Purchasing Apartment Complexes Pros and Cons

[Brendan Scherschligt]

Opinions on purchasing apartment complexes instead of multiple houses? I plan on eventually having both, but was curious about what you guys think the pros and cons are. So pros and cons of apartment complexes vs multiple single family rental properties!  Thanks in advance for your answers.  

[Nick B.]

Apartments (100+ units):

Pros:

• single location
• single transaction
• economies of scale (painting 100 units is cheaper than painting 100 houses)
• professional management
• higher capital gains due to forced appreciation
• can be a truly passive investment

Cons:

• higher turnover
• higher maintenance expenses
• lower COC returns
• smaller pool of potential buyers

Houses:

Pros:

• lower barrier to entry
• lower turnover
• lower maintenance expenses
• no need for professional management on a smaller portfolio (less than 20)
• higher COC returns
• bigger pool of potential buyers

Cons:

• multiple transactions
• multiple locations
• higher per unit repair costs
• lack of forced appreciation beyond initial equity capture (ARV - purchase price - rehab)
• professional management is more expensive than for apartments
• semi-passive