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Because of the perception that commercial real estate is confusing and complicated, some people shy away from investing in it. And while it is true that there are some jargons used in the industry, they are easy enough to learn and understand.
Terms like “multifamily properties” and “property classes” may be unfamiliar at first, but with a bit of research, these terms can help new investors navigate real estate investing.
For example, property classes are used to characterize assets and give investors an idea of what a property is like before they even see it in person. Real estate assets can be characterized by property class: Class A, B, C, and D are used to quickly describe a property based on age, location, condition, and amenities.
Based on these classifications and the investor’s preferences, they may choose one property over another. Some syndicators such as BAM Capital focus on Class A, A-, and B++ properties because they are typically considered safer investments when it comes to multifamily syndication. Others focus on investing in Class B and C properties with the intention of renovating these properties to a higher class than when acquired.
Familiarizing yourself with these terms will therefore help you make more informed investment decisions in the future.
What is a Multifamily Property?
If a residential building has multiple units and can be occupied by more than one family, it is considered a multifamily property. Apartment complexes, condominiums, duplexes, and triplexes all fall under this category. The number of units does not matter. As long as multiple families can live in separate units within one property, it is considered a multifamily property.[1]
Multifamily real estate is a specific commercial real estate product type. The term “multifamily” is used to differentiate the properties from single family homes and other housing types that are generally owned by one household.[2]
What is a Property Class?
A property class, also known as an asset class, is a group of investments that have similar characteristics. They are comparable in terms of age, condition, location, and number of amenities provided. [2]
Class A properties are considered the best across the board. On the other hand, Class D paints another picture: a property of this class may be old or in poor condition.
There are no strict rules that determine a property’s classification. In fact these property classes are just intended to be a guide for investors so they can quickly describe a commercial real estate property. Property class can be influenced by other properties in the area since location is one of the factors used when classifying real estate. Therefore the class system not only refers to the physical characteristics of a property but also its geographic and demographic qualities. [2]
It is also possible for a property class to change. This typically happens to Class B or C properties that go up one class after a few repairs or a renovation.
What is a Class A Property?
From a risk perspective, a Class A investment property is considered one of the potentially safest investments. These properties are well-located in primary markets, particularly in areas where the underlying economics are strong. Class A real estate are located near universities, hospitals, shopping centers, major employers, and cultural activities. They usually have good access to highways and/or public transit. Simply put, these are places where people want to live. [2]
Not only are Class A multifamily properties well-located but they are also in good condition. These are newly constructed condos and apartments with plenty of amenities that can attract renters. As such, they rarely have vacancies and even when they do, the vacancy does not last very long. Investors can therefore enjoy a continuous stream of revenue.
A property does not necessarily have to be new to be considered Class A. A property in a good location that has been recently renovated can also fit the classification.
Because of their quality and potential to produce a strong cash flow, Class A properties tend to be in high demand among investors. This is why they can drive prices that are beyond the means of the average investor.
Those who are interested in investing in a Class A multifamily property can try multifamily syndication.
A multifamily syndication is a type of real estate investment wherein multiple investors pool their money in order to purchase an asset. A sponsor locates the deal and manages the investment once the deal has closed. This sponsor serves as the general partner who coordinates the transaction throughout the process. [3]
Investors who want to try multifamily syndication should work with BAM Capital. BAM Capital handles all steps of the investment life-cycle, from purchasing to remodeling to management, yielding a potentially higher return for investors.
Investing in a Class A Property
Class A properties come with a number of benefits since they are considered the best of the best. For starters, Class A multifamily properties tend to attract the most desirable renters, including long term tenants and six-figure earners who are willing to pay a premium to live in these attractive properties. [2]
Repair and maintenance bills will be often smaller at first when you invest in a Class A multifamily property because the building, appliances, and fixtures are all brand new.
For investors who do not want the hassle of becoming a landlord, multifamily syndication can be the perfect option because the deal typically involves bringing in another company to handle property management. No need to worry about responsibilities like managing tenants and dealing with emergencies.
Work with BAM Capital
BAM Capital focuses on Class A and A- multifamily properties because they offer the lowest risk for our investors. BAM Capital also occasionally works with Class B++ properties because those are the ones with the greatest potential to upgrade into a Class A property with a few repairs here and there.
As an investor looking into Class A real estate investing, there is no need to purchase an asset on your own. BAM Capital will arrange the syndication deal and also handle property management.
Our investors love the low-risk investment approach offered by BAM Capital. Investors can pool their resources and get money from the cash flow and equity once the deal is done. [4]
BAM Capital has a Midwest focus, so we offer the best multifamily properties for investors in that area. Investors can enjoy BAM Capital’s low-risk investment strategy that creates forced appreciation. BAM Capital’s vertical integration model also mitigates investor risk. [4]
BAM Capital works with accredited investors and negotiates the purchasing and financing of high quality multifamily real estate properties on their behalf. This Indianapolis-based company currently has over $700M AUM and 5,000+ units. Schedule a call with BAM Capital and invest today.
