Cash Flow in Apartment Investment is a Function of Economy of Scale

When a real estate investor graduates from multiple residential single family rental properties to apartment investment, it's usually because they recognize the better cash flows realized in apartment investment. It's not about being able to charge more rent because of a large number of units in one location. It's mostly about economy of scale that reduces expenses per unit. Whenever a large number of units are concentrated in one location, sometimes even under one roof, there is great opportunity to cut costs of operations in a number of ways.

Maintenance and Repair Savings in Apartment Investment

Whether it's through hiring in-house service personnel, or the ability to negotiate with contracted service providers with volume work, the apartment investment property can significantly decrease the cost for repairs and maintenance per unit. Think of the difference if the properties were single family homes spread all over town.

Purchases & Upgrades

Whether it's new refrigerators or painting units, the ability to package several purchases into one negotiated major buy will cut costs. Volume speaks to vendors, and the buyer for an apartment investment property has clout when in the market for appliances, furnishings or any other commodities used in the operation of the property.

Insurance

It's less expensive to build apartment units than individual homes, so it's logical that insurance would be available at a lower cost per unit. But, there's also the negotiation piece, with the owner getting a better deal if for no other reason than there's only one policy for a great many units. The overhead to issue that many policies for individual single family homes would be much greater.

Apartment investment cash flow is increased by cost analysis of just about every expense line item in the budget.