How to determine the class of an apartment building

First let's start with the fact that classes are not a black and suite distinction 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 that'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 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 building 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. 

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I got inspired by this questions so I recorded a short video that discusses the classification is a more details.