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What Are The Different Multifamily Apartment Classes?

If you have been looking at multifamily investment memorandums or been researching multifamily for any time it is likely that you have seen or heard something about the “class” of the apartment community. The headline in the memorandum may have read something like “Class A, Multifamily Apartment Complex 226 Units, Midtown Atlanta.” That sound’s good and all but what does the term apartment “class” even mean?

What Are The Different Multifamily Apartment Property Classifications?

Property classifications refer to a grade that investors give to a property based on the physical condition and market attributes of the property. This classification system is very similar to the manner that a student would get a grade in school; property classifications include Class A, B, C and D. Class A apartments are the most pristine while a Class D apartment is in the worst condition.

Additionally a plus or minus may be added to the classification to give a more specific indicator of where that property is in the spectrum of other properties within that class (i.e. Class B+ properties vs. Class B- properties).

You may be thinking “Ok, that makes sense. So, to get the best investment I should look for the Class A apartment.” Unfortunately, it’s not that simple. There are investors that investing in properties in all classes. Based on their investment strategies and philosophies they would choose to invest in a property class that most aligns with their goals.

While there may be different schools of thoughts on were the borderlines are for each property classification, there are some commonly held understandings of what constitutes a Class A, B, C and D property. We break down the different property classifications below.


Physical Condition: These properties are typically built within the last decade or have undergone significant renovations that would make them comparable to a property that was built in the last decade. Class A properties will have the highest rents. You can think of these more like luxury apartments; well-manicured landscape, high-end finishes and a premium selection of amenities. There will be little or no deferred maintenance on these types of properties.

Market Condition: Typically located in high end neighborhoods or urban business districts where there are many jobs and perceived stability. These properties will tend to have very low cap rates of 5.5 or lower depending on the market you are investing in.

Type of Investor: Institutional investors who look for appreciation from more “clean” assets with lower risk will gravitate towards Class A properties.


Physical Condition: Class B properties are the generation before current class A properties. They will generally have been built within the last 10-30 years and be in relatively good condition without significant deferred maintenance. Given that class B properties were of the previous generation they lack the latest touches in design and finishes that would allow them to command rent premiums however they are more up to date than Class C and D properties. This middle ground in condition allows them to be able to command rents close to (in some cases more than) that of A properties.

Market Condition: Class B properties may be in town centers or in high end neighborhoods like Class A properties or in towns that border these areas. These properties will tend to have low to mid-range cap rates between 4.5-6.5 pending the market you are investing in.

Type of Investor: As class B properties fall in a middle ground between Class A and Class C you will see a mix of the Institutional Investors (Class A) and value add investors that favor Class C assets. These properties offer many of the benefits of Class A properties but at a lower price which allows for higher returns than Class A properties with incremental increase in risk.


Physical Condition: Class C properties are typically 30-50 years old and house lower income, blue collar residents. These properties may have been built specifically as affordable housing or experienced a renter demographic shift due to the age of the property. There is usually a decent amount of deferred maintenance on these properties and they will lack or have no amenities.

Market Condition: You can find these properties in poorer or higher crime neighborhoods or on the outskirts of the affluent neighborhoods. They may also be significantly aged buildings within town centers. These properties will tend to have mid-range cap rates of 6.0-8.0 depending on the market you are investing in.

Type of Investor: Since Class C properties cost less than Class A and B properties there is potential to get a greater return from investments. These properties are very popular with “value-add” investors who desire to make renovations to these properties to bring them up to current market standards and therefore realizing untapped revenue potential.


Physical Condition: Class D properties are those older than 50 years old. Due to the age of the property there is a significant amount of deferred maintenance and extremely outdated interior and exteriors. Due to the more transient nature of the tenant population and related payment issues that come with lower income demographics these properties can be very difficult to manage. These buildings will be the cheapest and command the lowest rents.

Market Condition: Class D properties tend to be in high crime and poor neighborhoods. These properties will tend to have high cap rates of 8.0-9.0 and higher, even reaching double digits, depending on the market you are investing in.

Type of Investor: You will find these properties typically covered by government housing subsidies. Investors that are willing to take on higher risk and more hands-on management will be interested in purchasing these types of assets.


You may occasionally see some properties being referred to as Class F properties. As you can infer based on the trend from Class A to Class D, a property that is labelled F would be in a very dilapidated state. Market conditions and investor profiles would be similar to those that invest in Class D properties that are in severe disrepair. A Class F property is effectively a very bad Class D property and may even be fit for demolition so it can be replaced with new construction.


Exceptions – while we have this age guideline for each property, investors tend to look at the overall picture of the property. For example, a 40-year-old property, located in an urban core that has undergone significant renovations may be considered a class A property. This same property however if located in a poorer neighborhood and with a significant amount of uncured deferred maintenance would be considered a Class D property.


Which class of property most fits your investment goals and strategies? Are you interested in more stable, low risk properties? You may be a more of a Class A investor. Do you prefer to take on a bit more risk for potentially out-sized returns? Then Class C or D may be the type of investments that work for you.

Interested in learning more about investing in multifamily apartments? Give us a call or check out some of the other free resources we have available at


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