Real Estate Investing Basics

Class A, B, C & D Real Estate: How to Know Where YOU Should Invest

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(The following is an excerpt from the new book from BiggerPockets, The Book on Rental Property Investing. If you are looking to buy more rental properties this year, pick up a copy today!)

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As you begin investing in real estate, you’ll likely hear people talk about a property being in an A, B, C, or D location.

Just like your high school class grades, a neighborhood can receive a grade, though the classification is a bit more subjective than a simple high school test. There is no government organization, board, or company that classifies locations.

It’s honestly more of an unwritten rule accepted by most investors, and the lines are not incredibly clear. You might think a location is an A location (the best), while I might think it’s a B location (second best), but for the most part, investors will agree on the class distinctions.

Some investors grade locations on an A through C scale, whereas others grade on A through F scale. In other words, you might say a location is a C location, meaning that you think it’s the worst, because you grade on an A through C scale; at the same time, someone who grades on an A through F scale might think it’s pretty middle of the road. For the sake of our discussion in this chapter, we’ll use an A through D scale, which is probably the most common grading scale.

Related: How to Identify A, B & C-Class Areas (& How to Know Which You Should Invest in!

In addition to the location receiving a grade, the property itself can be classified as an A, B, C, or D property. So you might hear someone say, “I have an A property in a B area.” To add more specificity to the classification system, some will add a + or – to those grades, so you might hear “The property is a B- house in a B+ area.” I’ll leave out the + and – designations in this chapter, but you can always use them if you want to get fancy or more specific.

Let’s take a minute and talk about the different classes of locations and property types.

Class A Real Estate

A Class A location is an area that has the newest buildings, hottest restaurants, best schools, wealthiest people, and highest-cost real estate. This is truly the best location you can find, and the highest-quality tenants are looking to rent here.

A Class A building follows the same concept. It is generally newer, probably less than ten years old, and therefore has fewer maintenance issues. The building has modern amenities, such as granite countertops, hardwood floors, and other in-demand features. Class A properties generally command the highest rent but may provide a lower amount of cash flow, because of the high-demand for an “easy investment.” More demand, higher purchase cost = lower cash flow.


Class B Real Estate

A Class B location might be slightly older than a Class A one, but perhaps still has decent restaurants, schools, and people. This might be your “middle class” areas, but these will attract more blue collar workers who live paycheck to paycheck.

A Class B building follows the same concept. It is probably 15–30 years old, mostly upgraded but perhaps lacking the shine of a Class A property. Rental income is probably lower than what you might find with a Class A property, and the maintenance costs will likely be higher because of the age of the home.


Class C Real Estate

A Class C location is likely a lower-income area with homes that are old—30 years or more. This area tends to attract people who are either on government subsidies or working low-wage jobs. You’ll likely find a lot of check-cashing businesses, pawn shops, and other such businesses in this area.

Related: Why I Don’t Buy Houses for $30,000 or Apartments in D-Class Areas

A Class C building follows the same concept. The property is likely older than 30 years and looks the part. Numerous repairs are likely needed, and ongoing maintenance should be expected. Systems in the property, such as plumbing and electrical, may be outdated and require ongoing attention. Properties will typically rent for a low amount in this area, but the properties will also be much more affordable than Classes A or B.


Class D Real Estate

A Class D location is a war zone where you likely would not want to travel alone. Not every city has a Class D area, but you’ll likely recognize one when you see one. Often, even cops are nervous about entering these areas, and crime and drug use/sales run rampant. There are probably numerous buildings with boarded-up windows and other indications of being vacant.

A Class D building is likely old, similar to a Class C one, but with far more neglect. Chances are, the property is currently uninhabitable, needing significant repairs before it could be lived in. Class D properties are generally exceptionally cheap, but getting good tenants can be difficult and dangerous. Unless you really know what you are doing, I don’t recommend getting involved with a Class D building or location.


As I mentioned earlier, the class distinctions are not very rigid or defined, but the classifications I just outlined here should give you a general indication of how investors view properties and neighborhoods. While doing research for this book, I stumbled upon a humorously accurate interpretation of the four classes, written by Matt R on the BiggerPockets Forums:

Neighborhood Classes

There is no right or wrong answer to the question, “What classification should I invest in?” You’ll likely find investors who only buy A, others who only buy B, others who only buy C, and still others who only buy D (God help them!). Each has pros and cons. Typically, the nicer properties will cost the most but may produce the least amount of headache—though this is not always true.

Because I am largely a “value add” investor (someone looking to rehab a property to bring its value up), I tend to look for Class C properties in Class B areas, but you’ll likely find a strategy that works well for you.

What do you think? What kind of location do YOU want to buy in?

Leave your comments below!

Brandon Turner is an active real estate investor, entrepreneur, writer, and co-host of the BiggerPockets Podcast. He began buying rental properties and flipping houses at age 21, discovering he didn’t need to work 40 years at a corporate job to have “the good life.” Today, with nearly 100 rental units and dozens of rehabs under his belt, he continues to invest in real estate while also showing others the power, and impact, of financial freedom. His writings have been featured on,,, Money Magazine, and numerous other publications across the web and in print media. He is the author of The Book on Investing in Real Estate with No (and Low) Money Down, The Book on Rental Property Investing, and co-author of The Book on Managing Rental Properties, which he wrote alongside his wife, Heather, and How to Invest in Real Estate, which he wrote alongside Joshua Dorkin. A life-long adventurer, Brandon (along with Heather and daughter Rosie) splits his time between his home in Washington State and various destinations around the globe.

    Curt Smith Rental Property Investor from Clarkston, GA
    Replied almost 4 years ago
    Hi Brandon, My view and experience is to rank a rental prospect by Great School number. Re calibrating your A-D ranking into a Great school number: A = 9-10 Great school ranking for the high school B = 7-8 C = 4-6 D = 1-3 We intentionally bought in the B range, the cheapest neighborhood in a B class high school. This is MUCH easier to quickly rank a prospect house. Your A-D is too subjective and you didn’t give a “rubric” a measurement system to rank A-D. I just did via Great schools and its a few clicks off zillow, down by “schools”. Go off the high school number. If you study Great School rankings and house price variances within a B class high school district. You’ll find as cheap a houses as you’d find in much lower ranked areas. It’s a mater of snooping the cheapest hoods in good high school districts. Smart parents wanting the best for their kids will drive your high vs low effort of landlording. We have a problem in our B rentals!!!! No body moves out!!! I’m slowly raising rents but I’m stuck waiting for the youngest kids to finish high school then the parents can ponder moving and me jumping rents big time.
    Michael Hayworth Contractor from Fort Worth, Texas
    Replied almost 4 years ago
    Useful piece. Generally tracks pretty accurately, from my view. One nit I might pick with it is the idea that class A = newer. IME, a lot of class A neighborhoods are older areas that went through gentrification. If only my crystal ball were good enough to tell me which older neighborhood near me will be the next to see property values double in the next five years!
    Alexis Davis Investor from Bloomfield, Connecticut
    Replied over 3 years ago
    I would have to agree. I am in Connecticut, and many of the older towns with older homes are considered class A.
    Account Closed Investor from Birmingham, Alabama
    Replied almost 4 years ago
    Totally agree Curt
    Ben Parr Investor from Royal Oak, Michigan
    Replied almost 4 years ago
    I mostly agree, I’m not so sure the grade of the home is so dependent on the age of the structure though, but on whether it’s obsolete, especially as you generally move further East through the country and to the older cities. I’d imagine on the East Coast especially that there are many 100 year old A class homes (of course they’ve been remodeled, insulated, updated, etc.
    Brad Lohnes Investor from Cambridge, Waikato
    Replied almost 4 years ago
    Thanks – this is a useful thought tool – providing language for a key investment consideration. Using this terminology, my wife and I primarily invest in Class C neighbourhoods; as at least in our part of the world, these are the easiest areas in which to obtain properties that can generate positive cash flow. It’s interesting also to note that while most of our properties would be considered Class C properties in Class C neighbourhoods, we do have one that would be considered a Class B property in a Class C neighbourhood. It’s newer than the others and after reversing past tenant damage when we purchased through a bit of a refurbishment, it looks and feels newer than the others. Interestingly, this property also consistently maintains a higher value, and one day if we’re looking to sell any properties, this one will be high on the list. It’s also interesting to consider the Class D neighbourhood – we don’t have a whole neighbourhood in our town that would meet this description, but certainly small pockets. Also, with recent epidemic of P / methamphetamine manufacture and use, individual Class D properties are turning up on all neighbourhoods, sadly even Class A. Finally, I think I agree with others that the age distinction is probably not 100% but to my mind this mostly applies to the Class A neighbourhoods, where there is lots of money to keep properties maintained and therefore older properties can easily qualify as Class A. Thanks for the article.
    Account Closed from Honolulu, Hawaii
    Replied almost 4 years ago
    Great way to know how to invest in real estate. Looking at the various types of neighborhoods and schools do make a difference in types of real estate invest in.
    Remax Advantage Philippines
    Replied almost 4 years ago
    Real estate is an investment, so you really have to think a hundred times before acquiring one. There are things that you need to make sure first before getting a real estate. And as a buyer, you must do a keen research as well to know which one is for you and which is not. Good thing there are post like this to give you an idea about the kind of real estate which is right for you.
    Remax Advantage Philippines
    Replied almost 4 years ago
    Real estate is an investment, so you really have to think a hundred times before acquiring one. There are things that you need to make sure first before getting a real estate. And as a buyer, you must do a keen research as well to know which one is for you and which is not. Good thing there are post like this to give you an idea about the kind of real estate which is right for you.
    Eddie Trefger from New Braunfels, Texas
    Replied almost 4 years ago
    You can always improve the property but not the area. As an investor, I know the bad areas and steer clear of them. I know investors that have purchased properties in the bad areas and regretted doing it. The general rule that I follow is when you buy in bad areas, you will have to deal with bad tenants so I skip the Class D properties. In my opinion, it really comes down to knowing your areas that you are looking at buying in and the types of tenants in those areas that are going to be renting from you.
    Ayodeji Kuponiyi Investor from King of Prussia, Pennsylvania
    Replied almost 4 years ago
    great breakdown Brandon & great tips Curt!
    Mitchlyn D. Investor from Jacksonville, FL
    Replied almost 4 years ago
    Very informative. As someone who is still learning, my biggest fear is not analyzing my area accurately. I’ve seen many people on the post mentioned to focus on a great school district which is a strategy I’ll be using. Can’t wait for the next post!
    Rachel Luoto Rental Property Investor from Bremerton, WA
    Replied over 3 years ago
    Thanks for the article! It’s always been confusing to me how to tell the classes apart, having it broken into both property and location adds clarity. In my area, how old the home is doesn’t matter, it’s the location. The “historic” neighborhood is the most desirable where I live – that means homes going as far back as the 20s!
    Alexis Davis Investor from Bloomfield, Connecticut
    Replied over 3 years ago
    Thanks. Very useful!
    Jose Harvin Real Estate Investor from Hollywood, Florida
    Replied over 2 years ago
    You can also tell a neighborhoods rating by asking a local commercial real estate agent what the going cap rate is for an area. low single digits is an “A” and mid to high double digits is an “D” area. They should be able to break it down further for the “B” & “C” areas.
    Dennis L Lewis Jr from Smyrna, TN
    Replied about 2 years ago
    Thanks, Very informative! I kept seeing people on the forum use these terms and had no idea what they were talking about.
    Andy Chen
    Replied about 1 year ago
    Thanks for clarifying the classification of neighborhoods and school districts is often tied to neighborhoods. My question is what do you think of the C – property in a B – neighborhood and subsequent updating versus a multifamily property in a C – neighborhood? I realize Single Family and Multifamilies are two different genres but where would you put your money, $300K in a single family in a A/B neighborhood versus an updated Fourplex in a downtown/ C neighborhood?
    Taione Sikivou
    Replied 9 months ago
    Thanks, i find this information super helpful at my current stage as a real estate investor.
    Shashank Gokhale from San Antonio, TX
    Replied about 1 month ago
    Good info, I didn't know what this classification was either. So, with this definition, how would one classify the neighborhoods? If you look at Zillow or other sites, does the average home age indicate the kind of class of the neighborhood?