New to property investing, ownership or management? One thing you’ve likely picked up on is the rating of multifamily properties according to ‘classes.’ In other words, referring to properties as “class A”, “class B”, or “class C.” Doing so allows for the establishment of set standards and acceptable rental rates for each.
Here, we take a look at the standards defined within each class, as well as the property type you should consider for your investment dollar.
Class A: These properties are the best of the best. They are typically new properties, but do not have to be in they meet other quality standards. They are well designed and use the best quality materials and construction processes. They are also well maintained and well-managed, making them highly desirable to tenants, and capable of commanding the highest rent rate levels.
Class B: While an older property can qualify as a Class A, these properties are likely between 10 and 50 years old. They are built with average materials and construction processes. Management does a good job with the property, but not to the level of a Class A, and is considered status quo. They are functional, useful, and typically in-demand dependent upon the community demographic. Yet, there is not really anything unique or special about them.
Class C: The tenants who choose to live in a Class C property are typically most concerned with affordability. They don’t mind the older age of the buildings, or that the construction and materials used to build them are below average. Systems such as electrical and HVAC are average-to-poor as is management.
For Your Dollar
Many investors automatically think purchasing a Class A is the best route. Better property = greater demand and more money. This, however, isn’t always the case. Our recommended route, instead, is to look for the Class B property that can be enhanced to offer the appeal of a Class A property. There’s less outlay in the beginning, but with just as much potential.
- The construction and materials are already good, but it will require a thorough look at how to improve where needed. How old is the roof? Does the drywall need to be addressed? Is there a better “flow” to the individual units that would improve the appeal? How about the addition of a clubhouse or fitness center? You get the idea; and once it’s decided which projects will be completed, it’s necessary to do it with the best quality materials and construction.
- Upgrades are the key to separation between the classes. Take a look at Class A properties in the community and see what they have chosen to offer. Make a list and then get yourself access to a good wholesaler of discount, but high quality, products. This might include bathroom fixtures, lighting, blinds, carpeting or hard woods, countertops, and a wide variety of kitchen upgrades.
- Get a management company who knows what they’re doing and will not only help you get everything completed on points #1 and #2, but can also manage everything about it from marketing, to applicant screening, to everyday business.
We know the importance of creating appeal regardless of property class and can help take your property to the next level. Call the professionals at Class A Management at 817-295-5959 or send us an email to firstname.lastname@example.org.