Economies of scale. This is one of the biggest advantages to investing in a large multifamily syndications, and by large I mean typically 100 units and above. And a multifamily syndication is just where we’re pooling capital together with the group of investors, and we go out, and we buy this large project.
So, for many years, and in the start of my career and many, many, many countless other investors’ careers we start out with a little single family rental house, right? It was a low barrier entry, easy to get into, maybe didn’t require a ton of capital to get into, and we were all of a sudden reaping the benefits of rental real estate, right? Tax advantages, depreciation, appreciation, principal pay down, all these great things, cashflow, right?
However, at some point you run init to a ceiling or a bottleneck in terms of economies of scale. So managing one rental house, not a big deal. Maybe three, four, five, maybe 10, but 10 is kind of that point where if you’re an investor and you’re managing these yourself, it starts to turn into a job. Now, many people got into a real estate investing to get out of a job and end up creating a job for themselves.
So, you’ve got this massive advantage to these larger properties, and I have several other videos on this topic specifically, but with economies of scale, let’s say you’ve got 100 unit property or 150 unit multifamily property, that property can support payroll, can support staff, can support a third party professional management company that’s doing all kinds of important things like HR, accounting, marketing, leasing, those kind of things that are the life blood of an apartment community.
So when you’ve got a larger property you just have more dollars coming in the door, you have a bigger line item for those type of activities so they can run this as a professional business. On the flip side, if you’re running a 12 unit apartment complex, or a 20 unit apartment complex, you really probably don’t have the budget dollars for that kind of staff. So now you’re looking at part-time staff and things like that. So, you’ve got economies of scale which is a massive advantage to larger apartment complexes and one of the many multifamily syndication advantages we enjoy.
