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Real Estate
Property Classes – Knowing Where to Invest Within Real Estate Property Classes
October 23, 2020
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Each property class brings along its own set of benefits and risks. Therefore, when picking the right property to invest in, it’s important to do your due diligence and find out what it means to invest in a particular class of property.

What are the Different Property Grading Scales?

The exact scale differs between each investor. Some investors grade in the scale of A-F and others consider properties within A-C. Generally, you should be looking at investments ranked between A to C classes. There are two grades you need to consider when looking at your next potential investment – the grade of the location and the grade of the property itself. Therefore, it is possible to own an A class property in a C class area.

Some investors go further to add in minus and plus distinctions, for example, “An A-minus property in a B-plus location”. However, for the sake of simplicity and clarity, we’re limiting ourselves to A, B, and C class locations and properties.

What does An A Class Property Entail?

A class A location is a new area with lots of new buildings, excellent schools, and the best restaurants. Frankly speaking, these are the most expensive real estate investments. Therefore, you can expect high earning tenants here, and you should expect your property to have a steady flow of tenants due to the highly desirable location. Therefore, the quality of tenants and the property are both impeccable in class A areas.

In the case of an A class property, you’re looking at a relatively new building, almost no maintenance issues and the building has all the trendy interior designs including expensive countertops and hardwood floors.

Class B Properties – The safest investments

Class B locations are older regions with decent enough restaurants, schools, and shopping complexes. Here, there is a larger proportion of property owners as opposed to tenants. Moreover, with a class B property, you’ll be aiming for middle-class income tenants.

Properties ranging in age between 10 to 30 years fall into Class B. These properties run with higher maintenance costs and the income is generally lower due to the age of the property. However, you can easily upgrade grade B properties to grade A properties with a little investment. As a result, class B property investments are excellent for new investors looking to start from a solid foundation. Here, you can start steady with a steady cash flow from a B class property.

Class C – steadier cashflow at the cost of high maintenance

Generally, in the oldest area. A class C building is often expensive to maintain and a lot of the amenities with the property are expected to be out of date. However, Class C properties are more affordable. Therefore, they provide the best in terms of stable cash-flow however, they require a rigorous amount of maintenance and monitoring to ensure everything is in order.

Conclusion

Without incurring massive debt and to stabilize steady cash flow, investing in Class B properties are the best way to go for new real estate investors. With a strong foundation built with Class B properties, you can start moving up to Class A properties to further boost your income and investing capabilities.

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Richard Nevis

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