The ABC’s of Real Estate Asset Classes

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Real estate experts and investors share different perceptions when it comes to ranking property and area classes.

Most will rank them on a general scale from Class A to Class C with others going as far as from Class A to Class F. Including lower subcategories of each class such as A-, B-, and C-, etc… Different states and cities can also offer variations on how the “classes” are ranked.

I prefer to stick with the KISS (Keep It Simple Stupid) approach and will only rank a particular area/property as either “A, B, or C”.

Please see below how I distinguish the different area and property classes in Toledo, Ohio- a market we are heavily active in.

The Class “A”

These properties are top of the line.

They are newer built homes with the majority of them situated on large river front lots. The properties are very well-maintained and posses a “WOW” factor, when driving past you can’t stop the thought of wishing you lived in one of them.

Related: What A “Working Class Neighborhood” Is … and Isn’t

Class A properties in Toledo are located in sought after school districts, are within a short commute of medical/shopping facilities and have ease of access to all major highways.

Owner-occupiers mostly reside in these properties with only a minority being tenanted. The cashflow tends to be low with a high potential for growth due to a high demand from home owners who’s decisions tend to be emotion based.

The Class “B”

I believe that Class B properties should be the bread and butter for every hands-off investor.

They can range to be anywhere from 30 – 60 years old and are mostly occupied by blue-collar working class people. While driving around you might find the odd vacant home with an overgrown yard but in general the area is very well kept.

The school zones tend be slightly less prestigious but the close proximity to all amenities makes the area very similar to Class A. The residents equal out to 50% owner occupied with the other 50% investor owned and tenanted.

Due to the cashflow, growth potential and exit strategy offered, Class B properties should be the foundation for every investor looking at building a substantial property portfolio.

The Class “C”

These properties fall into the highest risk category but can also be very lucrative investments with a right strategy and system is in place.

WARNING: Unless you have an armored vehicle I don’t suggest you drive in this area after 5pm.

All joking aside, most of the Class C homes are much older than the higher ranked areas with some dating back as far as the 1880s. Some of them show visible deterioration and a higher portion of them are bordered up.

Related: How to Find Great Working Class Neighborhoods to Invest In Using The “Leveraged Analysis Technique”

These properties are predominantly investor owned and are occupied by lower income tenants. They offer by far the highest cashflow out of all the classes, but require full time monitoring and management.

The property manager needs to specialize in this particular area in order for the numbers to work. In my opinion this Class should only be considered once a solid portfolio has already been built with Class B properties that are performing and generating a decent monthly cashflow.


A great portfolio needs to be built on strong foundations by acquiring B Class properties with the lowest amount of debt possible.

Once a strong foundation has been established and a decent amount of cashflow is generated each month, you can then consider to take on more risk. By using leverage and diversifying into the Class C area you will further increase monthly cashflow which will enable you to grow your portfolio at a quicker rate.

One of the most vital components, no matter what class you decide to invest in, is to have the right property management in place looking after your best interests.

Smart investors base their decisions on the numbers in the deal and focus on building a team that can make those numbers work. Capital growth is a prediction and if it occurs should only be considered as a bonus.

As far as Class A properties go- they should just stay as the “WOW” factor and instead of telling yourself “I wish I lived there” —once you have built a grand portfolio, you can!

What class do you primarily invest in?

Be sure to leave your comments below!

About Author

Engelo Rumora

Engelo Rumora, a.k.a.”the Real Estate Dingo,” quit school at the age of 14 and played professional soccer at the age of 18. From there, he began to invest in real estate. He now owns real estate all over the world and has bought, renovated, and sold over 500 properties. He runs runs Ohio Cashflow, a turnkey real estate investment company in the country (Inc 5000 2017 & 2018) and is currently in the process of launching a real estate brokerage called List’n Sell Realty. He is also known for giving houses away to people in need and his crazy videos on YouTube. His mission in life is to be remembered as someone that gave it his all and gave it all away.


  1. Out of state buyers need to beware when sellers classify property by class. I find in my market that most sellers boost their classification by 1 grade. Meaning they will call a C class property a B property. Funny enough I see many sellers calling C class properties when they should be D or F.

    BTW, I recommend not buying C class property as a out of state buyers. Most managers do not know how to manage these properties. C class Management is much different then A and B class property.

  2. I have seen far too many RE investors go after a Class C (or D), thinking they have great returns, and suffer so much maintenance expenses that they go broke.

    If you rent to the subpar caliber renters, you better know how to get them in, how to get them out, and how to maximize revenue.

    • Engelo Rumora

      Thanks Eric,

      I couldn’t agree more.

      It is a completely different world once you go down the ranks of property/area classes.

      Very rarely will a check for the rent arrive in the mail. Most of the time its the door banging rent collection sessions lol

      Thanks and have a great day.

    • Engelo Rumora

      My pleasure Vania,

      This is blog is based on my opinion and how I differentiate the properties/areas in the Toledo, Ohio market and also other markets that I have been involved in.

      Thanks for your comment and have a great day.

  3. I agree with the author comments.
    And I believe one should have one or two “Class A” properties (negative cash flow, but strong appreciation potential), most “Class B” properties (moderate cash flow), and several “Class C” properties for strong cash flow, no appreciation.

  4. Mehran Kamari on

    Love this article, thanks Engelo!

    “One of the most vital components, no matter what class you decide to invest in, is to have the right property management in place looking after your best interests.”

    I couldn’t agree more on this!

  5. good comment Joseph. We have a mix of A,B, and C properties and that balance works well for us. C properties are a challenge but we use an experienced PM. One day down the road we’ll probably offload them but right now they ensure our cashflow is more than sufficient to build liquid savings to purchase more and cover losses that the A’s and B’s might have on rough months.

  6. Thanks Engelo for this educational article. I invest in Detroit (I know, class C) and having problem with management. Since you are in Toledo can you suggest some strategy or a crash course in class C property management. Thanks in advance.

    • Hi Kay,

      Thanks for your comment.

      When dealing in lower income areas it is crucial for the property manager is flexible and needs to be very active. When the tenants call to offer rent collection he must not postpone and needs to go to the property immediately. “You snooze, you loose” as the saying goes.

      I have witnessed on many occasions PM lack of response to the call and when they are ready to collect the tenants had another expense pop up and they shorted the rent or don’t pay at all. As you can imagine this will cause dramas for all involved.

      Before a tenant moves in make sure to eliminate any upfront issues that you predict might occur during the tenants stay. This will won’t give them excuses to short or not pay.

      Spend the time to network and establish a relationship with a PM that has been working in this type of market for a while and maybe even owns properties in the area.

      You will find that they need to posses a fearless and alpha male type character.

      Most tend to be a bit wacky to be honest with you. Suit and tie won’t cut it in these areas.

      Don’t expect to have fancy online management systems and statements might might be a problem for these guys.

      This has been my experience with PMs in the lower class that actually perform and make the numbers work.

      I hope I helped a bit.

      Thanks and have a great day.

      • Julia Rowling

        Thanks, Engelo, for this great blog and all the addition info in your replys. A a new investor in the research stage, I have been leaning toward buying class C properties – because of the attractive (potential!) cash flow, but I am definitely NOT an alpha-male type. Since I am planning to do my own property managing – at least intitially – I’m beginning to think this might not be the best strategy!

        • Engelo Rumora

          Hi Julia.

          Thanks for your comment.

          I am glad you found my blog useful.

          Surround yourself with the right people that cater to the type of market you’re looking at investing in.

          They can insure your success.

          I have written quite a few blogs on building trust and relationships and more so focusing on the team rather that the stats and demographics of an area.

          Please feel free to check them out.

          Thanks and Merry Merry Xmas 🙂

  7. In my neighborhood, (Calabasas, CA) the ‘working class’ B homes (the one’s I’m working on buying) have a median resale price of $1.15m, with the A’s going upwards of $15m. And that $1.15m only buys you 3800sqft on a 7000ft lot. The very few C’s are around $600k+, and you’d call them a “C” only based on size and age… there’s really no such thing as a bad neighborhood here.

    • Engelo Rumora

      Hi Dilip,

      Thanks for your comment.

      There are many different perceptions on the asset classes.

      Mine is based on me considering myself a to be blue collar working glass guy and not growing up with a silver spoon.

      Someone from the Silicon Valley might say that my B class is his Z class haha

      Thanks and have a great day.

  8. Ida T.

    Great article. If you are an out of state investor and not be able to visit the location that you are going to invest, how do you know whether the potential investment is really classes A, B, C or D? How do you know the turn key provider is not going to sell you a class C property as a class B?

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