I prefer class B and C neighborhoods. I would definitely stay away from class Ds. I have driven by class Ds and I kept on moving. It didn't feel safe to walk around the property during daylight.
I made money in Class D but it's a hard way to make a buck. As soon as we could afford it we started buying better neighborhoods. If you can make money in class D, everything else is easy street.
@Matt Powers I’ve seen most investors start out in B/C class. It’s usually the best entry point for newer investors who are price sensitive but still want manageable tenant quality and lower maintenance risk. It definitely present with its own set of challenges especially in certain C class areas where tenant turnover or rent collection can be tougher but if you're doing your due diligence on the specific street, rental comps, and crime rate, you can find solid, cashflowing deals.
Class D tends to burn people, and Class A rarely makes sense unless you're playing a long appreciation game or have a different strategy. Class B/C is the sweet spot if you're focused on cash flow and building a long term portfolio.
you shouldn't frame the question as which class asset is best. It's all about tradeoffs and what works best for you.
Returns are a function of risk, effort and barriers to entry. By definition class D should have higher returns given higher risk and effort. Class A has higher barriers to entry. B and C class are more realistic for general investors to find balance of returns and effort. Best class for you will be different for others - so think about what factors are most important to you.
From my connections in real estate, I heard you should stay away from Class D. Class C and B are easier to get into as a beginner. Those are the ones I've been looking at.