friends and family who invest in single family homes, and it always starts the same way. I don't understand the deal is still cash flow. So why does it feel like I'm running in place? Why are my tires just spinning? So let's talk about what it actually costs to buy a single family rental right now, the median home price in the US today is about $400,000
Tyler Cauble 3:05
at 20% down, that's $80,000 out of your pocket just for the down payment. Add in closing costs, inspections and any immediate repairs, and you're looking realistically at 90 to $100,000 to get into one property. That's one house, one door, one tenant, and that house, if it goes well, is going to net you somewhere between 204 $100 a month after you've paid your mortgage, your taxes, your insurance maintenance, dealt with vacancy, and maybe you've set aside a little capital for expenses. Let's call it $300 a month on a good one. So you've got $100,000 deployed to make $300 a month. That's a $3,600 your return, or a 3.6% cash on cash. Now I'm not saying that's terrible. You're also building up equity. You get some tax benefits, and over time, the property appreciates with that cash flow number. That's the number that people are counting on to replace their income, and it takes a lot of houses to get there. But here's what makes it even harder. Your costs aren't just staying flat for the entire period. They're also climbing. Insurance premiums on rental properties have gone up nearly 70% in the last five years alone. Landlord policies are running 2000 to $3,500 a year on properties now, and in some states, it's even worse looking at you Florida, every house you add stacks more of that onto your plate. Then there's the management question. You can self manage to protect that $300 a month, but once you've got three or four houses, that's a part time job, Midnight maintenance calls tenant turnover, dealing with lease renewals, coordinating repairs, or you could just hire a property manager at eight to 12% of your rents, but on a $2,000 a month rental, that's 160 to 240 bucks a month, your $300 in cash flow just got cut in half, maybe more. And look, none of this means that single family rentals are a bad investment, like I said, they're not, but that seal. Thing is real, and most investors don't see it until they're already there. And if you're hearing this and thinking, Man, I wish someone had told me this before I bought my fourth house, I hear you like I said. I've had that exact same conversation with dozens of people close to me, real quick, drop a comment right now and tell me how many single family rentals Do you have, and are you feeling that ceiling? I want to know where you're at. I read and respond to every single comment. Now here's the good news, you're not stuck. You can actually sell those single family homes in 1031 exchange that equity directly into a commercial property and defer the tax gains. I've helped a lot of investors do exactly that. So nothing that you have built is wasted, but you need to see the full picture first, so let's zoom out and look at what it actually takes to build real income from single family rentals. So let's say that your goal is $10,000 a month in net cash flow. That's a reasonable number. That's enough to replace most people's income. A lot of people in real estate are chasing that exact amount at $300 per month per house, which is solid, that's a good deal. You need 33 houses to hit $10,000 a month, 33 houses at roughly $100,000 per door to acquire. That's $3.3 million in capital out of your pocket that you will need to deploy, just in down payments and closing costs. And that's assuming every deal is a good one. That's assuming no bad tenants or no surprise repairs, no vacancy gaps, and in reality, some of those houses are going to underperform. Now think about what you're also managing, 33 roofs, 33 HVAC systems, 33 water heaters, dozens of tenants, insurance premiums on 33 properties, property taxes on 33 properties, that's a lot to manage, even if you hire a property manager, which at this point you're probably going to have to, you're paying eight to 12% of your rents on every single one. So on 33 houses renting at $2,000 a month, that's anywhere from five to eight grand a month, just in management fees. That eats into your 10 grand. Maybe now you actually need 40 houses to net that $10,000 it's a very linear scale. Every dollar of income requires another door, another down payment, another set of headaches, and after a while, it stops feeling like building wealth and really just becomes a hamster wheel or a very expensive second job. Now here's where it gets interesting in commercial real estate, you can often double your income by improving a single asset, not buying 33 more buildings, just improving one. Let me show you what I mean. This is the most important concept that I think every single residential investor needs to understand, and it's the single biggest reason I've always been in commercial real estate with a single family home or a duplex, you cannot force appreciation. You can repaint the walls, you can update the kitchen, you can put in new floors or add a bedroom, but at the end of the day, your house is worth whatever the house next door sold for. That's it. You're at the mercy of the neighborhood's cops, whereas in commercial real estate, the value of the property is based on how much income it produces. That's the formula net operating income divided by the cap rate gives you the value. And because you control the net operating income through rents, through expenses, through lease structures, through occupancy, you control the value directly. So let me walk you through a real example, I bought a building in 2021 for $435,000
Tyler Cauble 8:25
it was a 2200 square foot, single tenant retail building. Before we even closed, I signed a lease on it, and because of that lease, the building appraised for $650,000 we then quickly flipped it for $625,000 almost 200 grand in profit from just signing a piece of paper. That's literally the only change was the lease. We had a contract to guarantee the income. The rent on that property was going to be roughly three or $4,000 a month, gross, like nothing special. So let's say I netted $2,000 a month in cash flow. It would have taken me 100 months over eight years to make that same $200,000 just waiting on the cash flow to come out. Why in the world would I do that? That's the power of forced appreciation. You're not hoping that the market moves. You're not praying that the neighborhood improves. You're creating value with a pen and a lease agreement. You simply cannot do that in single family rentals. And this is exactly the kind of strategy that we work through inside the CRE accelerator, how to identify underperforming assets, reposition them and create six figures of equity on a single deal. You want to understand that process step by step. I'll leave a link for you to go check out the mastermind in the description below. Now here's what I don't want you to hear. Everything I've done in residential was a waste, because it wasn't, not even close. And I see this firsthand. I watch residential investors come into our community all the time, and the ones who have been managing single family homes and duplexes or even small or large or multifamily, they're ahead. Of everyone else. They just don't know it yet. The skills that you have built, buying and managing residential rental properties, they transfer directly into commercial. The game just has different rules. You already know how to read a market in commercial. You're doing the same thing. You're just looking at job drivers and population trends and business demand instead of school districts and Zillow comps. You already know how to manage tenants in commercial your tenants are business owners. They're professionals. They sign longer leases. They maintain their own spaces because they care about their businesses. Appearance. It's actually easier. You already understand leverage. Commercial financing works a little bit differently. The lender cares more about the deal than your personal debt to income. But the principle is largely the same. You're using other people's money to control assets worth more than what you're putting in. That transition isn't as hard as people think, and I've watched it happen over and over again inside our community. That's someone who had the skills they just needed, the system and the roadmap. So let's bring this all together. Residential rentals aren't bad. They're just the starter. They're the on ramp. But if you stay on that on ramp forever, you'll never hit highway speed. The investors who build real lasting wealth, the ones who actually get to the financial freedom that you're all seeking, they use those single family homes and those duplexes to build the foundation, the skills, the capital, the confidence, and then they make the leap, not because residential failed them, but because they just outgrew it. It's a great first step, and that's not failure. That's just progress. So if you're sitting there right now with two, three, maybe four single family homes, and you're starting to feel that squeeze. Trust me, you're not alone. You're not doing anything wrong. You're just at the ceiling, and now you know it exists. So the question is, what do you do next? Well, if you're at the ceiling right now and you want to understand what the next move looks like, you're in the right YouTube channel. I have hundreds of videos teaching you how to make commercial real estate work, and that's also what we work through inside the CRE accelerator. It's a step by step system that I've created and honed in over the last nine years with real time coaching from me on how to do these investments yourself, that way you can just do it faster. It's not theory, it's the same playbook that I've used to build my own portfolio. But look, if you're not ready for that yet, if you just want to keep learning. Check out this video right here, where I break down the best commercial properties for first time commercial investors. It's a great step if you're just starting to explore what's on the other side. Now if you haven't already drop that comment, I really do read every one, and I'll see you guys in the next one. You