January 25, 2017
Joe Fairless

The 4 Multifamily Asset Classes Defined (12 Images)

Apartment or Multi-family real estate investing breaks down into four distinct asset classes: Class A, Class B, Class C, and Class D. As investors, it is important that you have the ability to distinguish between the four, which will enable you to determine which asset class best fits your apartment deals and which ones you should avoid.

Class A Properties:

  • The crème de la crème asset class for the multi-family home definition
  • Usually less than 10 years old and are upscale, luxury apartments
  • Average rents are high.
  • Generally located in desirable geographic areas
  • White-collar workers live in them and usually rent by choice.
  • Generally have the highest valuations per door and the lowest market cap rates
  • Bought primarily for appreciation
high-end corner apartment building

Image Credit: The Future Tense


apartment pool and lounge area

Image Credit: LIV Development


 apartment pool and lounge illustration

Image Credit: Homestead U

Class B properties

  • Can be 10 to 25 years old
  • Generally well-maintained
  • Have a middle-class tenant base, including both white- and blue-collar workers. Some renters are by choice, and others by necessity.
  • Cap rate that is higher than Class A property but lower than that of Class C property
  • Bought primarily for appreciation rather than cash flow, but they generally have more cash flow than Class A property
shared patio for apartments

Image Credit: AZ Big Media


three story apartment on grassy hill

Image Credit: RE Business Online


nine story urban apartment building

Image Credit: Urban Turf

Class C Properties:

  • Built within the last 30 to 40 years
  • Generally have blue-collar and low-to-moderate income tenants
  • Most tenants are renters “for life,” with the exception of some tenants who are just starting out and are likely to work their way up to Class B or Class A property as they progress in their careers.
  • Rents are below market.
  • Most attractive to cash flow investors because they offer the best cash flow
  • Can be the first to appreciate in a rising market
  • Some of the best deals occur when an investor finds a Class C property in a Class B area and makes the required improvements to bring it up to market standards.
row of apartment buildings

Image Credit: Anthony Griffin Blog


parking lot of brick apartment building

Image Credit: The Real Estate Guys


gated apartment complex and parking lot

Image Credit: Bolour

Class D Properties

  • Built more than 40 years ago
  • House many Section 8, government-subsidized tenants
  • Generally located in lower socioeconomic areas
  • Newbies beware: due to high vacancies, substantial deferred maintenance, and the likelihood of being located in a high crime area, they require intense management and heavy security. They are for seasoned investors only!
people walking by old apartment building

Image Credit: Anthony Griffin Blog


courtyard of old apartment building

Image Credit: Uprising Radio


panoramic of apartment building

Image Credit: Jefferson Village Apartments

Now that you’ve read my crash-course guide that explains the multi-family home definition – hopefully, you no longer have to wonder, “what is multi-family real estate!”

Are you a newbie or a seasoned investor who wants to take their real estate investing to the next level? The 10-Week Apartment Syndication Mastery Program is for you. Joe Fairless and Trevor McGregor are ready to pull back the curtain to show you how to get into the game of apartment syndication. Click here to learn how to get started today.

Disclaimer: The views and opinions expressed in this blog post are provided for informational purposes only, and should not be construed as an offer to buy or sell any securities or to make or consider any investment or course of action.

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