Return to site

DFW Multifamily: Class A vs. B vs. C

Characteristics, Submarkets, Rents, and Lenders

What determines if a multifamily is a Class A or B or C? Is it the location, the year built, the property and unit amenities, the building characteristics, or tenant base? In this article, I am going to walk through what determines the class of a property, what they are trading for in today’s market in DFW, and who is lending on each type of property.

Class A

Class A Example with attached garages.

Typical submarkets: Uptown, East Dallas, Plano, Frisco, McKinney

Year built: late 1990’s-Present

Amenities: Structured or garage parking, gated, pool, clubhouse, fitness center, 9 ft ceilings, stainless steel appliances, faux wood flooring, granite countertops, 2 inch blinds, and tile backsplash

Class A example with stainless steel appliances

Building characteristics: Pitched roof, individual HVAC and water heater, and washer/dryer connections. Avg. SF of units 900-1,100 SF.

Typical tenants: White Collar professionals earning over $75,000

Sales price per unit: $125,000-$200,000

Rents $1.50/sf/month-$3.00/sf/month

Lenders: Non-recourse financing at very low rates (under 4.00%) is available for these properties as life insurance, agency, and local banks have no problem lending on Class A properties as they are very stable.

Class B

Class B Example with pitched roof

Typical submarkets: Richardson, Carrollton, Irving

Year built: 1980’s-1990’s

Amenities: Covered parking, gated, pool, clubhouse, fitness center, 8 or 9 ft ceilings, black appliances, faux wood flooring, refinished countertops

Class B Example interior with black appliances.

Building characteristics: Pitched roof, mostly brick exterior, individual HVAC, boiler or individual water heater, and washer/dryer connections. Avg. SF of units 800-1,000 SF.

Typical tenants: Blue/White Collar professionals earning over $50,000 annually

Sales price per unit: $65,000-$95,000

Rents $1.10/sf/month-$1.25/sf/month

Lenders: Non-recourse financing at rates near 4.50%-5.00% is available for these properties as agency and local banks are comfortable lending on Class B properties.

Class C

Class C example with flat roof

Typical submarkets: Garland, Irving, Arlington

Year of construction: 1960’s-1970’s

Amenities: Surface parking, no perimeter fencing, no clubhouse and very small leasing office, 8 ft ceilings, white appliances, carpet, 1 inch blinds, laundry rooms

Class C example with white appliances and carpet

Building characteristics: Flat roof, Chiller for HVAC, Boiler, No washer/dryer connections. Avg. SF of units 600-800 SF.

Typical tenants: Blue Collar supporting service industry earning $30,000-50,000 annually

Sales price per unit: $40,000-$65,000

Rents $0.90/sf/month-$1.10/sf/month

Lenders: Non-recourse financing available for experienced owners through agencies and CMBS. Recourse financing through local banks for inexperienced owners.

Most properties do not have all the characteristics listed in each category.  As an investor, you have to look at all the components together and decide what class the property currently is and what it can become.  Some aspects of a property you cannot change, but other things you can to take a property from one class to the next. 

I help investors in all 3 classes of multifamily on the lending or equity side of the transaction.  I can be reached at 214-300-5035 or you can send me an e-mail at jeng@oldcapitallending.com.  

To see recent deals I have closed they are highlighted here: www.txmultifamily.com

All Posts
×

Almost done…

We just sent you an email. Please click the link in the email to confirm your subscription!

OKSubscriptions powered by Strikingly