In recent years, the rapid population growth has affected Iranian construction industry. In Tehran, most of buildings are not following the Iranian regulation for Buildings (code 19), which has major impact on the energy efficient of buildings. The traditional methods of construction are not as profitable as before, as energy prices are increasing, there are limited fossil base resources and the energy reform plan started in 2010. Recently, some sanctions against Iran were lifted and more opportunities are available for more energy efficient buildings. This paper is focused on a typical residential building in Tehran, a five story building built in 2008 without any concern with thermal insulation. A simulation tool was used according to code 19, to compare its thermal behavior and understand how it will affect user consumption and energy costs. Results show the building fails to comply with code 19, so a simulation method was used to investigate the impact of adding thermal insulation to the building envelope. Optimal results were achieved considering energy consumption and cost analysis, based on different thermal insulation thickness in walls.