If you’re new to property management, you’ve become or are becoming familiar with multifamily property classifications. Also referred to as ‘types,’ these classifications of either A, B, or C allows a property to be rated against a certain set of standards by which rent rates can then be determined.

Here is the breakdown of how each type is defined:

Class A: These properties are the cream of the crop. They have been built using the best quality materials and construction process. They have the best management companies on-board and are maintained to the highest of standards. And, while they are typically new or fairly new construction, there are some Class A properties that are a bit older, but receive such a rating because their quality standards are on-par for the class.

Class B: These are the ‘average’ apartments in terms of quality. The materials and construction process used weren’t the very best, but not the worst either. They are typically somewhere between 10 and 50 years old and, while they offer space and functionality, have very little to offer in the way of anything unique or special.

Class C: These, as you can imagine, are on the lower rung. They are built and maintained purely in the name of affordability, and therefore tend to utilize construction and materials that are below average. They are older buildings and have very few, if any, amenities.

The Recommended Approach

Without knowing, the average investor might think the Class A property is an easy, no-brainer investment. After all, the property is a moneymaker, right? It’s also a huge money outlay, and that’s scary when you factor in that no property, regardless of Class, is guaranteed to attract or keep tenants. 

Instead, we recommend the purchase of Class B properties with the potential for Class A-level appeal.

Here’s how:

1.     Look for a property that has a solid foundation with minimal wear and tear. Ask about the roof and it’s age. Are there minor structural changes that can be made to improve unit flow and usage? Will adding a fitness center or clubhouse work at the property? 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. Explore the competition for an understanding of what is being offered. Make a list and then seek out a discount manufacturer or warehouse of high quality products (www.cheaperfaucets.com ) where you can get the same for less money.

3.     Get a management company that knows what it’s doing. You want to work with professionals that know not only how to help you get everything completed on points #1 and #2, but that can also manage everything about the property—from marketing to applicant screening to everyday management.

The idea is to purchase a property that leaves enough room in your budget for the types of improvements that will increase appeal without breaching the cost of a Class A property.