Have you considered trading up to A properties from B/C value add deals?
Trading Up To A Class From B/C Properties
I’ve interviewed many multifamily syndicators on the podcast and I’ve seen and heard a trend from these syndicators that many are shifting from B/C value add deals to existing A properties and/or new development.
What are some of the reasons I’m hearing for the shift?
- prices for B/C multifamily properties have increased dramatically and the gap between B/C and A properties has narrowed
- during Covid, tenants especially in C properties were more impacted and had a harder time paying rent. Many tenants in A properties were able to work from home where many tenants in C properties either lost their job or had hours cut back.
- Rent as a percent of income is 1/3 for tenants in C class properties and is 1/6 for tenants in A properties so there is more cushion in case of a slow down. Tenants in A properties also typically have more savings in case of a slow down in the economy.
- As the property is newer there is less deferred maintenance
Below are some podcast episodes that talk about this subject if interested in hearing more;
- EP 74 – Evan Holladay – Affordable Housing Developer
- EP 73 – Agostino Pintus – Importance Of Cash Flow
- Ep 71 – Viacheslav Davidenko – Level Up To Institutional Properties
- EP 68 – Jack Langenberg – C Suite Exec Becomes LP GP
- EP 38 – Michael Becker – Bullish On Apartment Investing
- EP 30 – Venkata Avasarala – New Multifamily Construction
Why do I share this story with you?
I share this because I want each of you to learn from other successful investors in the industry. Many of these syndicators have shifted their focus from B/C properties to existing A properties and/or new development. I continue to invest in all three asset classes ( A/B/C) depending on the sponsor and the deal. I bring this to your attention as food for thought for each of you.
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