A tenant may not fully understand the classification of apartment complexes or even know classifications exists. To the owner and property manager, however, this rating is very important. It indicates not only appeal, but also the rental rate that can be expected for each level within the given market. And while owning and renting out a Class A multifamily property is highly desirable, the cost of acquiring one out-right can be prohibitive.
The great news? You have the ability to own a Class A-type property without having to purchase one. How’s it possible? It’s simple, really. You purchase a Class B or Class C property and make the necessary improvements to create a complex worthy of an “A” rating. Here, we take a look at the features that separate them, and learn how some simple changes can make big differences.
Multifamily Property Classes
One of the main differences between the classes is locations. When they say ‘location is everything,’ there’s truth in the statement. Class A properties tend to be in the more affluent areas of town where white collar workers live and the more expensive real estate is constructed. Class B properties are just a step down and can be found in the middle to upper middle class neighborhoods. Class C properties are another rung down, and can be located in the low to moderate income areas most typically home to blue collar workers. And then there are Class D properties, which suffer from neighborhood issues, and therefore cannot be modified in any way that would increase their ratings. For this reason, we do not make consideration for this classification going forward.
Another significant factor is age. The majority of Class A properties are brand new and are built to include all the latest components of design and amenities. Class B properties, on the other hand, are about 10 to 20 years old. They have structural integrity, but because of age, may be just a bit outdated in design and amenities. The Class C property is 30-40 years on average, and while it, too has structural integrity, it has likely already been through at least one significant revamping and may be in need of another.
While you’ll never be able to change a property’s neighborhood or age, you can up the asking rental rate by making it the most highly desired property in the neighborhood in which it currently resides. Here’s how:
B-Class Properties with A-type Qualities
To achieve an A-class quality in look and feel, it’s all about attention to detail. Fresh paint, new carpet, newer hardware such as knobs and faucets, and the latest in community amenities. New appliances are also an included offering.
C-Class Properties to B-type Qualities
One of the best things to be done with a C-class property is focusing on the age of the building and playing that up in the rehab and marketing. Many people are drawn to the history, look and feel of older buildings, so incorporating new hardware created to capture an older ‘feel’ will help accomplish this. Using new, but older-looking tiles and backsplashes, as well as hardwoods or treated concrete floors will help accomplish this as well. And, of course, amenities should also play a large part as well.