Buying An Apartment Complex Lowers Your Transaction Costs

And Increases Your Overall Return

When buying an apartment complex, or any other investment for that matter, you will incur transaction costs. It is only logical, therefore, to assume that if you can reduce the transaction costs as a percentage of each investment, your overall ROI (return on investment) will improve.

This is certainly the case when it comes to investment real estate, where transaction costs are significant. Costs such as...

• lender fees
• attorney or notary fees
• appraisals
• environmental phase ones
• engineering or home inspections
• surveys
• title fees
• etc.

If you were to purchase 40 separate single family homes as investments (a feat in itself) you would incur many of the above transaction costs 40 times over. Forty closings, forty loans, forty attorney visits, forty engineer/home inspections, forty appraisals etc. The cost per transaction would be and is substantial.

Compare that to buying an apartment complex with forty units

The time and effort savings alone are substantial, before you even consider the savings in transaction costs. Granted, the average transaction cost incurred when buying an apartment building will be greater than a similar cost on a single family residence, but not 40 times greater.

For example. Whether you purchase an apartment building or a house, you will require an appraisal for financing purposes. The appraisal on the apartment property, however, will likely need to be an MAI appraisal, which is a much more in depth report than a typical home appraisal. And thus more expensive. But again, not 40 times more expensive.

Aside: Before you order an appraisal when buying an apartment complex, make sure that you determine from the lender whether or not they require an MAI appraisal. If you go ahead and get one done by a non-MAI certified appraiser you will likely be wasting your money.

Finally, I mentioned the amount of time and effort (that's your time and effort) that you can save when purchasing apartment properties as opposed to single family homes. Never forget that as an entrepreneur your time is worth something. Make sure that you factor the cost of your time into the transaction costs as well.

Return from Buying An Apartment Complex to Apartment Building Real Estate Investment For The Rest Of Us