Multi-Family Property Classifications and Your Investment Strategy
Classification – Class A
Class A multi-family properties are buildings that are less than 10 years old. If they are more than 10 years old, they will have been extensively renovated.
The fixtures and fittings will be of the very best quality.
The amenities will be comprehensive and of a luxury standard.
While Class A properties tend to generate a lower yield percentage, they can grow exponentially and they tend to hold their value even in major economic downturns.
In terms of their investment profile, they are considered to be core assets.
An article on multi-family investing at millionairedoc.com explains why Class A apartment buildings, with a ‘core asset’ risk profile, offer a lower yield percentage:-
“Owners purchase these properties using lower leverage, therefore with lower risk. REITs and institutional investors purchase these assets for income stream. The lower risk profile results in lower returns in the 8-10% IRR range.”
A property in the Class A category would not likely have a “core plus” risk profile unless it were slightly downgraded in some way perhaps by a less favorable location, housing type or a number of other factors.