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.