Class A, B, C, Apt Buildings

[Tj Hines]

BP family,

I'm having just a small hangup on classifying apartment buildings. I've been taught and learning that:

Class A apt buildings  are 10 years older from today's current year

Class B apt buildings are 20 years older from today's current year

Class C apt buildings are 30 years older from today's current year

Lately as I have been networking with brokers in my target markets some of them are classifying a building built in 1980 as a  Class B building and Class C building built in 1960-70. Is it me or are those numbers off compared to the traditional way of how to classify apartment buildings? 

Are there any other parameters that I'm missing here in making sure I'm classifying these buildings the right way?

Thanks

[Joseph Gozlan]

@Tj Hines you got some good answers, let me try and put it together. 

First let's start with the fact that classes are not a black and suite distiction by age. You give me a C class building from the 70s in a AA area and enough capital budget and I'll make it an A class building (probably won't make money off of it due to the magnitude of work it'll need but tha S not the point). 

So how do you determine classes?

For starters, you should know that there are two (2) classes you have to evaluate:

• Area class
• Building  class

The area classification is probably more important when you buy than the building class. You can probably build a brand spanking new building in the worst neighborhood of south Dallas, do you think you'll have a waiting list of lawyers and doctors waiting to rent there? Multifamily, just like every other asset class, still follow the rule of "location, location, location" because that's the ONE thing you can't change about a property. Before I move on to the building class you should also recognize that classes are like grades, it's a sliding scale so between 2 classes there is gray area: ...B- -> B -> B+ -> C- -> C+... Now for the budding classification, brokers use a rule of thumb based on age because it helps average out the properties. New construction (less than 8-10 years old) would be called A class but if it brand new from 2016 and sits in the prime location of an upscale neighborhood they will call it a AA class asset (yeah, there is such a class as AA) Late 90s or Early 2000s to 2007-ish will be called B class IF the area is good and the demographics are  professionals, young families, tenants with high income and the property is very well maintained. C class buildings are usually 60s-90s built and are usually located at lower economic area with blue collar tenants. That's probably the widest band of age we see in properties D class buildings are easy to define. Age has nothing to do with that: if you won't feel comfortable sending your wife/girlfriend/mom over to the property at night. It's a D class. Also known as "war zone" properties.  Hope this helps clearing out the classification.