Investing Options

There are a variety of different types of investment properties to invest in.  One decision to make is the class type.  Properties are categorized based on several different indicators.  There is not a definitive definition of A,B,C and D properties but below are some of the general guidelines.  When discussing investment properties with other investors it helps to have a working understanding of how properties are categorized.  Most investors experiment with properties from a few different classes and then eventually fall into a specific class that meets their investing needs.

Class A,B,C, or D

Class A - 

  • Class A properties are perfect for the conservative investor.  They are more predictable and but also have a lower upside.
  • Lower vacancy rates.  Expect a 4% vacancy rate.
  • Homes are located in mostly owner occupied communities
  • Typically single family homes
  • Suburban and rural areas  
  • 5-8% cap rate
  • Typically $120,000+ purchase price
  • Faster appreciation and sellability 

Class B

  • Class B properties are also a relatively conservative approach
  • Vacancy rates around 6%
  • Communities are typically a 50/50 mix of owner occupied and rentals
  • Often in suburban and rural areas  
  • 8-10% cap rate
  • Typically $90,000-120,000 purchase price

Class C

  • Class C properties offer higher returns but can be less predictable.
  • Vacancy rates around 8%
  • Communities are comprised of mostly rental units
  • Often in urban areas
  • 10-12% cap rate
  • Typically $50,000-90,000 purchase price

Class D

  • Class D properties offer higher returns on paper but can be very volatile and require and experience landlord.
  • Vacancy rates around 10%
  • Communities are comprised of mostly rental units
  • Almost always in urban areas with high poverty and crime rates
  • 12+% cap rate
  • Typically under $50,000 for a single family home

Single Family VS Multi Unit


Multi Unit


  • Great cash flow
  • Less Occupants, less wear and tear
  • Even when one unit is vacant other units still provide income


  • Lower appreciation 
  • When selling only investors would consider buying
  • Fast turnover rate
  • Marginally qualified tenants

Single Family


  • Faster appreciation 
  • When selling there is a larger audience 
  • Long term tenants
  • High qualified tenants


  • Lower cash flow
  • More Occupants, more wear and tear
  • When vacant there is no income at all


Both multi unit and single family homes can provide great investment opportunities.   In general multi unit properties only make sense if the investor is going to hold the property for at least 5-10 years.   Multi unit properties almost always provide higher cash flow but require more work because there are more tenants and they are typically less qualified.  Multi unit owners should use a property management company unless they are experienced landlords.  Single family homes are great for investors that plan on selling and cashing out sometime within the first 5 years.  They appreciate faster and attract long term tenants so they are often consider a safer, less stressful investment option.