Skip to content
×
Try PRO Free Today!
BiggerPockets Pro offers you a comprehensive suite of tools and resources
Market and Deal Finder Tools
Deal Analysis Calculators
Property Management Software
Exclusive discounts to Home Depot, RentRedi, and more
$0
7 days free
$828/yr or $69/mo when billed monthly.
$390/yr or $32.5/mo when billed annually.
7 days free. Cancel anytime.
Already a Pro Member? Sign in here

Join Over 3 Million Real Estate Investors

Create a free BiggerPockets account to comment, participate, and connect with over 3 million real estate investors.
Use your real name
By signing up, you indicate that you agree to the BiggerPockets Terms & Conditions.
The community here is like my own little personal real estate army that I can depend upon to help me through ANY problems I come across.
Buying & Selling Real Estate
All Forum Categories
Followed Discussions
Followed Categories
Followed People
Followed Locations
Market News & Data
General Info
Real Estate Strategies
Landlording & Rental Properties
Real Estate Professionals
Financial, Tax, & Legal
Real Estate Classifieds
Reviews & Feedback

Updated over 8 years ago on . Most recent reply

User Stats

545
Posts
613
Votes
Ray Johnson
  • Irvine, CA
613
Votes |
545
Posts

Choosing a Class A or Class C/C- Rental Property

Ray Johnson
  • Irvine, CA
Posted

I’m on the fence between buying a Class A- rental property where I’d be putting in the typical 25% cash and financing the remaining 75%, or to just purchase a Class C/C- rental property for 100% cash.

I know there are several articles on BP discussing the advantages of leverage and I’ve considered them when thinking about this decision however I’m a fairly conservative investor always looking for ways to mitigate risk.

The two risk factors I see in this scenario are:

  1. The Class A- property allows me to leverage my cash into a better property in a better neighborhood minimizing the risk of higher vacancy rate, the need to rely on subsidized rents, and getting a better qualified tenant mix for the long term, minimizing the possibility of fewer headaches.
  2. The Class C/C- property comes with a lot more cash flow due to there being no debt on the property, however it also comes with a lot more risk in the form of all the issues that come with renting a C/C- property and there seems to be a lot of them.

I currently only have Class A properties with zero tenant or property issues however I’m thinking about going with this property class to increase my overall portfolio cash flow.

I know the saying “More Risk = More Reward”, my question to the BP community that have dealt with both Class A properties and Class C/C- properties:

  1. Is there really that big of a difference in managing the tenants, and property?
  2. If I went with a C/C- property is it better to pay the 8% Property Management fee and not deal with the issues that typically come with the C/C- property class?

Thoughts?

Loading replies...