What is the difference between investing in Class A vs Class B.

A vs Class B Investments

All buildings fall into a different category. Class A, Class B, and Class C. When you go to buy one as an investment it is critical you pick the right one in your market. Class A buildings are the newest and are the highest quality buildings on the market. They are also in a prime location. Class B buildings are a little older than class A they can be in the same location as class A. The main difference is the age of the buildings. Class B buildings are often what investors call “value add” properties. Class C is the lowest class of buildings. They are run down and need a lot of work to fix up, they are also in less desirable locations.

When investing Class A and Class B are the two classes you want to focus on but they both have advantages and disadvantages. Class A buildings tend to be more appealing and are better than Class B so when people do rent an office space or apartment complex they might choose the best option that is available. This comes at big risk because while Class A is the best, it is also risky because when the economy is going down companies may move out of their offices in their class A buildings and move into class B buildings to save money in a downturn. The same thing will happen to multifamily units, many people will not be able to afford their luxurious apartment and may have to go to a class B building.

Class B buildings also offer a unique opportunity to investors. Class B and Class A buildings are very similar. Class B buildings are just a few years older and may have a slightly older design inside. Class B buildings are usually a lot cheaper than the newest class A building which means that if an investor where to buy a class B building and renovate it to the point where the interior is on par with class A buildings in that market the investor would have spent less money on the class B buildings + renovations than they would have on buying the class A building outright. This gives the investor more equity in the class B building he invested in because the investor renovated it and brought the value up and it also gives a reason for the investor to increase the rent to the building since it is more desirable for tenants.

When you are investing, aligning yourself with an investor, or an investment firm you should always look into what class buildings they are buying. Buying a class B building compared to a class A should not deter you from investing because you're not buying the newest and best building on the market. Buying a class B building and doing renovations means you are making your money on the buy which every investor should consider before investing their hard-earned money into an asset. If you follow the right steps, do your research, and invest wisely you will be in the Real Estate game for a long time. If you don’t then your days of investing will come to an end.