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At the most basic level, an Apartment lot is just a new type of residential lot. Obviously though, there's much more too it than that- there are many differences between standard residences and apartments. Apartment lots can house multiple families of both playable Sims and Townies. Instead of purchasing their house outright, a Sim living on an Apartment lot will pay rent every week. The player will only be able to alter the interior of the apartment owned by the selected family when playing a household, with certain tools and options disabled. Even when altering an apartment with no Sims present, many Build Mode tools will be disabled.
The major difference between an apartment lot and any other kind of residential lot is the fact than an apartment can have more than a single household as residents. Up to four playable households can live on an apartment lot, for a possible total of 32 playable Sims on the same lot, and there is no practical limit to the number of additional apartments that can be occupied by Townies.
The first thing many players notice when going into build/buy mode on an apartment lot is that many options are grayed out. Additionally, if a player enters build/buy mode while a household is present on the lot, only areas that are considered to be within that household's apartment may be modified, with all public spaces on the lot being considered "out of bounds." Construction of new walls, doors, windows, and other structural elements is prohibited whether entering build/buy mode from a household or on an empty apartment lot from the neighborhood, though there are cheats that make such construction possible. Altering floor tiles and wallpaper, addition of objects, recoloring items, and a variety of other actions are permitted, with the caveat that such alterations may only be done within the apartment owned by a household, if a household is present on the lot. For alterations to the public spaces, the lot must be uninhabited (or the player must use cheats).
Creating Your Own Apartment
This []tutorial gives good information on the ins and outs of apartment construction, allowing you to have a wider variety of apartments than just those that shipped with the game.