What type of investment property is the right choice for you?
Today I’m talking about the different types of investment properties as they relate to cash flow, appreciation, and where they sit on the real estate investment spectrum. Are you looking for cash-flow properties? Are you looking for properties that are going to have higher chances for long-term appreciation? Are you looking for a combination of both? To figure this out, it might help to think of investment properties as being on a spectrum.
On one end, you have your A-class properties. These are typically located in desirable markets with strong economies, tenants have higher-paying jobs, they’re college-educated, and their rents are higher. When you invest in these markets, you’re typically going to see less cash flow but higher chances for appreciation. If you’re considering investing in these types of properties today, you can expect to make a 1% to 3% return on your investment, but the chances for long-term appreciation are much higher. Investors like to invest here because they feel like their money is safer. They trade cash flow for appreciation and tax benefits.
One of the best ways to search for properties is by using our website.
On the other end of the spectrum are your C-class properties. These are properties that are in less desirable markets. They’re somewhat run down, the local economy isn’t as strong, and there aren’t a lot of high-quality jobs in the area. In these markets, you’re going to see higher cash flow properties but not as much potential for long-term appreciation. Right now in these markets, you’re looking at about a 9% cash return. You’ll get your money back quicker, but the downside is you’re not going to have the long-term appreciation that you would in the A-class markets. Investors are trading appreciation for cash flow so they can go buy more properties.
In the middle of the spectrum, you have your B-class properties. For these properties, the cash return is going to be between 4% to 8%. These markets are going to be a little bit behind on appreciation compared to your A-class properties, but they’ll appreciate better than your C-class properties. One of the best ways to search for these types of properties is by using our platform multifamilyproperties.com. You can search by property class and our algorithm takes every single available multi-family property that’s on the market and it does a quick financial projection.
If you’re in the market to buy or sell a multi-family unit, give us a call or visit our website to schedule a call. We’re here to help you.
CEO, Multi-Family Property Exchange, LLC 1-888-48-MULTI
Realtor, LUX realty North Shore 978-922-1000