There’s nothing I love more than building my portfolio around C class properties. C class properties produce the highest return on investment, and are largely untouched by economic downturn. However, recently I’ve started implementing a new strategy—adding a few B class properties to my portfolio.
I understand that the neighborhood classification system can be confusing. If you need a refreshed on the distinction between neighborhoods, check out this post. Personally, I love to build my portfolio around C class properties—they are the backbone of everything I do in real estate.
But recently, we have started implementing a new strategy in our real estate business—adding a few B class properties into our portfolio. This is not to say we are totally rebuilding our strategy; we’re not. We still focus on C class properties, just not exclusively.
B class properties will have a slightly lower ROI, yet higher equity and appreciation. Also, purchasing a property that is worth $80,000 instead of $40,000 is a fast way to increase your personal net worth. However, I’m not talking about B class properties in B class neighborhoods.
This strategy consists of finding a rare gem—a C class property in a B class neighborhood. I’m looking for properties I can still purchase under market value, add value in order to increase my equity position, and still get a high ROI. Again, I’m not suggesting redirecting your strategy altogether. I still love C class properties. But in a portfolio of 30 properties, it might be smart to consider purchasing 3-5 B class properties.