Apartment buildings vary greatly by size and amenities. Of the more than 600,000 properties with at least five rental apartments across the U.S., about 70% have less than 25 apartments while there are nearly one thousand properties with more than a thousand rental homes. Larger and newer buildings often have various amenities too, such as a fitness center and parking.
Ownership of apartment buildings is widely dispersed, with about 300,000 different owners, or an average of two properties per owner. But at the same time, ownership of apartment units is concentrated with large property management and investment firms owning very large buildings. (Exhibit 1) An analysis of CoreLogic’s public records found that small properties tend to be owned by investors who owned just one or two properties: investors who owned no more than 50 rental apartments accounted for 85% of all owners but only 16% of all rental apartments. In contrast, investors who owned more than 50 units were 15% of all owners but had 84% of all rental units. And investors who held more than one thousand apartments numbered about 1% of all owners but held more than one-third of all apartments.
The ownership distribution of properties and apartment units also has changed very little in the last decade. We found these percentages also held true ten years ago.
We also found that mortgage finance varies by property size, with the least use for small and very large apartment buildings. (Exhibit 2) The placement of a mortgage to finance the property tended to be highest for properties with between 100 and 500 apartments. Financing for small buildings with less than 25 homes tends to be conventional loans from a bank or private investor and may carry higher financing costs. Mortgage loans on mid-sized properties have access to secondary market funds which may increase access and reduce cost. Properties with more than a thousand units may be owned by a large investment or management firm that have a cheaper alternative to a mortgage to finance their property.
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