Property classifications are a common topic when it comes to investors, lenders and brokers. These professionals take it upon themselves to rank properties based off of various reasons and communicate to each other the worth of the property without going into too much detail. These are normally ranked as Class A, Class B, Class C and so on and so forth. Real estate investors such as the Mindful Capital use these classifications to select the best real estate properties for their clients. Each of the different classes offer different types of risks and returns.
We’ll go into the main three different property classifications below.
Most investments that fall within this category are going to be newer properties. Often even built within the last 10 years. Another way a property may fall into this category is if it was completely renovated and has improved in value. Most of these properties are going to be low maintenance, possess the higher-grade materials for the buildings and most modern amenities. Due to this, they will be on a much higher price point compared to the other classes.
If you take a look at Class A properties and just take a step down in every aspect, you’ll fall into the Class B investments. These are some of the most sought-after properties due to them only being 11 – 30 years old. Not only that, but they offer the ability to become a Class A property with well-managed decisions on renovation and renewal. There is a lot of potential in Class B properties.
Finally, you have Class C properties which are going to be even older than Class B properties. These have noticeable visual deterioration around the properties and are going to be valued at a much lower rate. Many of these buildings are going to be in areas that aren’t well taken care of and are very high-risk investments. They may end up requiring a boat-load of maintenance which would eventually flip the investment upside-down.