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The Classifications of Multifamily Investment

Updated: May 22, 2023

Accredited investors have been able to reap significant tax benefits, steady cash flow, and substantial asset appreciation through commercial real estate investing.

There are four distinct asset classes in multi-family real estate: class a apartments, class b apartments, class c apartments, and class d apartments. The location, age, amenities, and level of rental income of multi-family assets are the primary factors considered when evaluating them.

To choose a property type that meets your goals for multifamily investment in Houston, Texas, as a real estate investor, it is essential to comprehend each real estate asset class. - Class A Apartments are those new, luxurious complexes built within the last 10 years. They are typically situated in popular areas close to lifestyle, entertainment, and business. Class As are also typically more pricey per door and market cap rates are generally lower. Investors on passive investment in Texas usually invest in Class As for appreciation purposes. - Class B Apartments are built within the last 15-20 years. These should be well-maintained living areas but are less luxe compared to Class As. In most cases, investors purchase for property appreciation over cash flow. - Class C and D Apartments, on the other hand, are over 30 years old. They are mostly affordable, incurring below-market rents, and have an outdated design. These buildings also require a higher CAPEX (Capital expenditure) budget. Most tenants rent out of necessity, which provides the best cash flow among all the classes. Most syndicators of real estate investment use a value add strategy and will force the appreciation of the asset through operational efficiencies, renovations, and rebranding. Want to learn more about multifamily investment and how you can start? Makaan Investment Group will be more than happy to help. Dial 281-500-8554.

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