In the world of real estate, there are many different types of property classes. From A to B to C, each neighborhood type comes with pros and cons that must be weighed before making a final decision on which is best for your next investment. In this blog post, we will talk about what makes up these classes and how they differ. Our property management experts will also provide tips on finding a great investment property in Logan and maximizing ROI!
There Is No “Wrong” Neighborhood for Property Owners
Before we get too far into talking about the differences between A, B, and C class neighborhoods, it’s important to understand that one classification versus the others doesn’t make one “wrong” for investing. Many property owners make plenty of money in C-Class neighborhoods!
Every investor has a different strategy and method for choosing the “best” areas for their real estate portfolios. However, understanding the primary differences between neighborhoods based on classification can help you find the ideal properties for your portfolio and long-term goals.
What Is a “Class A” Neighborhood?
Like grades in school, most neighborhoods have a grade of A, B, or C. Class A neighborhoods tend to be the most expensive and desirable. They are located in highly-coveted areas that attract plenty of renters who can afford higher rent prices.
Most investors consider Class A areas as “luxury” neighborhoods and homes. Houses are well-maintained, including landscaping and home exteriors. While these residences can be impressive to friends and families, your target renters might not place importance on an impressive rental home.
If you plan to cater toward high-end residents who can afford expensive rental homes, keep an eye out for opportunities in Class neighborhoods. However, be sure to plan for higher home prices and ongoing expenses. Budget for high property taxes, HOA fees, insurance premiums, and plenty of maintenance to keep these properties in the condition that residents expect in these areas.
Be aware that finding tenants for homes in this area can also be challenging. We’re not saying not to consider investments in these areas, but do your research and work with a property management company to evaluate properties, estimate potential rental rates, and budget costs accurately.
What Is a “Class B” Neighborhood?
Property management experts love Class B communities! They tend to offer similar benefits like high demand and low vacancies. However, they might not have as much prestige as their “A” counterparts—but that often works well for real estate investors.
These neighborhoods will usually provide a good return on investment (ROI) and attract quality renters looking for safe, affordable rental properties. Class B neighborhoods are generally the most common and serve the most significant portion of the population throughout Logan, UT and offer plenty of inventory for rental property owners.
While B Class areas have a wide range of residents, you’ll often find these homes house a significant number of blue-collar workers and families. Look for B Class communities with excellent schools and plenty of nearby restaurants, shopping, entertainment, and transportation options to maximize the potential for your investment.
What Are “Class C” Rental Property Neighborhoods?
Class C communities usually have the lowest property values and many of the problems that often come with low-quality neighborhoods.
These homes often have high turnover rates and low demand from qualified renters who can afford higher prices—but sometimes that’s great news! If you’re looking at Class C neighborhoods with opportunities, consider these possibilities:
- The neighborhood has recently been “discovered” by new residents or businesses and is currently going through revitalization areas.
- A recent change in zoning laws makes it easier to build on lot sizes previously designated as smaller (which increases the overall value of neighboring properties).
- You have the opportunity to contribute quality affordable housing in a neighborhood that needs it.
While it can be a good thing to help revitalize a Class C neighborhood, the best property management companies recommend making sure it’s a smart idea for your long-term investment goals. In many cases, landlords that buy properties in these areas deal with expensive renovations, high turnover, low rental rates, frequent property damage, bad tenants, and high crime rates that keep good tenants away.
Where Is the Best Place to Invest?
Ultimately, a property manager knows that any neighborhood that offers properties that fit your goals can be the best place for you to invest. While Class A and Class C areas can increase your risks of income loss, there are risks to investing in any neighborhood. Work with local property management experts to analyze a property and make sure it’s a smart investment!
Property Management Companies Help You Invest for Optimal ROI!
The neighborhood in which you purchase a property can have a significant impact on your ROI. It is essential to understand the differences between Class A, B, and C neighborhoods before making any investment decisions. Reeder Asset Management has experience analyzing different areas of Logan and the Salt Lake City area. We can provide expert advice about where it might be best for you to invest in a new property to maximize your return on investment. Reach out today, and let’s talk about how our property management services can help!
Learn more about what you need in an excellent property! Download our free resource, the “Biography of the Perfect Investment Property.”