Best type of properties

[Danilo Perea]

What type of properties are the best in general? Type A, B ,C or D? I know there is no such thing as "best type of property" because it depends on the strategy, but I would love to hear the opinion from people with more experience than me since I am begginer. What strategies are doing better or have less risk? A, B high aprecciation price or C and D with cash flow? Maybe somewhere in the middle? Thanks

Danilo

[Lauren Robins]

Hi Danilo! When you're just starting out, it's really smart to look at the different property "classes" — A, B, C, and D — not as good or bad, but as different tools for different strategies. Most experienced investors will tell you that Class A properties are typically newer, in prime locations, with high-income tenants. They're attractive because they come with fewer maintenance issues and tend to attract stable, quality renters. They also tend to appreciate well over time, especially in strong markets. The downside is that they’re expensive to acquire, and the rent-to-price ratio often isn’t great, so cash flow can be limited. Plus, during economic downturns, tenants may downgrade to more affordable housing, which adds some risk.

Class B properties are usually the sweet spot for many investors. These are slightly older properties in decent, working- to middle-class neighborhoods. They tend to offer a nice balance of appreciation and cash flow. Because they're not brand new, there's more room to improve them with renovations — making them ideal for value-add or BRRRR (Buy, Rehab, Rent, Refinance, Repeat) strategies. These properties are also more recession-resilient than Class A, because people who can't afford Class A often move into B-class housing.

Class C properties are older still, often in blue-collar or more transitional neighborhoods. They typically have better cash flow because purchase prices are lower compared to rents. However, they also come with more maintenance issues, higher tenant turnover, and potentially more management headaches. These are popular for investors chasing strong monthly income, but they do carry more operational risk.

Class D properties are in distressed areas and tend to involve the highest levels of risk. While they can produce the best cash-on-cash returns on paper, they often come with difficult tenants, high crime, lots of deferred maintenance, and frequent vacancies. Managing these successfully often requires a lot of experience, local know-how, and a strong stomach.

So what's “best”? For most beginners, the experienced crowd would suggest starting with a B-class property or maybe a strong C+ in an improving neighborhood. You get decent cash flow without the chaos of D-class, and you still have appreciation potential if you choose your market well. If you’re more risk-averse or investing more passively, Class A might suit you better — just be aware of the lower yield. It's all about matching your strategy, risk tolerance, and long-term goals.

Note: This information is for educational and informational purposes only and does not constitute legal, tax, financial, or investment advice. No attorney-client, fiduciary, or professional relationship is established through this communication.