Rental income is typically lower than Class A, and there may be some deferred maintenance issues. These properties are one step down from Class A and are generally older, tend to have lower income tenants, and may or may not be professionally managed. Additionally, they typically demand the highest rent with little or no deferred maintenance issues. Class A buildings are well-located in the market and are typically professionally managed. They are generally newer properties built within the last 15 years with top amenities, high-income earning tenants and low vacancy rates. These properties represent the highest quality buildings in their market and area. There is no precise formula by which properties are placed into classes, but here is a breakdown of the most common classes, A, B and C: Class A These letter grades are assigned to properties after considering a combination of factors such as age of the property, location of the property, tenant income levels, growth prospects, appreciation, amenities, and rental income. Investors can use these differences about property class types to consider how each property fits within their strategy of investing, such as return objectives and amount of risk they are willing to accept in order to achieve those returns.Įach property classification reflects a different risk and return because the properties are graded according to a combination of geographical and physical characteristics. For investors, property class is an important factor to consider because each class represents a different level of risk and return. What is Class A, Class B, or Class C property?Ī common question we receive from our investors is what do properties marketed as Class A, Class B and Class C mean, and why does it matter? To begin, investors, lenders and brokers have developed property classifications to make it easier to communicate amongst themselves about the quality and rating of a property quickly.
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