Welcome back to the blog. Last time we looked at Class A neighborhoods and their specific characteristics. Today we are going to define Class B neighborhoods and outline the pros and cons associated with real estate investment within this classification. Class B neighborhoods, are typically known as areas that can easily transition to class A. Properties in class B are considered well built, a little older, but well cared for, they don’t have the same high spec as Class A but they’ll contain a few depending on the homeowner. These homes may require some age related wear and tear repair and general maintenance. Class B neighborhoods may not contain the same level of upscale landscaping as Class A, but Class B neighborhoods still look good and well kept.
Class B neighborhoods usually contain good schools, shopping centers alongside popular restaurants and amenities. So they are a lovely place to live as they enjoy a low crime rates and are considered a comfortable, safe place for renters. These neighborhoods are made up of a combination of working-class families and a few higher-income earners dotted throughout the neighborhood, These residents generally take good care of their homes, which keeps the property in fair shape allowing it a good chance to upgrade into a class A neighborhood, This means you may have a positive appreciation in value and rent, so you will have a little bit more profit than in class A neighborhoods.
As Class B neighborhoods are considered to be in the middle to upper class bracket, those reliable incomes usually mean a steady and positive cashflow situation However, although Class B neighborhoods are not as expensive as class A they are still costly, so investors should thoroughly run the numbers when considering investing in this type of neighborhood. So Class B will give you a much better rate of return that you were hoping for in class A neighborhoods.
The most notable advantage of investing in a class B property is that the homes and the area they belong to, are attractive and well-kept. This allows them the opportunity to rise into a class A category and the positive appreciation that comes with this rise. A disadvantage of investing in B-class neighborhood is that you end up paying more and you may not see that much in rent. So, the property is less expensive than A, but it’s still expensive, and the rents might be considerably lower. So the ratio between the purchase price and the rent could be pretty large, so therefore not a lot of profit.
If you invest in a B-type neighborhood, it can go in either direction. You can progress into Class A, or it could drop to class C depending on a number of factors including depreciation. Not all neighborhoods gentrify, some will deteriorate which will adversely affect the value of your property. Now you have the characteristics of B-type class neighborhoods, and it they may be a good fit for your real estate strategies. Please comment below and let me know if it’s something that you’re doing right now. We’ll see in the next blog when we will look at type C and D neighborhoods.
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