Apartment Classes – What Class of Apartment Investor Are You?
It’s important to know the different apartment classes. The classification method for apartments 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. It helps investors determine the type of apartments they are looking at 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 easily 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 that all commercial brokers understand so you will come across as knowledgeable. This is a key piece of information that will come up in conversations with commercial real estate brokers. Communicating to a broker what apartment classes you want to buy will help clarify what are appropriate 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 same classification for apartment classes is used for neighborhoods. 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 in line with the class of neighborhood and similar class of other apartments in the market. Upgrading the apartment class allows for found appreciation to be taken advantage on and increase the investors equity value in the property.
The apartment class of a property vary in different markets. What is considered a certain class in one market may be different in other markets. This is dependent on the amount of development in a specific market and factors that are unique to that market. Property listings typically have their apartment class identified in marketing materials. It’s good to consult with a local broker that’s knowledgeable about what class a specific apartment is considered, especially when researching different markets.
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