Apartment Classes – What Class of Apartment Investor Are You?

It’s important to know the different apartment classes. The classification method for apartments (commercial real estate in general) is based on the letters A, B, C, D. It’s meant to distinguish between different types of properties. This classification method relates to the properties age of construction, level of upgrades and amenities. This helps investors determine the type of apartments they are considering and get a general idea of what to expect from certain property listings. Knowing the different apartment classes and deciding what you want to purchase, is an important step so you can distinguish between properties that meet your criteria and those that don’t. The decision on which apartment classes someone chooses is generally determined by their investment objectives and desired rate of return, but can involve other factors unique to the individual investor.

The following video describes how different apartments are classified:

The apartment class method is generally used throughout the different sectors of commercial real estate. These include office buildings, industrial, retail, etc. It’s a language commercial brokers understand. When you speak their language, you will come across as knowledgeable. It’s a key piece of information that come’s up in conversations with commercial real estate brokers. Communicating to a broker what apartment classes you want to buy will help clarify appropriate listings for you to review. This also prevents brokers from sending properties that don’t meet your criteria and waste your time.

Works for Neighborhood Classes Also…

This classification is used for neighborhoods also. Generally the same class of neighborhood will have the same apartment class, but that’s not always the rule. It’s most desirable when a mismatch between a lower class of property within a higher class of neighborhood exists. In this scenario you can add value to the property if the purchase price is well negotiated. You can rehab and upgraded the property to be consistent with the neighborhood and similar class of other apartments in the market. Upgrading the apartment class allows for found appreciation to be taken advantage and increase the equity value in the property.

The apartment class of a property can vary in different markets. What is considered a certain class in one market may be different in other markets. Value for different class of apartments can be vastly different from other markets. This is dependent on the amount of development in a specific market and factors that are unique to each specific market. Property listings typically have their apartment class identified in marketing materials. It’s good to consult local brokers knowledgeable about what class a specific apartment is considered, especially when researching different markets.