I've worked as a professional real estate manager for 15+ years, mostly in California but with also in a couple of places
The expected cap rate (annual rent / purchase price) in on both the East Coast and West Coast is roughly 5-7%. In places like Texas and Ohio, the cap rate is roughly 10% Since a "competent" property manager (like myself =P) usually charges about 10-15% of gross rent, this means your expected cap rate will drop to about 4.5%-6.3%.
Expense rates are roughly mortgage (7-10%) + taxes (1-2%) + maintenance (1-2%). Most commercial properties also don't have a high expense ratio because tenants typically like to keep their places of business up and running. However, keep in mind that commercial properties are usually paid back a faster schedule (usually 10-20 years) than residential mortgages (usually 15 or 30 years), so there are much larger monthly payments.
People usually do real estate for the tax benefits; there are many common, legal and IRS sanctioned ways to create tax-free income streams. However, to get to that stage requires starting with a significant amount of equity.
Quick disclaimer: I am not a tax professional; please always consult your own professional help.
I don't want to sound like I'm lying, so I'll provide a very benign example of the "common, legal, and IRS sanctioned" income streams,
Let's suppose that I have a house that's paid off. Instead of selling it and incurring all sorts of taxes, why don't I:
1) take out a mortgage against it
2) rent it out
The mortgage is not really income, according to the IRS, but a valid business expense. By renting it out, I get the tenants to pay back the mortgage for me.
