What are Class A, Class B, or Class C properties

A common question we receive from our investors is what do properties marketed as Class A, Class B and Class C mean? Each property classification reflects a different risk and return. These letter grades are assigned to properties after considering a multitude of factors such as age of the property, location of the property, tenant income levels, growth prospects, appreciation, amenities, and rental income. There is no exact 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 properties represent the highest quality buildings in their market. They are typically newer properties built within the last ten years with top amenities, high-income earning tenants and lower vacancy rates. Class A buildings are well-located in the market and are typically professionally managed. Additionally, they can demand the highest rent because of their location with little or no deferred maintenance issues.

Class B

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. Rental income is typically lower than Class A, and there may be some deferred maintenance issues. Mostly, these buildings are well-maintained and many investors see these as “value-add” investment opportunities because the properties can be upgraded to Class B+ or Class A through aesthetic upgrades to the units. 

Class C

Class C properties are typically more than 20 years old and located in less than desirable locations. These properties are generally in need of renovation, such as updating the building infrastructure to bring it up-to-date. As a result, Class C buildings tend to have the lowest rental rates in a market.

What does this mean for investors?

It is important for investors to understand that each class of property represents a different level of risk and reward. Class A provides investors with more security by knowing that they are investing in top tier properties, with little or no outstanding issues requiring further capital expenditures. 

Class B and C properties tend to be bought and sold at higher CAP rates than Class A, as investors are paid for taking on the additional risk of an investing in an older property with lower income tenants, or a property in a lower income neighborhood.

8 Things Tenants Look for in a Rental Property

We talk a lot about what landlords should look for when buying a rental property, but what does a tenant look for? We have put together a list of Eight things MC Companies focuses on to attract tenants to our properties. 
 

1. Location

Location is the #1 priority for tenants. Most tenants are willing to drop other items on their wish list for the right location. Tenants look for rental properties that are close to work, school, shopping, or entertainment. Many investors miss the mark when it comes to location. They often try and purchase in a less expensive area, and that can result in high vacancies and lower rents.

2. Safety

Tenants want to feel safe in their home and in their community. They look for security gates, cameras on premise, low crime rates in the area, and an attentive staff.  Anything additional you can do to make them feel safe is a big win. 

3. Parking

You have to have reserved parking and also enough parking for two cars. If tenants can’t park conveniently, they won’t want to live there. Adequate parking should be one of the first things you take into account before buying a rental as well.

4. Open Floor Plan

Open floor plans are a trend that I think is here to stay. Long gone are the days of a cramped separate dining room. Open floor plans are a great way to maximize the available space.

5. Clean and Tidy

A clean and well-lit rental will win every time. Hire a professional cleaning company when you turn a unit and make sure it has the just been cleaned scent. Lastly, avoid air fresheners. That will only make people question, what are you hiding? 

6. Storage

Most landlords don’t think of storage within the unit when buying a rental. Tenants look for space for their stuff, including outdoor equipment like bikes and skis. That is why walk-in closets or garages are a big draw. 

7. Pet-Friendly

A lot of landlords shy away from allowing pets in their units. At MC Companies, we have fully embraced our furry friends. We have found that with the right pet deposit and monthly pet rent, we attract a nice group of responsible tenants who take care of their pets and their community.

8. Quality Landlord

Finally, like any business, your business start with you. You have to be a quality landlord to attract quality tenants. This means fixing items in a timely manner, being professional, and hiring quality contractors.