New Investor Introduction – Seeking Guidance and Mentorship
Member since 2025 · 4 posts · 3 votes
New Investor Introduction – Seeking Guidance and Mentorship
Most Popular Reply
Michael SmytheBusiness Member
Real Estate Agent · Metro Detroit · Member since 2023 · 4k+ posts · 3k+ votesRecommend you first figure out the property Class you want to invest in, THEN figure out the corresponding location to invest in.
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 affect what type of contractors, handymen and property management companies will work on a property.
If you buy & renovate a property in Class D area to Class A standards, what Tenant Class will 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. Check out the map on our website where we’ve made this all easy to follow.
We can also share numerous examples of properties & portfolios we’ve assisted investors with!
DM us if you’d like to discuss this logical approach in greater detail!
Logical Property Management4.9455 Reviews
6 Replies
- 1yCorby GoadeBusiness MemberInvestor · Boise, ID · Member since 2014 · 3k+ posts · 3k+ votes
Hawaii is expensive because people WANT to be there. Property is cheap in places that aren't as desirable. High prices aren't a bad thing, it's actually a good sign.
I'd start looking at house hacking where you live- find properties that you can live in for a year, force some equity and keep them as rentals. Repeat that every year for a few years and you'll be amazed at what a difference it makes in your life.
- 1yJoel BongcoBusiness MemberInvestor · Honolulu HI & Los Angeles, CA · Member since 2018 · 372 posts · 180 votes
@Ilayda Elmas - I invest both locally in Hawaii and out of state. I’ll walk you through our local flips and on the mainland so you can make an educated decision on which way to go.
- 1yKerlous TadresBusiness MemberRealtor · Columbus, OH · Member since 2023 · 1k+ posts · 1k+ votes
Quote from @Ilayda Elmas:
Hi everyone,
I’m excited to join BiggerPockets and start my real estate investing journey! I bought my own home two years ago and have been saving up, and I finally feel financially ready to invest. However, I know I still have a lot to learn, so I’ve been watching webinars, reading books, and using this site to try to analyze deals.
One of my biggest dilemmas is where to invest. I live in Hawaii, where prices and HOA fees are high, but appreciation is strong. Investing here makes sense in some ways since I know the market, but it's also expensive. The mainland offers more affordable opportunities, but it feels riskier since I don't have connections there.
I’d love any advice on how to decide where to invest, and I’m also open to connecting with a mentor who can help me navigate my first deal. Looking forward to learning from all of you!
Thanks!
Ilayda
Hey Ilayda, welcome to BP!
I would say the first thing that I would do is find the area that you want to start investing (since your area might be too expensive to start investing in) and then build your CORE 4 which consists of finding a great realtor, contractor, property manager, and attorney. Then from there finding properties that fit your buy box, I would start off with a single family for your first investment to get your feet wet
Kerlous Tadres | Reafco Real Estate541 Reviews - 1yMichael SmytheBusiness MemberReal Estate Agent · Metro Detroit · Member since 2023 · 4k+ posts · 3k+ votes
Recommend you first figure out the property Class you want to invest in, THEN figure out the corresponding location to invest in.
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 affect what type of contractors, handymen and property management companies will work on a property.
If you buy & renovate a property in Class D area to Class A standards, what Tenant Class will 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. Check out the map on our website where we’ve made this all easy to follow.
We can also share numerous examples of properties & portfolios we’ve assisted investors with!
DM us if you’d like to discuss this logical approach in greater detail!
Logical Property Management4.9455 Reviews - 1yMichael BorgerPro MemberRehabber · San Diego, CA · Member since 2010 · 502 posts · 208 votes
Aloha, @Ilayda Elmas - welcome to BP and the Hawaii scene. I've been doing deals in Hawaii for about 12 years or so now. It's a mixed bag -- good for flips but can be tough for long-term holds given the normal holding cost vs incoming rent. A lot of people invest elsewhere. There is some good education here on BP for getting started -- how to build a basic marketing campaign, how to speak with sellers, run numbers, get your financing together, etc. The main thing is to get started. Sending out your first batch of letters can be exciting and scary for many people, but do it anyway. Good luck!
- 1yJaycee GreenePro MemberReal Estate Consultant · St. Louis MSA · Member since 2024 · 3k+ posts · 727 votes
Quote from @Ilayda Elmas:
Hi everyone,
I’m excited to join BiggerPockets and start my real estate investing journey! I bought my own home two years ago and have been saving up, and I finally feel financially ready to invest. However, I know I still have a lot to learn, so I’ve been watching webinars, reading books, and using this site to try to analyze deals.
One of my biggest dilemmas is where to invest. I live in Hawaii, where prices and HOA fees are high, but appreciation is strong. Investing here makes sense in some ways since I know the market, but it's also expensive. The mainland offers more affordable opportunities, but it feels riskier since I don't have connections there.
I’d love any advice on how to decide where to invest, and I’m also open to connecting with a mentor who can help me navigate my first deal. Looking forward to learning from all of you!
Thanks!
Ilayda
Hi @Ilayda Elmas, welcome to the BP Forum! With my CFO clients that ask the same question about where to invest, the first thing I recommend them is to focus on a city/market where they either 1) currently or have previously lived, 2) have family/friends that live there, or 3) travel to for work or vacation frequently.
Do any of these resonate with you?
Join the conversationCreate a free account to reply, vote on answers and follow this thread.