In a different class: How to distinguish a property’s worth

If you’re new to property investing or management, it’s important that you first and foremost understand the different property “classes.” These classes help set standards as well as acceptable rental rates.

So, let’s take a close look at what defines each and then we’ll talk about the best property class for your investment dollar.

Class A: These properties are the top of the line. They are well designed, and use the best quality materials and construction. They are well-maintained and well-managed, and for these reasons are the most desirable properties. They are typically new properties, but do not have to be if all other factors are met. In fact, a much older property can be Class A if the right materials were used and management has kept it in the best possible condition.

Class B: Properties in this category are most likely going to be somewhere between 10 and 50 years old. They are built with average materials and construction and have been maintained according to the status quo. They are useful spaces, but there isn’t really anything unique or special about them.

Class C: Those properties that would fall in this class, as you might imagine, are not the cream of the crop. They are much older buildings, in which the construction, materials, and management are below average, while the main systems, such as mechanical, electrical, and HVAC, are average-to-poor. These spaces are known to attract a lower income tenant whose primary concern is affordability and not amenities.

For Your Dollar

What would you guess is the best buy? Most investors are going to say a Class A property because it’s likely to attract the right tenants, and at a higher rate. But that’s actually not the case. What you want to try to do is go for the Class B property. It is going to be more affordable than a Class A property, but has all the foundations needed to turn it into a Class A property.

Here’s how:

1. The construction and materials are already good, but it will require a thorough look at how to improve where needed. How old is the roof? Are there drywall needs to be addressed? Is there a better “flow” to the individual units that would improve their appeal? How about the addition of a clubhouse or fitness center? You get the idea. Once it’s decided which projects will be completed, it’s necessary to do it with the best quality materials and construction.
2. Upgrades are the key to separation between the classes. Take a look at Class A properties and see which they have chosen to offer. Make a list and then get yourself access to a good wholesaler of discount, but high-quality, products. This might include bathroom fixtures, lighting, blinds, carpeting or hard woods, countertops, and a wide variety of kitchen upgrades.
3. Get a management company who knows what they’re doing and can not only help you get everything completed on points #1 and #2, but can also manage everything about it, from marketing to screening to the everyday.

Class A Management is a leading property management company for Texas owners and operators, offering a wide range of premier services. For more information, visit www.classamanagement.com or call 817-284-1411.