How do u classify neighborhoods in your area ?

3 Replies

So how do you classify A,B,C, and D class neighborhoods in your investment areas? Obviously price has to do with it, crime rate, income levels, condition of properties in area. But is their a guideline ? Something more solid or is it really just a kind of personalized assumption. for me, I have a rental in a C+ class neighborhood. Super quiet, never any crime in this part of the township, working class families. Only reason I say C+ instead of maybe B or B- (if that’s a thing) is because a lot of the houses are older. Pretty even mix of rentals and owner occupied. Maybe slightly more owner occupied. So to me thats C+ but maybe to some it’s not. Maybe some it’s B, maybe some it’s D.
@Nicholas Weckstein Everyone has their own criteria they seem to use to label neighborhoods and I’m no different . Here’s a general way I think of the letter coding A - fine hIgh end homes no rentals a great place to raise a family upper IncoMe folks often gated community and most people are driving expensive newer cars B- nice houses with good landscaping.typical suburban famIly homes some rentals here and there no boarded up houses or rift raft walking around You’d raise your family here and feel safe virtually no crime nice cars good blue collar working class C- even split of rentals and home owners some crime older cars some boarded up houses sporadic crime people tend to stay indoors at night youd be sure to lock your house and car here most houses are older and many need repaired D- Lots of dilapidated houses and the ones livable look to need repaired . Older out of date cars . Pockets of crime n most everyone Is low income large mInority popluatIon tend to be in these areas .able bodIed people walking around in middle of day not working . Yards not mowed .children running around the streets with no parental supervision F- war zone .
@Nicholas Weckstein Just curious, but for what purpose do you/other investors use the classifications for? I could see maybe labeling the likelihood of being paid or for knowing your market of tenants. What market rents are and the likelihood of being paid on time/no damage to the rental seem to be the golden focuses to me. Just curious as to what you use the letter grades for? Thanks!
Originally posted by @Jonathan Dempsey :
@Nicholas Weckstein Just curious, but for what purpose do you/other investors use the classifications for? I could see maybe labeling the likelihood of being paid or for knowing your market of tenants. What market rents are and the likelihood of being paid on time/no damage to the rental seem to be the golden focuses to me. Just curious as to what you use the letter grades for? Thanks!

Mainly used to standardize the neighborhood between other investors. During REI meeting, new or out of state investors are not familiar with the area so when you label them, you can go thru deals quick. For instance A class neighborhood most of the time won't give you cash flow. B class are established, C class will have the most potential for ROI and has the potential to turn into a b class neighborhood.

So when a deal comes up, it normally goes like this “I have a property in (insert name of neighborhood), which is a (a,b,c) class neighborhood for those interested, see me after the meeting”. 

Majority of investors have different preference in what class they invest in so it just makes it easier to jump into deal or not think about it.