First time investor
Member since 2025 · 1 post · 4 votes
First time investor
Most Popular Reply
Michael SmytheBusiness Member
Real Estate Agent · Metro Detroit · Member since 2023 · 4k+ posts · 3k+ votesHow much do you know about Property Classes?
Recommend you spend some time learning about them, so you don’t mistakenly buy a property that will NEVER meet your expectations!
Why is Property Class so important for investors to understand and apply in their investing strategies?
Because the Property Class dictates the Class of the tenant pool that the property will attract.
The Tenant Class greatly impacts rental income stability and property maintenance/damage by tenants.
Both Property Class and Tenant Class will affect what type of contractors, handymen and property management companies you should target and be willing to deal with a property.
The Property Class will also impact the maintenance & renovations you do to,, “Maintain to the Neighborhood”.
Why is that important?
Well, if you buy & renovate a property in Class D area to Class A standards, what Tenant Class will actually rent it?
Or, if you put several Class D tenants in a Class A four-plex, what do you think will happen to the property?
So, if you fail to apply the correct assumptions to a property, your expectations won’t be met, and it may even be a financial disaster.
We use the following to rank Property Classes, in order of importance:
- Property Tenant Pool: closely linked to location, but not always.
- Property Location: closely linked to tenant pool, but not always.
- Property Condition & Amenities: it’s important to, “Maintain to the Neighborhood.”
Key metrics for each Property Class:
Class A Properties:
Tenant Pool: Majority of FICO scores 680+, no convictions/evictions in last 7 years.
Tenant Default: 0-5% probability of eviction or early lease termination.
Section 8: Class A rents are too high and won’t be approved.
Vacancies: 5-10%, depending on market conditions.
Cashflow vs Appreciation: Typically, 3-5 years for positive cashflow, but you get highest relative rent & value appreciation.
Class B Properties:
Tenant Pool: Majority of FICO scores 620-680, some blemishes, no convictions/evictions in last 5 years.
Tenant Default: 5-10% probability of eviction or early lease termination.
Vacancies: 10-15%, depending on market conditions.
Cashflow vs Appreciation: Typically, 1-3 years for positive cashflow, balanced amounts of relative rent & value appreciation.
Section 8: Class B rents are usually too high for the Section 8 program.
Class C Properties:
Tenant Pool: Majority of FICO scores 560-620, many blemishes, but should have no convictions/evictions in last 3 years. Verifying recent 2-years of rental history very important! Same for 2-years of job/income stability.
Tenant Default: 10-20% probability of eviction or early lease termination.
Section 8: Class C rents usually meet program requirements, proper screening still recommended.
Vacancies: 10-20%, depending on market conditions and tenant screening.
Cashflow vs Appreciation: Should cashflow immediately, at the lower end of relative rent & value appreciation.
Class D Properties:
Tenant Pool: Majority of FICO scores under 560, little to no good tradelines, lots of collections & chargeoffs, but should have no convictions/evictions in last 12 months. Verifying last 2-years of rental history and income/employment extremely important to find the “best of the worst”.
Tenant Default: 20-30% probability of eviction or early lease termination.
Section 8: Class D rents meet program requirements, often challenges to pass Section 8 inspection.
Vacancies: 20%+, depending on market conditions and tenant screening.
Cashflow vs Appreciation: Typically, all cashflow with little, maybe even negative, relative rent & value appreciation.
Where did we get our FICO credit score information from?
Check out this chart:
|
FICO Score |
Pct of Population |
Default Probability |
|
800 or more |
13.00% |
1.00% |
|
750-799 |
27.00% |
1.00% |
|
700-749 |
18.00% |
4.40% |
|
650-699 |
15.00% |
8.90% |
|
600-649 |
12.00% |
15.80% |
|
550-599 |
8.00% |
22.50% |
|
500-549 |
5.00% |
28.40% |
|
Less than 499 |
2.00% |
41.00% |
Make sure you understand the Class of properties you are looking at and the corresponding results to expect.
Metro Detroit has 132 cities, the City of Detroit 183 Neighborhoods, which we’re analyzing and classifying.
Logical Property Management4.9453 Reviews
10 Replies
- MD/DC · Member since 2024 · 1k+ posts · 1k+ votes1y
Welcome, this is exciting news. If you post your general investing area you might get some locals to weigh in. I guess the positive to having different contacts with different views is you can pick the one that resonates the most with you. There really is not 100% right or wrong way to do this.
- Lender · Los Angeles, CA · Member since 2020 · 65 posts · 15 votes1y
Andrew congratulations! Make sure to share a scenario and we can give more input! Look forward to connecting
- 1yJ CastroBusiness MemberLender · Florida · Member since 2025 · 684 posts · 242 votes
Hey @Andrew Deans, welcome to BP!
As a first-time real estate investors you can choose between more passive options, a more hands-on strategies, such as buying rental properties, house hacking, or wholesaling. Your best path depends on your available capital, time, skills, and comfort with risk.
To start real estate investing, first determine your goals and financial situation to choose a strategy like buy-and-hold rentals, flipping houses, or even REITs. Focus on single-family homes for simplicity, research locations thoroughly, and understand all associated costs. Build your knowledge, network with professionals, assemble a team of experts, and consider seeking mentorship for a strong foundation.
Attend local real estate events and connect with experienced investors to learn from their successes and failures. Here in BP, you'll be able to seek guidance from experienced investors to help you avoid common pitfalls and build confidence. This team can include a real estate agent, contractor, and a property manager. Good Luck on your venture!
- 1yArman AhmedPro MemberReal Estate Agent · Columbus Cleveland Dayton, OH · Member since 2024 · 2k+ posts · 923 votes
Congrats on getting started, Andrew! Sounds like you’re in a great spot with savings and guidance from friends. Since you’re exploring strategies, I’d focus on what fits your goals—cash flow vs. appreciation, short-term learning vs. long-term growth. In the Midwest, there are some solid rental markets with strong cash flow and lower entry costs compared to coastal areas. Starting with one property here and really understanding the process can give you a strong foundation to scale your portfolio later.
- Wholesaler · Irvington, NJ · Member since 2025 · 112 posts · 53 votes1y
Congrats on getting started, Andrew! It’s common to hear very different strategies, but the best approach is the one that fits your own goals and risk tolerance. Take what you’re learning, run numbers on a few deals, and you’ll get clarity on which path feels right for you.
- New to Real Estate · Miami, FL · Member since 2024 · 1k+ posts · 453 votes1y
Andrew, you’re doing it right—saving, learning, and talking to experienced investors. With different strategies around you, focus on what fits your goals: cash flow, appreciation, or long-term wealth. Learn from both sides, take that course, then move forward with what aligns with your vision. Feel free to reach out for any help!
- 1yMackaylee BeachPro MemberReal Estate Agent · Kansas City, MO · Member since 2020 · 1k+ posts · 492 votes
Everyone has their unique approach and perspective, which can offer valuable insights and fresh ideas. When you open yourself up to diverse opinions, you can gain a more nuanced understanding of the market dynamics and perhaps discover strategies you hadn’t considered before. It’s all about finding what aligns with your goals and risk tolerance.
Remember, the investing journey is a personal one, and what works for someone else might not necessarily work for you. Keep an open mind, stay informed, and trust your instincts. Happy investing!
- 1yMichael SmytheBusiness MemberReal Estate Agent · Metro Detroit · Member since 2023 · 4k+ posts · 3k+ votes
How much do you know about Property Classes?
Recommend you spend some time learning about them, so you don’t mistakenly buy a property that will NEVER meet your expectations!
Why is Property Class so important for investors to understand and apply in their investing strategies?
Because the Property Class dictates the Class of the tenant pool that the property will attract.
The Tenant Class greatly impacts rental income stability and property maintenance/damage by tenants.
Both Property Class and Tenant Class will affect what type of contractors, handymen and property management companies you should target and be willing to deal with a property.
The Property Class will also impact the maintenance & renovations you do to,, “Maintain to the Neighborhood”.
Why is that important?
Well, if you buy & renovate a property in Class D area to Class A standards, what Tenant Class will actually rent it?
Or, if you put several Class D tenants in a Class A four-plex, what do you think will happen to the property?
So, if you fail to apply the correct assumptions to a property, your expectations won’t be met, and it may even be a financial disaster.
We use the following to rank Property Classes, in order of importance:
- Property Tenant Pool: closely linked to location, but not always.
- Property Location: closely linked to tenant pool, but not always.
- Property Condition & Amenities: it’s important to, “Maintain to the Neighborhood.”
Key metrics for each Property Class:
Class A Properties:
Tenant Pool: Majority of FICO scores 680+, no convictions/evictions in last 7 years.
Tenant Default: 0-5% probability of eviction or early lease termination.
Section 8: Class A rents are too high and won’t be approved.
Vacancies: 5-10%, depending on market conditions.
Cashflow vs Appreciation: Typically, 3-5 years for positive cashflow, but you get highest relative rent & value appreciation.Class B Properties:
Tenant Pool: Majority of FICO scores 620-680, some blemishes, no convictions/evictions in last 5 years.
Tenant Default: 5-10% probability of eviction or early lease termination.
Vacancies: 10-15%, depending on market conditions.
Cashflow vs Appreciation: Typically, 1-3 years for positive cashflow, balanced amounts of relative rent & value appreciation.
Section 8: Class B rents are usually too high for the Section 8 program.Class C Properties:
Tenant Pool: Majority of FICO scores 560-620, many blemishes, but should have no convictions/evictions in last 3 years. Verifying recent 2-years of rental history very important! Same for 2-years of job/income stability.
Tenant Default: 10-20% probability of eviction or early lease termination.
Section 8: Class C rents usually meet program requirements, proper screening still recommended.
Vacancies: 10-20%, depending on market conditions and tenant screening.
Cashflow vs Appreciation: Should cashflow immediately, at the lower end of relative rent & value appreciation.
Class D Properties:
Tenant Pool: Majority of FICO scores under 560, little to no good tradelines, lots of collections & chargeoffs, but should have no convictions/evictions in last 12 months. Verifying last 2-years of rental history and income/employment extremely important to find the “best of the worst”.
Tenant Default: 20-30% probability of eviction or early lease termination.
Section 8: Class D rents meet program requirements, often challenges to pass Section 8 inspection.
Vacancies: 20%+, depending on market conditions and tenant screening.
Cashflow vs Appreciation: Typically, all cashflow with little, maybe even negative, relative rent & value appreciation.
Where did we get our FICO credit score information from?
Check out this chart:
FICO Score
Pct of Population
Default Probability
800 or more
13.00%
1.00%
750-799
27.00%
1.00%
700-749
18.00%
4.40%
650-699
15.00%
8.90%
600-649
12.00%
15.80%
550-599
8.00%
22.50%
500-549
5.00%
28.40%
Less than 499
2.00%
41.00%
Make sure you understand the Class of properties you are looking at and the corresponding results to expect.
Metro Detroit has 132 cities, the City of Detroit 183 Neighborhoods, which we’re analyzing and classifying.
Logical Property Management4.9453 Reviews - Specialist · Member since 2025 · 32 posts · 12 votes1y
Congrats on saving up for your first rental, Andrew—that's a big milestone already 👏 I think it's smart that you're talking with REI now and also taking the Lifestyles Unlimited course. I've got a friend who's experienced in rentals and BRRRRs, and he always says the best path really depends on your long-term goal (cash flow, appreciation, or scale).
Curious—which way are you leaning for your first deal?
Join the conversationCreate a free account to reply, vote on answers and follow this thread.