I truly believe that real estate is the best way to reach financial freedom, so I’m breaking down property classes to help you understand this opportunity.
Investing in real estate can feel intimidating to a lot of people because there are a lot of industry-specific terms. Property class is one that confuses people and makes them uncertain.
In general, property classes are used to describe a piece of real estate and its location’s quality to other investors. It helps you get a clear picture of deals you’re looking at.
Let’s break them down one by one.
A, B, Cs of property classes
Before I go over each of these classes, I want to point out that these standards are not set in stone.
Property classes are often based in opinion and there are not rigid standards. That being said, these definitions will get you a long way.
As the name suggests, this is considered the best property quality you can get in the best locations.
This class of real estate is less than 15 years old with lots of amenities.
While this property has lower cash flow, it has great appreciation potential.
The B class properties are just a step below top tier.
You’ll find these properties are a little older (less than 20 years old), and may need a little maintenance.
This asset will attract a mix of white and blue-collar tenants. It has good cash flow and appreciation. Cap rates run around 5-7%.
Assets in this category are in rough shape.
You are looking at 25+ years old and you can guarantee at least one major repair (i.e a new roof). The location is difficult to attract tenants for one reason or another.
However, it will have cash on cash returns of over 8%.
In explaining A, B, and C property classes, my goal is for you to feel more comfortable in talking about real estate.
Being able to communicate with others and understand them is critical to the success of any venture. Be aware that these classifications are flexible and may or may not define whether a deal is a good one.
To get started as a real estate investor, check out my free training in which I tell you exactly how I came to make billions in this industry.