Multi-Family Property Classifications and Your Investment Strategy

What does the A, B,C, and D mean in multi-family property classification?

In terms of investment opportunities which of these property are core assets and which core-plus assets?

If you are looking to pursue a conservative investment strategy or if you prefer a more aggressive one that has the potential to deliver a higher yield in which class of multi-family property should you be looking to invest?

This article will clearly answer all these questions and more.

Classification – Class A 

A Class A multi-family property classification is building that is less than 10 years old. If it is more than 10 years old, it will likely have received extensive renovations.

The fixtures and fittings will be of the very best quality.

The amenities will be comprehensive and of a luxury standard.

While Class A properties tend to generate a lower yield percentage, they can grow exponentially and they tend to hold their value even in major economic downturns.

In terms of their investment profile, they are core assets.

An article on multi-family investing at explains why Class A apartment buildings, with a ‘core asset’ risk profile, offer a lower yield percentage:-

“Owners purchase these properties using lower leverage, therefore with lower risk.  REITs and institutional investors purchase these assets for income stream.  The lower risk profile results in lower returns in the 8-10% IRR range.”

A property in the Class A category likely has a “core plus” risk profile unless slightly downgraded in some way by a less favorable location, housing type or a number of other factors.

Classification – Class B

Class B properties are older than class A properties. Usually, class B properties have an age between 10 – 20 years.

The quality of the construction will still be high but there could be some evidence of deferred maintenance. These properties will include limited amenities and the unit interior will consist of builder grade or mid-grade quality fixtures and finishings.

Classification– Class C

Class C properties have construction dates within the last 30 years. They will definitely show some signs of deferred maintenance.

Located in less favorable locations, the property’s management structure is less than optimal.

There are few if any amenities and the unit interiors will exhibit dated and low quality fixtures and finishings.

Both Class B and Class C properties can be candidates for a ‘value add’ investment strategy.

By bringing deferred maintenance issues up to date or by upgrading the property by means of an interior and/or exterior renovation there is an opportunity to increase the tenant occupancy and receive a higher return on your investment.

In his article, ‘what are the 4 investment strategies?’ Ian Ippolito explains why pursuing a value add investment strategy is a higher risk: “Much of the risk in value-added strategies comes from the fact that they require moderate to high leverage to execute (40 to 70%). Leverage does increase the return, but also increases the risk, and makes the investment more susceptible to loss during a real estate cycle downturn.”

Classification – Class D

Class D properties are generally more than 30 years old. The property will show signs of disrepair and will appear run down.

The construction quality will be inferior and the location will be less desirable.

The property may be suffering due to prolonged and intense use and high-level occupancy.

Both Class C and Class D properties can be candidates for an ‘opportunistic’ investment strategy.

Because these properties require major renovations they are the highest risk investments but they can also yield the highest returns.


In overall terms, the US multi-family real estate market continues to give excellent returns for well-informed investors.

This article has clearly explained how different types of multi-family properties are classified. The article has also given an overview of how each class of property fits the different types of investment profiles. We trust that this information will assist you in assessing your multi-family real estate investment goals.

For further assistance please connect with our team.