Developer · Atlanta, GA · Member since 2016 · 165 posts · 32 votes
Anybody invest in Class D Apartment buildings? When I talk to other investors most multifamily investors invest in B&C properties. Im curious to hear from someone who is in the D class niche. I was thinking of using the BRRRR strategy with the Class D apartments. Feedback welcome.
@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.
@Rashad Jones Jennings be very careful with property managers in D areas. Or sure they know what they’re doing and have a few backup PMs in place. It’s a nightmare to buy property in a D area and get stuck having no choice in PM. Me? ive done it both ways ans next time I would start small and self manage.
@Calvin Lipscomb if your looking for info on how to invest in gentrifying areas look up Brian Murray’s book crushing it in commercial real estate.
I never found a lot of info on how to invest in gentrification. It’s not easy to do but it’s easy to get burned bad.
However when you do it right you can make money. Most investors look for 10,12.15 percent. With gentrification I’ve made 40x my money.
When you see favorable demographic and economic changes you that there will physical expansions. You need to he aware of the driver's of that expansion and what makes a particular area favorable. Knowing your local market is a key advantage. You are 100% correct in that you need a solid PM firm to assist with such a plan.
@Calvin Lipscomb if your in Brooklyn come up and check out Newburgh NY. I was an investor in bed stuy in the mid 2000s. Interesting stuff going on up there if you don’t mind taking risks.
Since your talking about gentrification and D property I figure your ok with risks but just to emphasize that’s risky stuff. I love it tho.
@Rashad Jones Jennings I don't personally look for D class assets. The BRRRR could work but from what history tells us and other experienced operators is that D class assets get hit very hard when the market corrects. Lots of bad debt, skips, and unit damage. Im not saying you can't make money I just think there is a lot of risk around a D asset.
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.
Definitely don't want to get burned out but I see it as my way in. Its hard finding B&C properties in Atlanta. So I figured id go where no one else wanted to go. With good property management I think I could make it work. At least to get my foot in the door. Does your investor friend that invest in D properties have a podcast, youtube channel etc?.... I would love to learn how he's doing it with D properties. Theres so many of them laying around here that I see opportunity.
If you KNOW your area deeply then there is a great opportunity for you. Riding the gentrification train it will stop in one of these D areas. Knowing the drivers and amenities of what would make the next D community valuable in such an event is beneficial. There D communities right next to universities that can be plus, as an example.
Yea thats what I was getting at with the D properties. I will look only in areas where I see the developments coming. No one wants to be the first on these types of things but its he who is first who eats the best. I would have a few different exit strategies such as: buy and hold it the market shifts upon completion of renovations, or buy renovate and sell, and lastly buy rehab refi and hold or sell. I would only hold a D property if the market shifts and I can't sell because of the pull back or refi. But like I said it wouldn't be just any D property, theres a lot of development going on here in Atlanta. Been going on for years now, places you wouldn't want to be caught in after dark are now the desirable areas.
@Rashad Jones Jennings be very careful with property managers in D areas. Or sure they know what they’re doing and have a few backup PMs in place. It’s a nightmare to buy property in a D area and get stuck having no choice in PM. Me? ive done it both ways ans next time I would start small and self manage.
@Calvin Lipscomb if your looking for info on how to invest in gentrifying areas look up Brian Murray’s book crushing it in commercial real estate.
I never found a lot of info on how to invest in gentrification. It’s not easy to do but it’s easy to get burned bad.
However when you do it right you can make money. Most investors look for 10,12.15 percent. With gentrification I’ve made 40x my money.
thanks for the feedback. I have that book by Bill Murry and I am going to finish it soon. I put it down for a while so that I can finish up Sam Zell's book. But I will definitely finish it up soon.
@Rashad Jones Jennings I don't personally look for D class assets. The BRRRR could work but from what history tells us and other experienced operators is that D class assets get hit very hard when the market corrects. Lots of bad debt, skips, and unit damage. Im not saying you can't make money I just think there is a lot of risk around a D asset.
I agree there is a lot of risk in D properties and thanks for your feedback. I would only target areas where I see a trend for redevelopment. But Im happy to get feedback from experts like those on this thread. Its very helpful.
I personally will purchase a D class property if it's in a C class neighborhood. I don't have a problem with section 8 as long as background checks are run and I don't have a problem with crime.
@Rashad Jones Jennings like you said about eating first. But..... there is a tipping point. SiGNS need to see before I buy. To me the indicators are like signs on the highway. But others I talk with don’t see them. Don’t think those things matter. I was talking with another investor the other day. 10 years in a market. He’s selling. I’m buying. He thinks I’m crazy. Not the first time I’ve heard that.
I would look around down by you for a guy that’s doing that. Going in and buying first...then ask to help him out and show you how to do it.
I would not start in D-class buildings. They are very hands on and often loose money. Buying a D-class often looks on paper, like a great choice, but in reality you most often times are better off with B-class. Actual returns will show your profit as being similar in many cases.
@Calvin Lipscomb if your in Brooklyn come up and check out Newburgh NY. I was an investor in bed stuy in the mid 2000s. Interesting stuff going on up there if you don’t mind taking risks.
Since your talking about gentrification and D property I figure your ok with risks but just to emphasize that’s risky stuff. I love it tho.
Thanks for thought. What are some of the drivers up there that you are seeing?
@Calvin Lipscomb I don’t know about “drivers” what I do is very specific. But I didn’t learn it in college. In fact I didn’t finish HS. But i do know how to find areas that are turning around and buy and make lots of money. FOR ME There are no free lunches. I’m not selling any 199. Buy real estate make money kits. I am buying in newburgh tho bc I think I’ll make money. Will you make money? Maybe but you could also lose it all. I don’t agree with the post right above. Just my opinion tho. He could be right. To me I learned D real estate by starting in D real estate. Now I’m an expert.