Class C Property

What is a Class C Property?

Class C properties are older homes that are often owned and resided in by middle-income families and senior citizens who have lived in their homes for many years. Class C properties are reasonably well-kept but will also require some repairs. The majority of Class C homes are smaller in size.

Property Classes Explained

In conversations with real estate investors, you may hear references to the term Class C Property (or for that matter, Class A, Class B, or Class D property).

Real estate investors use these terms to describe several important physical and financial characteristics of a property. Some of these characteristics typically include (but are not limited to):

  • location of the property
  • age of the property
  • income levels of residents
  • appreciation
  • condition of the property

Understanding the combination of these items can help an investor determine a general value for a property.

One extremely important point to remember when discussing property classes is that everything is relative. A property should be evaluated in the context of the other properties in the general vicinity.

class c property

For example, a Class C Property in one geographic location should only be compared to other Class C properties in the same area. An area may be a city or county or another geographical area within a state. Keeping this in mind will help an investor stay focused on becoming an expert in their local market.

Class C Property Guidelines and Characteristics

While there are no official guidelines for what a Class C property is, most real estate investors identify Class C properties by some of the following characteristics:

  • Location – Typically in older, mature areas, crime may be more evident
  • Age of the Property – Class C properties are usually more than 30 years old
  • Income Levels of the Residents – Typically lower to middle-income
  • Appreciation – Future value of the property may or may not increase with time
  • Property Condition – Some costly maintenance may be required if it has been deferred

Class C properties and neighborhoods are always in demand, not because of their luxury or grand appearance, but because of their practicality and affordability.

Class C Properties

While these properties are smaller, older, and significantly less expensive than Class A and Class B properties, most cities and huge portions of land allocated to serving Class C neighborhoods because a large percentage of the overall population is in need of affordable housing.

Are Class C Properties Good for Real Estate Investors?

Class C properties are very commonly used by real estate investors as long-term buy-and-hold rental properties or as fix-and-flips.

Let’s cover some of the pros and cons of investing in Class C neighborhoods.

Advantages of Investing in Class C Properties

  • Class C properties have a lower appraised value, which means a lower barrier to entry for investors will less liquidity
  • Many Class C properties can be purchased at a discount
  • Some Class C properties may require minor cosmetic repairs in order to make market-ready
  • Class C Properties are the most in-demand type of housing in many markets
  • Class C properties can be a good strategy for diversifying an investor’s portfolio

Class C Property

Disadvantages of Investing in Class C Properties

  • Because of a potentially wavering income level, the tenant base for Class C properties may be more short term than long term
  • Many Class C properties will require more repairs because of higher deferred maintenance

While every real estate investor has a different financial situation with different goals, many will have experience with Class C properties at some point in their investing career, because of the many benefits they have to offer, namely their lower cost and perceived simplicity when compared to other property classes.

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