A, B, or C? Picking the Right Neighborhood For Detroit Investments

By Own It Detroit

Some investors often wonder how to invest in real estate and expand their Detroit portfolio. It may seem overwhelming if you're just starting, or even if you've been in real estate for a while. You can find some helpful information in real estate investing books. However, the best long-term success with real estate investments includes experience and expert insights! 

When considering a new property, understanding the different property "classes" will assist you in making the right choices for your real estate portfolio. You may have heard of Class A, B, or C neighborhoods but weren't sure what it meant. The best property management company Detroit offers has the details here!

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What is a Class A Property?

If you've read anything about Class A properties from real estate investing books, you would have learned that these properties are in high-end, top-notch neighborhoods. The "A" classification indicates the "pride of ownership" status regarding the homes you'll find there. Class A homes are often in low-crime areas, with beautiful homes, land, and well-manicured landscapes and yards. Quality schools are abundant in Class A neighborhoods, as are plenty of amenities and community involvement. 

While this sounds great at first glance, property managers know that these neighborhoods and properties may not be the best option for investors. To meet ROI requirements, a property owner might have to charge high rent rates that won't appeal to most renters in the Metro Detroit area. Plus, some Class A homes are in HOA neighborhoods, which adds another fee to your operating expenses and often requires stringent property maintenance requirements that can be costly. 

Typically, a Class A property is a good opportunity for homeowners looking for a private residence. These homes offer an impressive place to settle down with the family and be in a safe, comfortable location. However, since these properties tend to be pricier and can involve expensive maintenance tasks to keep up with the quality of the area, they can be costly investments for property owners.

What About a Class B Property for Real Estate Investing?

A Class B home is often recognized as a middle-class property. According to the best property management company Detroit offers, these properties attract middle-class families looking for safe communities and quality, affordable homes, which is a prime demographic for rental property investors.

In a Class B neighborhood, you're apt to see a good mix of blue-collar workers, such as construction workers, contractors, and small business owners. The homes in Class B areas may not be as luxurious as Class A, but they are modest, well-kept, and priced just right for maximizing your ROI. A property manager can tell you that these qualities often make Class B neighborhoods ideal for an investment property. 

Should Real Estate Investors Consider a Class C Property?

The final category of homes for rental property investing is Class C properties. As you probably guessed, these homes are in run-down neighborhoods and congested areas with little to no revitalization. Even though there can be plenty of options for buying homes in this area, there are a few other things a property owner should think about first.

Class C rental properties often experience problems with high turnover rates. Renters don't seem to stay in the area long before moving on to something else. This can be problematic for an investor who needs to reduce vacancies to generate consistent rental income. On the other hand, these properties are usually in high demand for low-income tenants and are sometimes in demand because of the low rents.

However, low rental rates for tenants mean less income for you, as well. It's difficult to charge competitive rental rates for Class C properties because these areas suffer from several issues, including:

  • High crime rates

  • Increased drug activity

  • Schools with lower academic performance

  • Fewer amenities

  • Congested traffic patterns

  • Less access to resources

  • More police presence (for the wrong reasons)

Also, property owners can often count on increased insurance premiums due to the higher crime rate. However, with all things considered, real estate investors must weigh the pros and cons of investing in a Class C property. You may find that purchasing one for your portfolio is a good idea to diversify a portfolio of primarily Class B properties. When choosing the best properties from Class A, B, or C neighborhoods, it can be best to work with a Detroit property management company for guidance!

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Choose A, B, or C With Help From a Detroit Property Management Company

Make the investment process easier by connecting with the best property management company Detroit offers! A property manager can help you analyze potential ROIs so that you know what you're getting into before you purchase. From tenant screening, lease signing, maintenance, inspections, and more, a full-service property management company helps investors maximize returns! If you're ready to choose your next property, Own It Detroit is here to help! 

Learn more about what to look for in a property when downloading our free resource, the "Biography of the Perfect Investment Property!"

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Topics: Property Management Company Detroit Detroit Property Management how to invest in real estate