Which class is best for multifamily properties?

Question

I am currently focused on investing and selling B/C value add properties in the Atlanta area. I was wondering which class others were interested in and think is best and why?

Ellie Perlman · Answer

I buy Class B properties in Atlanta MSA, and prefer this class over Class C for several reasons:

- class B assets usually have less deferred maintenance

- class B assets tend to attract higher quality tenants

- During COVID, Class B collections were the highest in the U.S, following by Class A assets, then Class C (which usually attracts tenants from the service industry and low paying jobs that got hit the hardest)

Kerry Hartley · Answer

@Ayat SuleimanPersonally love Class C also. Still opportunities in the ATL MSA market. Especially well for smaller funds and for the Cashflow as @Karl B. mentioned. Have experience in the south ATL and Downtown areas and personally love It. Also I enjoy the social cause behind helping Class C tenants experience a enjoyable renting experience. It's a balance! The number one thing with any investment is to gain the trust of your stakeholders. Tenants are a stakeholder and you must come to a mutual understanding when It comes to turning around a Class C project. I love to set expectations and to deliver with our tenants and this helps people to join the vision.

Ayat Suleiman · Answer

@Brenden Mitchum thanks I def will!

Hai Loc · Answer

B- C+

Adriel Hsu · Answer

I prefer B properties.  Cap rates have compressed so much on C properties that the returns are hardly justifiable. The toilet you replace in a class C and class B property are the same, and will still be $90.  The difference is the Class C 1 bedroom  rents for $650 while the Class B gets $850. The expenses don't trend linearly with income. This applies to a lot of other items such as paint and appliances as well. Also, you have a more secure and stable tenant base than C class properties.

Ayat Suleiman · Answer

Thank you @Kerry Hartley and @Karl B. I will def look more into C properties. I've been so much more focused on B properties but I love the insight and will def look more into C class.

Brenden Mitchum · Answer

@Ayat Suleiman

That's a good idea. You definitely want to do some research and know what you're talking about before you take it to your investors. The last thing you want is to pitch them something that you aren't well-informed on. Feel free to reach out if you run into any questions during your research!

Ayat Suleiman · Answer

@Brenden Mitchum hey! Thanks for your response. I’ve actually been hearing more and more about mobile home parks and they do sound interesting. I would love to look more into it. I actually have a few investors I wanted to bring the idea up to about possibly investing in some mobile home parks.

Brenden Mitchum · Answer

Hey @Ayat Suleiman!

I am currently focusing on mobile home parks (30+ pads) in the greater Atlanta metro for a number of reasons, most of which are explained very well in this BP blog post. The space is getting hot but there is still nowhere near the amount of competition that exists in the apartment space here in Atlanta. Not to mention, it's relatively easy to get a mom & pop owner of a park on the phone. In fact, I just met with one yesterday who was nice enough to show me around his park for a few hours. I could be wrong and I'm sure this is just anecdotal but I'd bet finding this in the apartment space would be near impossible.

But I could chat about MHPs allll day so if you ever want to know more, shoot me a message anytime!

Karl B. · Answer

Hello. That is personal preference and depends on what you're looking to achieve as well as your penchant for dealing with B.S. whether it's tenants or repairs VS cash flow.

I ride or die with cash flow and so I'm ready to deal with the B.S. I've gotten pretty good at managing stress and separating it from my life (something real estate has really taught and helped me with).

I know some property owners don't want to deal with the stress and so they invest in A or B class properties or they hire a PM to deal with everything.

And so (to tie it all up) I don't think there's a best in general as best depends on what the investor wants and doesn't want and what best acclimates to their goals and happiness.

As for me, as mentioned, I like cash flow. And so I look for properties that ideally need value-add and meet or exceed the 2% rule (typically C-class). I actually enjoy fixing them up and placing good tenants in there. I also learn from my mistakes and take full responsibility for them.

I recently moved to Columbia, MO to be able to invest locally (within two hours) as well as be closer to my Pennsylvania properties (I will likely continue to invest there also).

Like Ben Mallah says, invest in whatever works and makes you monnnneeeeeyyyyyyyy! :-)

Which class is best for multifamily properties?

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