All Forum Posts by: Rashad Jones Jennings

How do you determine the various classes of properties?

I have investor friends that only invest in D class multifams, they have good systems in place, but they have been doing it for a long time. I personally wouldn't invest in D properties if you are newer to REI investing. It's a easy way to get burned out quickly.

GREAT MANAGEMENT IS LITERALLY THE KEY TO SUCCESS WITH A D PROPERTY. JUST MY OPINION. 

Yup !! in D class you will definitely need to be hands on. You will find that most tenants in D class neighborhood live with bad to no credit or worse. A lot of section 8 tenenants are niether credit contious or care. You will also find section 8 tenants not to have overwhelming employment records or consistency. 

You definitely need to be or become a real people person.

If your personality is that of an understanding drill sergeant then this might serve you well. It is a lot of work to make these properties pay off. It will help if you exercise a thorough background check and qualify your tenants well. 

That said, if you can manage well you can make these properties cash flow very well. 

I try to keep an open mind about class D properties and when I buy I will attempt to buy a block of these properties but also start a company to offer employment to my tenants if need be that way they depend on me for their pay check as I will depend on them to pay the rent but over all I am not big on being a buy and hold investor. I concentrate on getting in and out forcing appreciation when it make sense, then selling ASAP. 

There is no investment holy grail to be found in class D properties. You can often find class D apartments for sale with an asking price of a song and a dance but still need to spend a small fortune on repairs and upgrades. 

To me these properties are for investors with a construction background and repair/installation skills leaving the minimum to be done by hired contractors. At least this is how I have been able to make the few class D properties I own pay off. It is called. " sweat equity", but I know this is definitely not for everyone.

@Rashad Jones Jennings While I wouldn't say my properties have been as low as a D when acquired, if you are BRRRR focused find the D property in the C class or upper C class neighborhood. Getting a property to jump classes is very valuable and where a lot of money can be made. I love finding C class properties that I can transition to B class properties. These have come with healthy rental increases which means they turn into cash cows since I bought them at lower valuations. I would agree that hands on is the key to successfully doing this. Be it your own hands or a very attentive property manager.

@Rashad Jones Jennings I own a 20 unit that is considered C-. It is not quite a D, but it is definitely border line. I can tell you that they are profitable, but the vacancy factor and more importantly, the economic vacancy, can be very high. They are also extremely hands on from a management perspective. You will definitely want a management company (in my opinion) because managing these types of tenants is like herding cats. No one has bank accounts, no one has cell phones, no one has emails, etc...

I do think these properties can be very, very profitable, but you have to balance the profitability against the amount of time you are spending on it. Most investors flock to B and C class for a reason. I personally am leaning more towards B class because if a property takes away too much of your most valuable resource (time) it may not be worth it in the end.