Guidelines To Help Determine Property Grade - A, B, C, or D

16 Replies

Is there a definition somewhere to help one determine whether a apartment complex is an a, b, c, or d grade property?

There are no strict definitions of these terms. They're just rough grade people use to give an idea of what a property is like.

A: Newly built properties in the nicest areas.
B: Slightly older property, but still nice. Might be not quite as nice of an area.
C: Older properties. Likely really could use some work. Not the best areas. For investors, these are really the bread and butter for rentals.
D: Run down properties in bad areas.

The area and the property can be described separately. Its possible to have a run down property in a great area. Harder to have a great property in a bad area, though.

In Orange County CA:
A. New or newer complex, finished with granite, upgraded appliances, laundry room in apartment, nicely landscaped, pool and other amenities such as physical fitness, playgrounds for kids, organized activities for tenants

B. Newer complex with upgraded features, nicely landscaped, nice pool and play area for kids.

C. Older complex granite or tile in kitchen, clean well kept grounds, pool, and possibly play area for kids. Coin op laundry

D. Older complex, no pool, no play area, basics. Coin op laundry

There are a lot of threads on this topic, many of which have lots of opinions in them along with personal preferences and beliefs. While the ratings can be somewhat objective, there is a baseline to this and it has nothing to do with price. In CA, a unit that rents for $600 a month would likely be a dump, in a bad area, and no amenities, but in a place like OH, it would be a regular blue collar neighborhood, hence price has nothing to do with it as values of property change dramatically depending on geography.

The actual factors that impact a class of property is: Age, location, amenities, and condition. "A" class properties are typically 10 years old or less, in great neighborhoods, in great condition, and have lots of amenities like pool, playgrounds, access to public transportation, etc. Then they go down from there. Of course the subjective ness comes into play when you have a building that is I in an a class neighborhood, all the amenities, great condition, but perhaps is 20 years old. So do you rate it as an a class or b class? That is the subjective nature of this due to the fact that more than one factor comes into play for the ratings. I personally would rate such a property as an old A class.

Originally posted by Will Barnard:
Of course the subjectiveness comes into play when you have a building that is I in an a class neighborhood, all the amenities, great condition, but perhaps is 20 years old. So do you rate it as an a class or b class? That is the subjective nature of this due to the fact that more than one factor comes into play for the ratings. I personally would rate such a property as an old A class.

Or you could call it an A- and be done.

Originally posted by Dawn Anastasi:
Originally posted by Will Barnard:
Of course the subjectiveness comes into play when you have a building that is I in an a class neighborhood, all the amenities, great condition, but perhaps is 20 years old. So do you rate it as an a class or b class? That is the subjective nature of this due to the fact that more than one factor comes into play for the ratings. I personally would rate such a property as an old A class.

Or you could call it an A- and be done.

Yes you could, or you could call it a B+, again this is the subjective part left up to personal opinion, personal preference, etc.

I've always found that identifying and A or D property is fairly easy...you know it when you're looking at it. The trickier part comes when determining B-C properties which can be done with the good advice further up this thread.

Does this apply to neighborhoods the same as individual properties?

Class A = where you live or where you want to live.

Class B = where professional renters live

Class C = where working class renters live

Class D = war zone.

That's my definition. :)

Bumping the thread for newer members, like myself, that wasn't sure how properties were graded.

Another bump to the thread.

@Jon Holdman  & @Will Barnard  

How do you reconcile the subdivision phenomenon that constitutes much of the new construction in the past 20 or so years with "nicest areas"?  

In every market I've lived in, the nicest areas were the established communities where the properties were at least 30+ years old in Utah and 100+ years old in New England.  These are the neighborhoods with low crime, mature landscaping, tree-lined streets, "pillars of the community", etc.  Are these B's?

It could be argued that across the country in 2008-9, new construction in even the nicest subdivisions were among the worst properties and certainly the hardest hit.

In other words, which would you prioritize between new construction and established neighborhood since many times they are mutually exclusive?

Thanks.

@Ben Hughes My very technical determination of A & D is

A where ever I'm selling;-)

D where ever I'm buying;-)

I agree with @Minh Le B and C are professional and working renters.

Realtor tells me this office building is : '4A'. What does that mean? 

This is just my method and it works well enough if you want a clear cut way to do something:  Score each section honestly with 1-4.  1 being the best, 4 being the worst or vice versa... doesn't actually matter (for the sake of this, we'll do 1 = best).  After each area has been scored, add them all up and divide by the number of sections (areas).  whatever your number is will give you at least a fairly close guess as to what it is.  1=A, 2=B, 3=C, 4=D.  If you do it on an excel spread sheet, you can always add more criteria later on for grading and will always have a template to evaluate other properties in different areas.  Lastly, I generally grade two areas instead of just one whole.  Building class and neighborhood class.  The building class could easily be an A or B if it is super old but entirely rewired recently, newly remodeled, etc, versus, a new home can still be terrible with no updates and be a D.  Evaluate what traits you consider to be a generally accepted as desirable and undesirable and write them down and do the scoring of 1-4 for it as well.  overall rating should be lapsed because if there is even a single three when everything else is 4, it will never be a four if you don't stagger the numbers.  1-1.74 = A, 1.75-2.4 = B, 2.5-3.24 = C, 3.25-4 = D.

To reiterate, there should be a class rating for: (this is an example of one of my properties)

The neighborhood

1. Age of community:  4 (100 years old)

2. Things to do: 1 (clubs, golf, movies, shopping, bars, parks, river, mountains)

3. Scenery: 1 (mountains, river, trees)

4. amenities: 1 (Park, pool, river, football field, tennis court, baseball field (not close enough to be hit lol), yard)

5. crime rate: 1 (literally only a few assaults in past year and one robbery)

6. income: 3 (median household income = $43,000)

7. transportation: 2 (some but not much)

8. walking distance: 1 (close to everything)

9. ***Personal rating of overall neighborhood: 2 (nice neighborhood but just not a class A which is really nice)

10. ***Personal rating of the neighborhood's buildings' condition: 2 (very old community but well kept victorian houses and overall well maintained).

4+1+1+1+1+3+2+1+2+2=18/10=1.8=B 

And the property you are looking to buy: (This is when I bought it, not how it is now)

1. Age: 4 (1923)

2. upkeep Interior: 3 (nothing super messed up but needed a lot of work)

3. upkeep exterior: 2 (Old and needed a little work but overall looked nice)

4. electrical: 1 (new wiring, service, breaker box, etc)

5. Plumbing: 2 (newer but may need work in a less than 10 years)

6. appliances: 4 (there were none)

7. room size: 2 (fairly large but not huge)

8. curb appeal: 3 (overall nice look for an old brick building but meh, nothing special)

9. unique features: 2 (Cool architecture and design)

10. amenities on property: 2 (has a ton: big yarded area, tennis court, etc.)

4+3+2+1+2+4+2+3+2+2=24/10=2.5=C (barely)

Ultimately, don't get too wrapped up in the class rating. It is more or less for you and every single last class rating in this WORLD is going to be subjective to the person rating it. Take it with a grain of salt and just use it for a quick reference. If they are asking $500,000 for a fourplex and its a C class neighborhood and C class building, I would probably keep looking, but in my case, a barely C class (almost B class) in a B class area for $5000 and less than $20,000 in repairs and renovations, it was a no brainer.  I'm not an expert in real estate, but I do think in numbers for most of everything and it hasn't failed me yet.  Good Luck to everyone who reads this and I hope this helps some.

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