Donald Trump is quoted as saying “If you’re going to be thinking anyway, think big.” Thinking big can take on many forms, and one is thinking about economy of scale as one great reason to be investing in commercial real estate through purchase of apartments and multifamily housing.

Economy of scale wears several hats in apartment and multifamily real estate investment:

· Apartment buying discounts – go to the Home Depot or Lowe’s and tell them you want one refrigerator. You’ll get a good price. But, tell them you want a dozen, and you get a cup of coffee and a special quote.

· Multifamily structure maintenance – If you own a dozen rental homes, you have a dozen roofs with different ages and in different stages of condition. With a single building multifamily property, it’s just one.

· Landscaping and outdoor maintenance – Those dozen yards require trips to each for landscaping, or at least careful watching if you’re leaving it to the tenants to do. The apartment property is in one location, and landscaping and yard services do it all in one trip.

· Cash flows ramp up with more units – The savings already mentioned combine with multiple rental units all in one place to produce much higher cash flows than taking them apart and spreading those twelve units all around town.

· Buying more units is no more of a task – Whether you’re doing a negotiation and transaction for four units or twenty, the effort is the same. The due diligence is concentrated, rather than spread out.

Those all relate to a larger number of units in one place. But, there are benefits in commercial apartment & multifamily investment that are derived from the higher dollar value of the properties as well.

If appreciation of real estate in the area is expected to be 15% over your holding period, would you rather be holding $200,000 worth of property, or $2 million worth? The difference is more than a quarter million dollars in your pocket.

One more benefit that began to show huge promise during the collapse of the housing and mortgage markets beginning in 2007 is the increase in rental demand that comes from homeowners displaced by foreclosure.

Any commercial real estate investment portfolio will be greatly enhanced with the addition of apartment and multifamily properties investment.

I’ll share more with you soon…

Warm Regards,

Karen Hanover, CCIM Candidate
Apartment Education Institute, President

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