What Are Class A and B Multifamily Property Classes?
After researching the property market and how to invest in multifamily real estate, you may have come across some unique terminology related to property investing.
Understanding terminology will not only make you a more informed investor, but it can also give you greater confidence and put you in a position to make the right decisions. After all, knowing what you're investing in is a fundamental step in the due diligence process.
One of the most common ways properties and the surrounding markets are defined is by a ranking system using the Class A, B, C, and D systems. What might seem like a confusing classification system is a relatively straightforward way to designate value to a particular property on the market.
This blog will examine how Class A and Class B properties are determined based on various factors. We'll also talk through how Viking Capital uses these asset classes to build a strong and financially secure multifamily investing strategy for investors.
How Are Multifamily Properties Classified?
Based on the alphabetical classification of a property, informed investors and real estate professionals will immediately know what a Class A or Class B property entails. From there, they can devise a portfolio baseline, make decisions about a property, or communicate more effectively with other real estate professionals.
However, these classifications are not set in stone and are a rough guide to the various factors contributing to a property's attractiveness as an investment.
These factors include:
- A property's location
- Condition of the property
- Migration rates
- Age of the property
- Area crime rates
- Local amenities
- Vacancy rates
- Projected appreciation
Because of this, the property classification system might be best thought of as a risk ranking.
As you might have guessed, the class A real estate definition represents the highest 'class' of property with desirable features that contribute minimal risk to the portfolio and investors. The ranking system then descends through in alphabetical order until D, where you might find older properties requiring extensive refurbishments in undesirable locations.
Some property specialists may add a + to the ranking to indicate an even narrower definition, i.e., a B + property is just below an A (just like a school report card grading system).
Since the Viking Wealth Fund operates within the parameters of Class A and B properties, these will be the focus of our examination today.
What Is a Class A Property?
A Class A multifamily property is highly desirable due to its attractive features and overall market durability.
A Class A property can be defined as:
- Newly built (usually ten years or less)
- In a popular area
- With modern amenities
- In a high-income neighborhood
Because of this, a class A property is often a safer investment option due to the underlying market and strength of the local economy. It's also likely to deliver higher returns for investors based on the high-end nature of the property, tenants, and rents.
Class A properties are high-class investments with a high rent yield from residents who will likely be high-income individuals.
What Is a Class B Property?
Class B properties are considered a step below Class A buildings. Therefore, they tend to be slightly older or in less pristine condition while still extremely desirable as a multifamily investment.
A Class B property can be defined as:
- Older than a class A (usually 15 years or older)
- Located on the fringe of a primary market (i.e., a submarket on the outskirts of downtown)
- Require some maintenance upgrades
- Demand a lower rental income (about median range)
Class B properties can pose a lucrative investment opportunity after conducting value-add upgrades. These properties can also be upgraded to Class A properties making them an attractive and high-value option for investors and real estate funds. In addition, Class B properties can bring a significant market return for those who know how to invest in multifamily real estate.
Due to this, Class B properties can often be where great deals are uncovered. Therefore, timing and working with an experienced investment team who knows how to locate and discover these deals is paramount.
This leads us to the Viking Wealth Fund strategy!
What Property Types Does the Capital Wealth Fund Invest In?
Now that you know how the property ranking system works, it's essential to see how it functions within the context of the Viking Wealth Fund.
Knowing under which classification a particular asset falls is a great starting point, but you must find the right assets within these specific contexts. For example, simply choosing a property because it is a Class A building is not an effective strategy for success!
For example, a Class A property may yield a higher rental income, whereas a class B property might appreciate faster thanks to improvements and upgrades.
Then, of course, there's also the question of location. Viking Capital invests in Class A and Class B properties within the Sun Belt region, as both classes in the right market and desirable locations are ideal for the Viking Wealth Fund.
After conducting extensive research into factors including (but not limited to) demographics, job market, and net migration, we locate opportunities that show great potential for growth and high rental income. In addition, our strategy of purchasing and improving apartment buildings also pays off for accredited investors who choose our assets in the long term.
Because we focus on Class A and Class B multifamily communities with 100 units or more and determine compelling value-add opportunities in growing markets (such as tertiary cities) throughout the Southeast and Midwest, we can achieve several outcomes for our real estate investors.
- A focus on capital preservation for our investors
- An opportunity for diversification within the fund
- Stability and accelerated returns
- Exposure to the upside (increase in returns on investment)
Our experienced team and structure help us find the best investment properties in these desirable asset classes to maximize returns for investors!
Viking Capital Knows How to Invest in Multifamily Real Estate for High Yields
If you're an accredited investor looking for your next opportunity, multifamily property investment doesn't have to be a challenge or a confusing process. Multifamily buildings with a Class A and B property classification are a safer and more lucrative option for savvy investors looking to maximize their income in the medium to long term and benefit from the upside of undervalued assets in the fund.
However, investors don't have to take on the full capital required to invest in multifamily properties. Investing through a real estate fund backed by experience, a proven strategy, and capital preservation can help you get into this lucrative strategy and build more generational wealth.
Investors choosing Viking Capital will access greater returns, upside exposure, tax benefits, and more through our focus on expertly selected Class A and B properties. So, reach out to us today to learn how to get started!
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