Relationship Between Multi-Family Size and Price per SF

[Mark Dresdner]

Hi BPers:

I am a New Jersey real estate investor. My experience is in the office space, but I am now looking at multi-family properties. 

Should I expect the acquisition price per SF to decline as the building's size increases, e.g. 100 unit property vs a 10 unit property? This relationship holds in the office market. 

I ask because I am trying to determine if it is better to build up to 10 properties of 10 units each (as an example) or focus on one 100 unit property. (There are also operational efficiencies with a larger property too, which is another consideration.)

Thanks!
Mark

[Theo Hicks]

All things equal, 100 doors at one location is better than 100 doors at 10 different locations because of economy of scale. You will most likely be able to acquire the 100 doors at a lower cost per door because of the lower operating expenses that come from economies of scale (i.e. lower payroll, management fees, contract service) and capex expenses.