What Are the Differences Between A, B, C and D Class Properties?

November 5th, 2019

When looking at turnkey rentals to buy, you’ll often notice a classification referred to as A, B, C or D. These are class distinctions that are used to help define and communicate the characteristics of a property and/or the neighborhood where it’s located. These classifications are primarily used within real estate investor circles, and they pertain to the overall condition of a property as well as the overall ambience of the neighborhood. You can think of A, B, C and D like a shorthand that investors use with each other to describe the general state of a piece of real estate. Following is a helpful guide to what each classification means.

What Factors Are Taken Into Consideration With the Various Classes?

Many factors are taken into consideration when classifying a property. Note that the classification is not official; it’s subjective. However, within the real estate industry, there is a generally-agreed upon rating system of:

 

– age of the structure

– location of the property

– property appreciation prospects

– area growth prospects

– quality of prospective tenants

– income of prospective tenants

– property amenities

– neighborhood amenities

– local job prospects

– area crime statistics

– proximity of public services

What is a Class A Property?

A class A property is top of the line. It’s in the best possible condition, in the best possible neighborhood. It’s likely a home that you yourself would consider living in. The neighborhood is high quality, with most of the nearby properties owner-occupied versus renter. Crime is extremely low and what crime there is would be very low-key and non-threatening. There’s an abundance of public services in the area; fire hydrants, municipal water services, public transit, post office, and shopping and entertainment centers. A class A property may be in a cosmopolitan area or in a bedroom community of a cosmopolitan city. The property itself is newer; built within the last 10 years, or fully renovated within the last 10 years. For instance, an historic home could become a class A property if its structure ad infrastructure is completely brought up to date. A class A property doesn’t need any repairs. The building and the grounds are in pristine condition. Within the neighborhood, its value would be on par or higher than nearby homes.

What is a Class B Property?

A class B property is a more common piece of real estate. It’s affordable to those whose income falls in the category of middle class. It may be an older home, but it’s generally been kept up over the years. A class B property may need a few general repairs, but nothing serious like a sinking foundation or other catastrophic structural failures. Class B properties are usually located in decent neighborhoods where there may be a mix of owner-occupied homes and rental homes. There will be public services and plenty of job opportunities, most of which may be blue collar jobs. The general local crime situation would typically be on par with the national average.

What is a Class C Property?

Properties that are classified as class C are older; they may be 30 years old or more. They may be rundown unless they’ve been recently renovated by a turnkey rentals company. Class C properties usually have yards that are in bad condition, and there may be junk scattered about; again, unless the property has been rehabbed. The property will be in a neighborhood that is definitely blue collar. Most of the residents will work in lower paying jobs like factories, distribution centers or in retail. Crime in the area will be moderate, but not enough to keep families with children from living there. Repairs will be needed on the property, if not now then in the near future.

What Are Class D Properties?

Class D properties are in highly distressed neighborhoods where there is a high rate of crime. Nearby properties may be boarded up or inhabited by squatters. The properties themselves will be in states of heavy disrepair. Portions of the roof may be missing entirely, or there may be a failing foundation. The residents of class D neighborhoods may be on public assistance or otherwise dependent on charity for assistance. A class D property may also be actually more similar to a class C property, but due to its location it’s considered to be class D.

Investors often make decisions about whether to further research a piece of property based on its classification, which is another reason why property classes are convenient when describing a piece of real estate. At MartelTurnkey, we offer turnkey rentals in B and C classes. Our turnkey rentals are fully renovated before we offer them to investors. If you have any questions about property classes or about our turnkey rentals for sale, please  contact us.

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