How Much Does It Cost To Build An Apartment Complex?

Owning an Apartment Complex – Profitability, Pros Cons

 April 09, 2019

An apartment complex consists of two or more apartment buildings.  Logically, you would expect that running and owning an apartment complex is harder than running a single building.  However, there are certain economies of scale that work to the benefit of apartment complex owners.  Owning an apartment complex pros and cons are somewhat different from those for other multifamily structures.  In this article, we’ll discuss the process of buying and owning an apartment complex, review its profitability, and evaluate owning an old apartment building vs a modern apartment building.

On a related note, you can check out our breakdown of different types of apartment buildings.

Apartment complex planning and construction

As with any building or development project, developers and project owners have a lot of factors to understand and consider. Between the costs and what impacts them, as well as choosing materials, there is a lot to know.

What impacts costs

The cost to build an apartment complex is subject to many factors. Obviously, the region in which the project exists is a major component to estimating the cost. Building an apartment complex (or any type of building) in the East or West is typically more expensive than the same project in the Midwest or South. 

It’s also important to consider demand. The cost to build an apartment complex will be higher in areas experiencing construction booms. In these areas, contractors have many projects to choose from, so they don’t need to be as competitive with their bids. In areas where construction is slow, bids may be lower as contractors are pining for jobs to keep their calendars full. 

Also, should union labor be a requirement, the cost of building the construction complex will be significantly higher. Unions pay higher wages and offer training and benefits to their members, and company owners need to bid higher to cover the costs.

Selecting materials

One of the most significant factors affecting the cost to build an apartment complex is materials selection. Apartments with basic fixtures and furnishings will be significantly less expensive to build than those with luxury-grade finishes.

Material volume is a factor, as well. The building of an apartment complex is typically repetitive, with the same materials used in each apartment. For that reason, contractors need to order large quantities of the same materials. Should those materials run short or become unavailable, delays will occur. And, if the price of those materials jumps 10 or 15 percent overnight, the overall cost to build the apartment complex will jump. 

For these reasons, contractors might consider using materials financing to lock in prices and take advantage of materials being in stock.

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What do you need to rent your first apartment?

During the application process, you'll likely be expected to provide identification, a Social Security number, and pay stubs from your job. You may also be asked for a bank statement. Since first-time renters typically have sparse credit histories and relatively low income, they may be asked for a referral letter from a family member or employer. A co-signer may help alleviate concerns if you can't provide any of this information, for instance, if you're a full-time student without regular paychecks from a job.

How Profitable Is Owning an Apartment Complex?

Frequently, there is good profit potential in buying an older apartment building.  Typically, the price of an older multifamily property will undercut a more current, modern apartment building’s price in the same location.  Unsurprisingly, your profit potential ties directly to the amount of rehab you must perform and the purchase price you pay.  Therefore, you need accurate numbers for NOI and a cap rate that makes sense.  Only then can you feel comfortable with the purchase price.  Suppose your complex has 50 units and the average annual NOI per unit is $10,000.  Then your net operating income should equal approximately $500,000 per year.  Any unexpected expenses or unplanned vacancies will decrease this number.  Therefore, it’s prudent to assume you’ll earn just 90% of expected income.  In this case, that’s $450,000.

For more detailed information, including current multifamily market trends and success stories, read Investing in Apartments: Complete Success Guide. For a guide on how to buy apartment buildings, check out Multifamily For Sale: Complete Buyer’s Guide.

Operate from a good baseline

  When I look at properties in any market I analyze at least five similar deals to the ones I’m interested in purchasing. This gives me a good baseline for typical property expenses.

Such as, if I see an atypically high cost for “Water” I know I need to investigate further. This could be a red flag for serious plumbing issues.

But without a baseline I might completely miss the water bill is high in comparison to similar properties.

Here’s another example. The price for pest control is often included under the “Repair and Maintenance” category. Pest control is a common property operating cost but the number is typically fairly low. An unusually high number could be a red flag for a serious problem such as bed bugs, which can infest an entire property. Bed bugs are becoming more and more common. Even five-star hotels and new Class A apartment buildings can—and do—become infested.

Again, without historical numbers and a baseline to compare expenses to, you might miss noticing an abnormally high pest control number.

How To Account for Living Expenses

Finding an apartment that includes utilities in the rent can simplify your budget. However, this option isn’t always available. If utilities such as gas, electric, and water are not included in the rent, you will need to factor them, along with other common living expenses such as renter’s insurance, into your apartment budget as follows:


This amount should stay the same each month for the duration of your rental contract unless you get a monthly rental agreement, which is not binding but also doesn’t prevent rent increases. In addition, most rental agreements require at least one to two months of a security deposit, so be sure to account for that, as well.


Tenants typically pay for this utility.Because you're in an apartment, your electricity bill should be fairly small each month. If you miss any payments, the utility company can turn off your electricity until all fees have been paid.

Natural Gas

Gas is often paid for by the landlord and is not typically expensive. However, if you are responsible for this utility, make sure you are able to make the monthly payments, as the utility company can easily turn off your heat and hot water for the money owed.


Landlords also often pay your water bill. However, in certain cases, you may need to pay for this utility, and you want to be sure you can make the monthly payments.

Internet and Cable

You'll be responsible for this charge, and you may be able to get a bundled service from your cable or cellphone provider at a lower rate. Depending on your apartment complex, you may have to pay an installation fee. Make sure to inquire about this fee when shopping for a provider. In addition, cable may be optional if you don't watch much television. Consider streaming services as a cheaper option if you don't watch cable channels often.

Miscellaneous Fees

Also, be aware of these common fees that many apartment complexes and landlords charge:

  • Pet fees
  • Garbage pickup
  • Pest control
  • Parking
  • Storage/garage
  • Administration fees

Not all apartments come with these fees. However, it's a good rule to ask if they do. Some fees may occur on a monthly basis, while others may be a one-time charge.

You might find you can afford the monthly rent without an issue, but the upfront costs to move, such as security deposits, renter's insurance, and administration fees, seem overwhelming. To get a realistic picture of what you can actually afford and to avoid any surprise charges, you should also include these expenses in your budget.

Security Deposits

In addition to paying the first month's rent, you will likely need to pay a minimum of one month's rent as a security deposit. If you use a broker, you might have to pay them another month's rent as a fee. For example, if you rent an apartment that costs $1,000 per month and you use a broker, you would have to pay $3,000 upfront. Even without a broker, you would need to pay $2,000 upon moving into your apartment.

Some places may give you a break on the security deposit. Instead of a traditional deposit where you get your deposit back as long as there's no damage, you might be able to make a non-refundable deposit for a much smaller amount, like $175.

If there are damages to the apartment that exceed that amount, you may be on the hook for those at the end of your lease. If you agree to this non-refundable option, make sure you save a little money each month in case you are charged an additional fee at the end of your lease.

If you have pets, you might also have to pay a deposit for them. This amount is typically much smaller than the monthly rent, but it should be included in your budget.

Renter's Insurance

This covers all your belongings in your apartment in case of theft or certain types of damage. Renter’s insurance is usually fairly low-cost. You can cut the cost even more by bundling this insurance with your car insurance coverage if you have a vehicle. You may also be able to get multiple quotes for renter’s insurance to compare costs.

Many management companies require that you have proof of insurance before you move, and it's a good idea to insure your belongings regardless. Renter's insurance is usually $10 to $20 a month, depending on the area you live in and your type of apartment. If you have a car, ask your car insurer if they offer this coverage, as you might get a bundle discount.

Utility Deposits

Some landlords require that utilities be in the tenant's name. Therefore, you may have to pay a deposit for service, especially if this is your first time paying utilities. Deposits can range from $70 to $150, but as long as you pay your utilities on time, you should receive a refund when you move out. You may have to wait a few months to a year. If you continue service with these utility companies elsewhere, you can expect to receive a credit on your statement instead of a refund payment.

Administration Fees

If you want to apply for an apartment, the management company will likely need to run your credit and conduct a background check before it’s time for you to move in. You typically have to pay an administration fee for this service of about $100, although some companies will waive the fee if they’re offering a special.

Apartment Building Construction Cost Breakdown

Many variables determine the overall cost of an apartment building, including materials and labor and the cost of an architect, general contractor or builder, and structural engineer. Costs vary by location, material types, and building style. High rises require more material in total and for the structure, so you have higher total material costs.

Every project is different, but you can get a general idea of how a large-scale project like an apartment building breaks down in costs. This includes the labor and materials for each section as a percentage of the total project cost. Architect, designer, and builder fees are in addition to the total cost to build.

Project AreaAverage Cost Percentage
Architect Fees8.9% – 10% of the total cost (added)
Structural Engineer Fees$500 – $20,000 as needed (added)
Contractor or Builder Cost25% of the total cost (added)
Floor Structure12%
Walls (Wood) and Exterior Finish6% – 10%
Roof and Cover10%
Windows and Doors5%
Interior Finish6% – 10%
Floor Finish3% – 5%
Interior Features3% – 5%
Bath Detail4%
Masonry Walls (If Used in Place of Wood)9% – 12%

Average Maintenance Cost for an Apartment Complex

There is a wide range of associated maintenance costs for apartment complexes. The materials used, number of units, and unit type all play a role in how much maintenance costs.

Monthly maintenance fees range from $50 to $1,000 a month for each building, and many have varying monthly costs, depending on the needs of the building at that time. This can also vary by location and the type of tenants you have. Urban areas and luxury buildings may have different maintenance needs than apartments in other areas.

The path to creating wealth through apartment complex investing has been laid

Here is a brief summary of the steps you need to take to jump in and get to work:

  1. Decide on multifamily as your niche.
  2. Take massive action by educating yourself. Look into Wheelbarrow Profits Academy
  3. Seek out a mentor, coach or partner.
  4. Research markets and focus on one market.
  5. Learn how to analyze deals.
  6. Seek out properties with multiple value-adds. The more value you can create, the wealthier you will become.
  7. Start to build your real estate team.
  8. Put in offers.
  9. Expect rejection! Exhibit patience, persistence but willing to walk away mentality.
  10. Land your first deal.
  11. Get to work and implement your game plan.

The Courtyard deal gave us the experience and the momentum to continue in real estate. I often wonder if I did not jump into this deal, would I have been able to purchase our most recent deal? Do not underestimate the power of positive action and momentum.

The Hammond was a much larger property than the Courtyard, but exhibited many of the same characteristics. It was bloated with high expenses, the revenue was not being maximized, the property needed some TLC, (tender loving care) and there was an abundant amount of value-adds. The strategy was identical to the Courtyard: buy on actual numbers, implement our repositioning strategy and increase the NOI.

It took us around six months before we actually went into contract with the Hammond. There were a couple of groups ahead of us, and we had given up on the deal, only to have it come back to us because of our tenacity and persistence.

There were several differences between both deals, such as age of the property, condition, tenant base, property class, desirability, but one feature stood out to us. It was the size of the Hammond that excited us. We were able to provide housing to a larger pool of tenants, thereby increasing our ability to generate wealth. Our profits would be magnified once the property was repositioned.

We are about six months into our plan, and the property is chugging along. The property was purchased with $100,000 in monthly revenue collections.

We have expanded the revenue to $110,000 in six months, and estimate that revenue will grow to around $120,000 per month within twelve months. There are three laundry units that are being converted to apartments, as well as increases in rental rates.

Our goal is to achieve a value of $9,000,000 within twelve months, allowing us to refinance the property and extract the capital we placed as the down payment.

To recap, whether you are purchasing a four-unit deal or one thousand units, the focus should be on:

  1. Buy Right
  2. Manage Right
  3. Finance Right
  4. Look for value-adds
  5. Have a plan
  6. Implement the plan
  7. Create value
  8. Repeat

The financing terms on our first were less than stellar. The interest rate was 6%, it was a twenty-year amortization and the term was five years. Compare that to the Hammond: 4.25%, 25-year amortization and one year interest only payments. What is the moral of the story? Expect to make mistakes, learn from those mistakes, course correct and continue to pursue your dream.

Additional read: A Roadmap For Buying Your Next Apartment

If you have any questions, please contact me at I hope this article serves you well and gives you a framework to attack apartment investing.

Unexpected apartment building operating and renovation expenses

  As a new apartment building owner you will incur unexpected expenses. That’s a promise.

It’s almost impossible to foresee every eventuality. You might simply overlook an expense. That happens. But with some practice analyzing deals—as many as you can—you will be become more educated and less likely to miss something.

Until you become proficient with property analysis, work with a multifamily mentor or apartment building owner operator to analyze any deal you are considering making an offer on.

In addition to mentoring programs I offer one-on-one private consulting for specific deal and property analysis. Please visit my Real Estate Mentoring and Consultancy Services page for more information. Or, why wait? Contact me directly with any questions you have.


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