We all have the same amount of time each day.  Most entrepreneurs spend a lot of time deciding what they are going to do with their time.  Time is a very valuable and indispensable commodity.

Picking the right real estate investing strategy in the beginning will go a long way towards your success in the long run.  The more time you spend on important, business-building activities, the more money you will make.  In this article, we are going to discuss economies of scale to help you understand why apartment building investors tend to create more, long-lasting wealth than most other asset classes.

Economies of scale is when you increase the efficiency of your business because you reduce expenses by buying in bulk.  In the case of buying apartment buildings, a 6-unit apartment building roof replacement expense would typically cost just a little more than a single family home roof replacement.  While your expenses for that roof replacement are similar, the income from the 6-unit would be much higher.  The economies of scale on  your 6-flat apartment house would be much better than your single family investment.

Now, that we understand economies of scale, let’s discuss why this saves you time:

Let’s say that you set a goal for your self to acquire 100 units over the next 10 years.  In the case of single family investing, you would probably look at 10,000 houses to find 100 good deals.  If you bought a 100-unit apartment building you would probably look at 100 apartment buildings for sale to find 1 good deal.  That was a time savings of several hundred hours.

Let’s say that your goal was more specific and you want to earn $100,000 per year in passive income over the next 10 years.  You have decided to invest in a C area and your target cap rate on each deal is 10%.  You could analyze hundreds, if not thousands of single family or multi-unit deals or you could look for 1 building now that produces $8,333/mo in passive income.

The general rule of thumb that experienced apartment building investors use is, the more units per roof, the more efficient the building.  The more efficient the building, the less buildings you have to buy and the more time you will save.