An A class property is typically a big, fancy home in a great neighborhood. It could also be an apartment in a high rise in a city like New York, Chicago, Austin, or Miami. A single-family in an A class neighborhood would sell for hundreds of thousands of dollars. You can expect a variety of bells and whistles like garages and central air in this type of residence. Since the price is so high, you could potentially bring in thousands of dollars in rent per month.
I know what you’re thinking: “Higher rent means more income!” Not so fast. The ROI is actually lower in an A neighborhood, because the up-front cost is so high. And not to mention, A class properties typically are the biggest headaches for investors! It’s counterintuitive, but tenants in an A property have much higher standards, and need more maintenance and attention.
Think about all of those bells and whistles I mentioned. More amenities = more upkeep! In an A class property you have to worry about things like fixing garage doors. I like to say that A class properties make for A class problems.
Also, an A neighborhood is going to be most affected by a recession than any other neighborhood. Tenants with higher incomes are more likely to lose their jobs when the economy is down. If you’re looking to earn a steady, passive income, you’ll want to consider this before purchasing an A property.
We suggest centering the bulk of your portfolio around C class properties. In C class neighborhoods, the demand for rentals is ever present. C class neighborhoods are full of hardworking, blue-collar Americans who hold steady employment. To learn more about the merits of C class neighborhoods, check out this podcast episode!