Classes of Real Estate Property Investments
When it comes to real estate assets, they are put into three classes: Class A, Class B, and Class C. The letters are assigned to properties depending on the location of property, rental income, tenant income levels, growth prospects, the age of the property appreciation, and amenities.
Each letter represents a certain level of risk, as well as potential returns. If you are an investor, you want to consider a property’s class as it fits into your investment strategy. You want to consider the risks and rewards.
Class A Properties – Class A properties are luxury properties that are newly constructed or less than 10 years old. In the last 10 years, if the property was remodeled it can also be classified as Class A. Class A properties have gated entrances, pristine landscapes, high-quality construction, and impeccable features. Class A properties have the higher rents (averaging around $1,600 per month in 2016) and are considered extremely desirable. Many of these properties even have a gym or health center, swimming pool, tennis courts, basketball courts, clubhouse, and more, if they are a multifamily property. These class of properties attract high-quality tenants with high credit scores and stable jobs. These properties increase in value higher than other classes.
Class B Properties – These properties are less than 20 years old and in desirable locations and can be found near Class A buildings. They don’t usually need structural repairs but need general maintenance. They don’t have many amenities and are managed by investors, investment management firm or property management company. Class B properties are a good investment plan if the surrounding area is growing.
Class C Properties – These properties are usually older than 30 years and have a dated interior and exterior. They have little amenities. Class C properties have original appliances and light fixtures. They also likely have structural and foundational problems. Many investors usually replace plumbing and electrical wiring. Class C properties are usually managed by the investor or someone they hire directly. If the property is in a place that is experiencing growth, upgrades, repairs and some new additions to the building can go a long way to get returns. Investors can buy Class C properties at a discount to reposition and ultimately enjoy a higher monthly profit margin or sell for a capital gain.
Need help choosing what type of property to invest in? Our team at HOWE Louisville can help. Your choice will depend on your funds, investment style, and goals.
Louisville Commercial Real Estate Investing
Whether you’re new to investing or a long-time investor, you can benefit from investing in a commercial space, especially with our team at HOWE Louisville looking out for your best interests. CRE investing offers some unique benefits that can help in a diversified portfolio, whether you invest in a Class A, B, or C property.
We want to help you reach your financial goals with a CRE investment.
Let our team of professionals at HOWE Louisville help you get started on looking for a commercial property. We work with buyers, sellers, lessors and lessees across all property types in and around Louisville. To contact us, send us an email or call 502-890-4475.