Apartment Building Classifications: An Investor’s Guide

Does Your Apartment Have the Right Class for Success?

 Identifying the Best Apartment Building Classifications for Investors

apartment building classifications

Classes of Apartments

 

Apartment buildings classifications are used by many lenders and investors to attain an understanding of the current condition of a property. This allows them to quickly assess the property’s potential value.

Apartment building classifications are typically based on the age, location and physical condition and amenities offered by the buildings. Each has a letter grade:  A, B, C or D.

Here are a few general guidelines to illustrate some key differences between them:

 

Building Class

Age

Condition & Location

Rental Capacity

Reason for Investor to Purchase

A

< 10 yrs old

Excellent condition & upper class neighbourhood

Highest rents

 

Cash flow + Appreciation

B

10 – 20 yrs old

Very good condition & middle class neighbourhood

Moderate rents & stable income

Cash flow + value play opportunities*

C

20 – 30 yrs old

Good to fair condition & low-mid class neighbourhood

Affordable rents & stable income

Cash flow + value play opportunities*

D

+ 20  yrs

Deteriorating condition & low class area

Below market rent

Cash flow , but generally no appreciation

For an investor that is learning how to invest in real estate, it may be a good idea to look for value play opportunities. This is done by locating and acquiring a property that is not performing well. Then you initiate strategies to increase its net operating income in an effort to increase its cash flow. This then increases it’s value. Being able to identify those opportunities is valuable to a real estate investor. Understanding the different apartment building classifications can go a long way in helping you identify those great opportunities that will help you build wealth.

If you want to learn more about how to invest in real estate or how it can benefit YOU, Contact us. 

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