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Understanding Property Classifications 

Posted by Kiearha Davidson on June 29, 2017
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Simple as ABC

Each rental property can generally be categorized into one of three main classes – Class A, B, or C. Class A properties are typically located in neighborhoods with a high percentage of primary homeowners. These homes appreciate faster than the average investment home but tend to have a lower capitalization rate than class B or C properties. Class B properties appreciate at a moderate pace and offer a median capitalization rate.  These homes are located in areas where the approximate owner/tenant mix is 50/50.  The final classification is Class C. Class C properties appreciate slower than average but have a higher capitalization rate than most A & B properties.

Class A properties are typically located in neighborhoods with a high percentage of primary homeowners. These homes appreciate faster than the average investment home but tend to have a lower capitalization rate than class B or C properties. Class B properties appreciate at a moderate pace and offer a median capitalization rate.  These homes are located in areas where the approximate owner/tenant mix is 50/50.  The final classification is Class C. Class C properties appreciate slower than average but have a higher capitalization rate than most A & B properties.

The classification table pictured depicts property classifications for Southeast Michigan properties. The same classification table may be used for Chicago properties, but rent estimates should be increased by $150. A thorough discussion surrounding your investment goals can help determine which properties best fit your investment strategy. For State-specific classification information for properties we own or manage in a different state, please contact our office at 586.799.4700.

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