Neighborhood Ratings, Class A,B,C etc. Where does this come from??

Question

Hi everyone.  When I hear people talk about buying investment properties in a class  “A” or “B” neighborhood.  Who classifies this, and where can you find the lettered ratings? Is this something that is easily quantifiable or are these ratings loosely defined by people doing demographic research on an area for themselves?

Christopher Allen · Answer

Typically you wont find neighborhood ratings in the typical "A" - "D" system you hear about on here. These ratings are mostly qualitative and sometimes subjective to each person. Typically, class "A" areas have the nicest houses, lowest crime, best schools, etc. This is the most desirable area that everyone would want to live in and thus, are typically the highest prices. All the way down are class "D" neighborhoods (some even referred to as war zones...). These are areas with very high crime, very difficult tenant base, etc.

Again, these ratings aren't published or determined by a company. Rather derived by investors based on their own observations and research on a particular area. Typically property managers and other bigger investors in the area know right away which class some areas (even down to the street) fall into since they have the experience and knowledge there.

But you can also get a fairly good idea by looking at crime and school rating data and driving the streets. Do you see very well kept roads, sidewalks, properties, cars,...? Are there a lot of people jogging or walking around the neighborhood? Any starbucks or macys stores? Signs of gentrification? These are typically good signs of an "A" or "B" neighborhood or on its way there.

On the other hand, is it sketchy being there at night? Lots of liquor stores or dollar stores around? Other properties have a lot of neglected maintenance and visually look distressed? Cars on cinder blocks and bars on windows? These are typically signs of a "C" or "D" area. You can usually get a good feel pretty quickly when driving the area