Location is probably the most important factor to consider when you are buying an investment property. If you buy properties in a bad location, you will not get good returns and will probably lose your investment. Locations are divided into 4 classes (real estate classes based on location). These are geographical areas ranked from the best to the worst in a city, or market.
If you drive around in your city, you will see that neighborhoods are not the same. Some areas look nice with clean-looking properties, with good schools, good infrastructure, etc. On the contrary, other neighborhoods look terrible, houses are old and falling apart, loads are cracked, have bad schools, etc. You can divide your city into classes based on the quality of properties, quality of infrastructure, and services supporting them. In this article, we are going to examine real estate location classes.
1.Class A locations
Class A locations are the ones with the highest standard of living possible in a market. Properties in these neighborhoods are new (less than 10 years old) with fewer maintenance problems. Some properties in these locations can be a little old but they are usually renovated. These locations have good schools, good teachers, and a great curriculum. People who live in these neighborhoods have stable jobs with the highest household income compared to other areas.
 Class A locations have good infrastructure including new roads, reliable electricity, and a great public transportation system. Properties in Class A are expensive since they are new or fully renovated. Crime rates are very low in Class A locations. The good news is that you will get top dollar if you have investment properties in A locations. This is because your tenants have good-paying stable jobs and they will stay a long time.
2. Real Estate Classes: Class B locations
If you said that Class B locations are downgrades of Class A, you are right. Properties in these locations are older (between 10-30 years) than the ones in Class A. Properties are renovated, with manageable maintenance. Schools in Class B locations are good with reliable teachers, and good educational programs. Security is still good, and crime rates are low. The infrastructures are good, but their quality is a little lower compared to Class A locations. You will still pay a lot of money for investment properties in B locations.
Residents of the Class B area are financially stable, and their families are settled down. They have good and stable jobs and therefore, will always pay on time.
3.Class C locations
Properties in C locations are generally old and are not renovated (30 years and older). These properties have a lot of major renovations ranging from painting, replacing floors to major projects like roof replacement, electrical and plumbing, or Foundation renovations. You can purchase an investment property in a C location at a lower price. These homes are good for flipping as they have visible renovations due to the age or carelessness of owners.
It could be difficult to found good tenants in C locations. People who are looking for housing in these areas are generally blue-collar employees who change jobs very often. For these reasons, tenants will be shorter terms and might not behave as desired. The crime rates are high with less policing. Schools do not have enough resources to attract good teachers. Therefore, children tend to miss schools, and their performance rank among the worst in the nation.
4. Real Estate Classes: Class D Locations
This is the lowest class possible with everything that can go wrong. Imagine locations where people are afraid of walking outside days and nights. These areas have the highest crime rates possible with less to no police around. There is a lot of violence in D locations due to the presence of gang activities.
Good infrastructures do not exist. Roads never get repaired on time. People in these neighborhoods are not educated, and so, are their children. It is rare to find schools there and if there is any school, it will have the lowest possible quality with no qualified teachers.
It will be unwise to buy investment properties in D locations. Houses are falling apart and sometimes abandoned. Drugs are all over the place. You will never find good tenants in the Class D area. The unemployment rates in D locations are the highest because no business what to be located there and the ones that start never reach success. Real estate properties are in bad conditions, real old, and no new developments.
Bottom line
Where should you buy an investment property? Well, we know that it is unwise to buy an investment property in D locations. So, Class D is out of the equation. What about class A? If you want to buy a house with a lot of security, good schools, good infrastructure, you might get one in class A or B. However, if you want to buy a rental property, for example, class A, might not be a good option since you will pay a lot of money to get the property and there is a limit to how much your rental income will be.
Class B could be a good option since properties in Class B locations are a little old and therefore, you have room for bargaining. You can also add value to the property and increase rental income from it. I personally like class B properties as they are not terrible, and it is easy to find good and stable tenants. For those who are into the house flipping business, a Class B location could be the best option. This is because you can find a C Class Property in a B location and transform it into a B property by doing minor rehabs.
Class C is a bit risky as it is hard to find good and reliable tenants. You can still make money in C locations if you are familiar with the area and know how to play the game. However, if you are starting out with no real estate experience, I would recommend staying away from C and D locations.
What is next ?
Learn about 4 ways your rental property will make you money
Learn about top 5 ways you can invest in real estate regardless of how much money you have
Learn about 9 tips to help you calculate how much money you should invest
Long time supporter, and thought I’d drop a
comment.
Your wordpress site is very sleek – hope you don’t mind me asking what theme you’re using?
(and don’t mind if I steal it? :P)
I just launched my site –also built in wordpress like yours– but the theme slows (!)
the site down quite a bit.
In case you have a minute, you can find it by searching for
“royal cbd” on Google (would appreciate any feedback) – it’s still in the works.
Keep up the good work– and hope you all take care
of yourself during the coronavirus scare!
Thank you for stopping by and your support,Justin. I real appreciate your feedback. I use the Bam Theme but I personally think it is not the best I could use. I also edit my pages using Elementor plugin. The combination of both let me do adjustments I want. You are welcome to try them out.
My site is also new and it is going through a lot of transformation on daily basis (whenever I get chance). I checked on yours and it looks professionally done. It looks a little different than mine because you have different theme and are selling products on it. However, your site is unique and offer good navigation experience to users. Keep up the good work and stay safe out there as well.