Apartment Classes
Multi-family apartment properties are usually classified as Class A, B, or C. Class A apartments are under 10 years old, or they have been substantially renovated if they are older than 10 years. They feature high quality construction, modern amenities, attractive landscaping, and a rental office and/or club building. As a result, their prices are the highest of all the classes. Class B properties are somewhat older – usually they have been built within the last 20 years. They have good quality construction with little deferred maintenance, but their amenities are dated, so they command lower rental prices than Class A properties. Class C properties are in the range of 30 years old. Their physical plant is more deteriorated, their construction is of lower quality, and they are located in fringe or mediocre locations. In addition, they have a more transient rental population.
For investment purposes, we prefer class B and C apartments because there’s a limited supply of them. The economics are simple: a growing population versus limited supply. Builders want to build class A properties, so there is always a limited supply of class B and C ones. There are opportunities to add value to these B and C properties, which makes them perfect for the hybrid play.
For investment purposes, we prefer class B and C apartments because there’s a limited supply of them. The economics are simple: a growing population versus limited supply. Builders want to build class A properties, so there is always a limited supply of class B and C ones. There are opportunities to add value to these B and C properties, which makes them perfect for the hybrid play.