Class A, B, C & D Real Estate: How to Know Where YOU Should Invest

by Brandon

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Class A, B, C & D Real Estate: How to Know Where YOU Should Invest

(The following is an excerpt from the new book from BiggerPockets, The Book on Rental Property Investing. If you are looking to buy more rental properties this year,pick up a copy today!)

As you begin investing in real estate, you’ll likely hear people talk about a property being in an A, B, C, or D location.

Just like your high school class grades, a neighborhood can receive a grade, though the classification is a bit more subjective than a simple high school test. There is no government organization, board, or company that classifies locations.

It’s honestly more of an unwritten rule accepted by most investors, and the lines are not incredibly clear. You might think a location is an A location (the best), while I might think it’s a B location (second best), but for the most part, investors will agree on the class distinctions.

Some investors grade locations on an A through C scale, whereas others grade on A through F scale. In other words, you might say a location is a C location, meaning that you think it’s the worst, because you grade on an A through C scale; at the same time, someone who grades on an A through F scale might think it’s pretty middle of the road. For the sake of our discussion in this chapter, we’ll use an A through D scale, which is probably the most common grading scale.

Related: How to Identify A, B & C-Class Areas (& How to Know Which You Should Invest in!

In addition to the location receiving a grade, the property itself can be classified as an A, B, C, or D property. So you might hear someone say, “I have an A property in a B area.” To add more specificity to the classification system, some will add a + or – to those grades, so you might hear “The property is a B- house in a B+ area.” I’ll leave out the + and – designations in this chapter, but you can always use them if you want to get fancy or more specific.

Let’s take a minute and talk about the different classes of locations and property types.

Class A Real Estate

A Class A location is an area that has the newest buildings, hottest restaurants, best schools, wealthiest people, and highest-cost real estate. This is truly the best location you can find, and the highest-quality tenants are looking to rent here.

A Class A building follows the same concept. It is generally newer, probably less than ten years old, and therefore has fewer maintenance issues. The building has modern amenities, such as granite countertops, hardwood floors, and other in-demand features. Class A properties generally command the highest rent but may provide a lower amount of cash flow, because of the high-demand for an “easy investment.” More demand, higher purchase cost = lower cash flow.

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About Brandon

has written 199 Awesome posts in this blog.

Brandon Turner (G+) is the BiggerPockets.com Senior Editor and Community Director and owner of RealEstateInYourTwenties.com. He is also an Active Real Estate Investor (Flips, Apartments, and Buy-and-Hold), Entrepreneur, World Traveler, Third-Person Speaker, and Husband. Come hang out with him on Twitter!

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