As a real estate investor, you may prioritize diversifying your portfolio as much as possible. Even so, you still might debate about which neighborhoods to buy properties in and what parts of the city to avoid entirely.
Even if you are an experienced investor, you still might find it challenging to settle this debate yourself. Instead, you can work with an experienced real estate investment business like Upside Investments to identify high yield areas in which to invest today.
Class A Properties
Class A properties are the highest level of properties available to investors today. As their classification denotes, neighborhoods in Class A areas feature high-end, top-notch appearances and values. High levels of pride of ownership are common in Class A properties.
Even more, they are low crime areas, full of beautiful homes on well-kept properties. People who own or rent homes in such neighborhoods prioritize keeping highly manicured lawns and gardens, which lend to the beauty and value of their neighborhoods.
Class A properties offer high-quality, high-performance schools, as well as ample amenities for residents. Residents also typically are very involved in their communities in these types of neighborhoods, which contribute to Class A properties being both safe and comfortable for people who live in them.
Overall, Class A properties are impressive and desirable places for people to settle down in with their families. As appealing as they sound, however, Class A properties can be less than ideal for investors.
For starters, the rents in Class A properties are often so high that they exceed the financial reach of average renters. Further, many Class A properties have homeowners associations, or HOAs, which often add to the hassle of investing in properties in them.
HOAs, for example, often require an extensive amount of repairs and upkeep for properties in their neighborhoods. This burden can add to the costs you have to put into maintaining your investment properties. The costs of satisfying the expectations and requirements of HOAs can significantly detract from any profits you make from the homes you own in Class A properties.
With that, Class A properties are more suited for people looking to buy and live in houses long-term. They may not offer the opportunities to generate solid incomes for investors looking to diversify their portfolios.
Class B Properties
Class B properties typically offer better opportunities for real estate investors. These properties are often home to blue collar and middle class homeowners. People working in professions like manufacturing, construction or education often live in Class B properties.
Neighborhoods in Class B properties are typically safe and comfortable, albeit without the luxury and exclusiveness found in Class A properties. Still, they offer comfortable and quality homes that appeal to middle class earners.
They can also provide the ideal market for investors looking to diversify their portfolios. Because of the quality and comfort of the homes found in these properties, they tend to attract both renters and buyers. Further, the home prices in Class B properties may fit more conveniently in the budget you have for buying properties.
Moreover, you can charge reasonable rents, allowing you to recoup money that you have put into your investment properties. These neighborhoods often do not have HOAs, which further can save you money. You can keep your properties repaired and maintained without the hassle of having to satisfy the persistent and high demands of an HOA that is typical of a Class A property.
Additionally, given the safety and quality of residents in Class B properties, you may find it easier to afford insurance on properties that you own in them. You avoid paying the high costs of insuring premium houses like those found in Class A properties. However, you also avoid having to take out higher amounts of insurance to protect your properties because of factors like high crime rates.
Class C Properties
Class C properties are the lowest quality properties into which investors can buy. These properties often are home to run down neighborhoods. They also feature congested areas and have little to no revitalization.
As an investor, you may find plenty of housing options to buy in Class C properties. You may also find it easier to buy houses in a Class C property. Even so, you still need to weigh this option carefully to protect your portfolio and income.
For example, investors who buy properties in Class C areas may experience high turnover rates in their rentals. People who rent housing in such properties often move in and out quickly, which can result in high vacancy rates and little to no income from your rental investments. You may not be able to count on your investments in Class C properties to provide you with any kind of solid and reliable income.
Alternatively, you may find that you can always attract new renters, particularly those that are low-income, because of the lower rents found in Class C properties. Lower income renters cannot afford the rental amounts for properties in Class A and B properties. Still, the lower rents you charge for housing in a Class C neighborhood can translate into a lower income for you as an investor.
Other characteristics to take note of in Class C properties include:
- High crime rates
- Higher levels of drug activities
- More crime
- Lower performing schools
- Fewer neighborhood amenities
- Congested traffic
- Less access to community resources
Further, you may notice a higher police presence in Class C properties because of drug activities and crimes.
Alternatively, you may find it less expensive to maintain any houses you buy in these neighborhoods. You may keep more of your income that you generate from your investments there.
With that, you understandably want to consider the pros and cons of investing in Class C properties. Adding one or two investments from a Class C property can be a realistic, more affordable and lower risk way to add to your portfolio of mainly Class B properties.
Choosing properties to invest in and finding houses to buy in them can be challenging. Upside Investments has the expertise you are looking for when it comes to diversifying your portfolio and getting a solid return on your investments. Contact us to learn more about investing in high yield property classes today.
