Updated: Mar 7, 2021
When talking with passive investors and sponsors I hear a lot of misconceptions about how the current pandemic is affecting different property asset classes. Many investors compare today’s economic downturn with the great recession of 2008, but the two are not alike because the reasons for the problems were different, and the impact on people is different as well.
There are 3 misconceptions that I keep hearing over and over, and those are the ones that I would like to share with you. As you’ll see, they have a major impact on the different property asset classes that investors and sponsors like to purchase.
For those who are not familiar with the different property asset classes, here’s a quick refresher. Class A properties are high-end, mostly newly built buildings in the best neighborhoods, located in the best areas of town. They are generally either newly built or up to 5 -o-10-years old and usually have no deferred maintenance.
Class B properties are a bit older than Class A, but they still have good amenities and were generally built in the 80’s and 90’s. Usually, these properties have low to medium-low deferred maintenance.
Class C properties are older than those in Class B, and were built in the 50’s and 60’s. They often have a lot of deferred maintenance and usually have lower rents because they attract tenants that aren’t that financially strong.
Class D properties are older, similar to Class C properties, but the property has been neglected and need significant repairs. Tenants in these properties are usually looking for cheap rents and finding good tenants can be difficult.
The asset classes that performed well during the “great recession” are the ones you want to invest in now.