Class-B Multifamily assets are now considered the best property investment since it ensures steady cash flow coupled with a good balance of reward and risk.
What Are Class B Assets?
For many reasons, this class of real estate is the most sought after for income entrepreneurs and investors in Texas. One of these reasons is that you will enjoy constant demand from working-class families and individuals such as teachers, police, retail workers, social service workers and others. This group normally takes good care of their houses and are capable of paying the rents on time.
If you invest in this class of assets, you will enjoy things such as high occupancy rates and a stable cash flow. The total returns and cap rates are also higher since the Class B assets are easily affordable compared to the Class A ones.
Why You Should Invest in Class B Property
Many entrepreneurs and investors looking to use a buy-and-hold strategy will enjoy the steady cash flow of class B investments. Besides that, here are some of the best reasons you might need to invest in these types of properties.
First, you should note that this class of property does not require high amounts of money to purchase or rent. As such, other potential investors will show interest in your property and they are more liquid in case you need to sell at a future date.
Also, since most of the tenants will be middle-class workers, such as government officials and service workers, your property is likely to remain in better condition and well maintained. This means that even when they leave, your property can still be in good condition without needing much improvements and will attract other tenants.
When further improved, class B properties can easily enter the class A category of assets. From there, you can choose whether to rent it out or sell it to a willing buyer, thus making higher profits. However, before you reposition the property, you must ensure that it has all the latest amenities to attract as many clients as possible.
Characteristics of Class B Assets
Now let us look at some of the factors that might make an asset fall in the class B category.
Age
These houses are mostly between 10 and 20 years old and are primarily described as average. However, in places where construction happens so fast and the city grows rapidly, a class A property can be listed as a class B in a few years.
Condition
The assets are excellently maintained, with minimum to zero deferred maintenance. They have finishing that is above average, though they might not be renovated yearly.
Location
In Houston, these properties are commonly found in neighborhoods that can best be described as middle class or rather working class. The crime rates are very low, with school districts being well above the national average.
How to Find Class B Property
If you are looking for the best class B property, you might spend several days and weeks collecting and analyzing data. To find the right property, you might want to consider school rating, neighborhood, property age, and cap rates.
The Bottom Line
Before you invest in commercial real estate, you should thoroughly research the market. Multifamily investments have become common these days, but you can still make money if you invest strategically. Be sure to look out for the characteristics we have listed above to enhance the chances of getting maximum returns.
