In this week’s newsletter, I wanted to go over different asset classes when it comes to properties.

Just like a grade in school, properties are assigned a grade based on their condition, age, location and many other things.

Many of these specifics are subjective based on prior experience and what I have learned, but they should still give you a good idea of each class.

Interestingly, sometimes an A property won’t necessarily be the best investment; whereas a B or C class property will allow you to force the most equity and get the highest return.

Four Different Asset Classes

-Class A

-Class B

-Class C

-Class D

Class A

This property type is usually a newer build that has not experienced much wear and tear yet. It is also probably located in a white collar neighborhood with great school districts and almost no crime.

These are great properties to own as they are essentially turnkey and do not require much maintenance or management oversight.

They are higher priced and also bring in the highest rents.

However, they tend to come with lower returns since they are less risky. So depending on your risk tolerance and where you are in life, this can either be a great investment or an average investment.

Class B

This property type may have been built over 20 years ago and is located in more of a blue collar neighborhood with decent schools and low crime rates.

However, this asset class is a great starting point to add value to the property and force equity through renovations.

It is also recession resistant as Class A renters will begin to move into Class B properties when the economy is down.

If you can buy these types of properties at a discount and improve the condition of the property, it can create good returns.

Class C

When it comes to Class C properties, these tend to be even older properties in an area that may be more run-down than other areas.

These properties will require more rehab work and maintenance.

Rents are lower in this area and properties are more affordable for investors.

These areas have a lot of blue-collar workers that take great care of properties and treat them like their own.

Class B and Class C are sometimes seen as the best place to put your money and are usually considered value-add.

Class D

The final asset type is Class D properties. These tend to be neighborhoods that are riddled with crime and are commonly called “war zones”.

These areas tend to consists of a lot of crime and drugs, which does not make a great location for your investment.

Most of these homes are occupied by renters with low pride of ownership.

Unfortunately, many of these areas were created by segregation laws back in the day.

Some of these areas include opportunity zones where incentives have been created by local governments for investors to improve these areas.

This should give you a better idea of the different asset classes when it comes to properties.

My preferred asset classes are Class B and Class C as they are usually in less expensive areas when purchasing properties and there is room for growth by using some sweat equity.

Have a great weekend!

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