Flip and Danny break down real estate property classes: A properties are newer with high-income tenants and appreciation potential, while D properties are older with lower rents but stronger cash flow. The best class depends on whether you want appreciation or monthly income.
Hey, everybody. Flip and Danny here, founders of the Freedom Real Estate Group family of companies. And welcome to another episode of our.
Podcast called Freedom through Passive Income.
That's right. And today's podcast is called. Today's episode is called now the Podcast. Still the same podcast.
It's still freedom.
It is still. Yeah. Well, no, we're not starting another podcast. Anyway. This episode is called Classes of Properties in Real Estate. And which one is best?
That's right.
Or which is best? Not which one, but which is best?
Yes.
So let's see. Do you. I do a number one. Yeah.
Yeah.
Okay, so there's two different classes of properties, this class of property, and then there's class of neighborhood. There's two different things.
Yes.
So you can have a D property in a B neighborhood. You can have A A property and a C neighborhood. So it's two different types. And we're going to go into that a little bit further.
Yes, we are. So when you're judging a property, you're going to judge a property by age and condition. When you're judging a neighborhood, you're going to judge it by the amenities, crime, type of tenants, and then the owner occupied to renter ratio.
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Yes. Because it makes us smile when we.
See likes and love. Yes. Okay, so back to program. So first class is A class properties. Okay. These are new, brand new builds. Okay. Best neighborhoods. The higher appreciation is lower cash flow because it's higher appreciation. It's your white collar neighborhoods, doctors, lawyers, your busy professionals or just anyway, those type of professionals. The schools are very high class schools. Bigger schools, better schools and also the amenities. You're gonna find a Starbucks.
Yes.
If not two, you know, and the malls, parks, very low crime. And also a very high owner occupancy rate compared to renters.
Yes.
All right. Class B neighborhoods before you go into.
Class B. Oh, right. One thing about class A properties, you're looking at appreciation and not cash flow. This is something that we don't do. We don't look for appreciation. We strictly look for cash flow.
Yes.
A class properties, there is cash flow. Okay, so again, and not always cash flow.
I mean, your mortgage payment could be $3,000 and you're getting 2,400.
That's weird.
Cheeks by me. Coke. So anyway, it could be much, much less.
All right, now B. Okay. B class neighborhoods. We didn't start the timer so who knows how long this is going to go. All right, so I'm going to go fast. It's going to be a newer Property, less than 20 years old. You're going to be in good neighborhoods, you're going to have some appreciation and okay, cash flow, it's still going to be white collar but probably teachers and nurses. It's going to be lower vacancy, more affordable but still nice. Good schools, it typically attracts families so that they stay longer because they've got kids and you know, their friends and all that other good stuff. You're going to have lower crime, still a higher, higher owner occupied ratio in B class neighborhoods. The reason why you're going to buy a B class property is because it's more affordable and it has less vacancy.
Yes. All right, so C class properties. Now these are older properties, they need more work, they're blue collar workers, much more affordable. They're higher cash flow. That's where we like amenities are usually discount type of stores. There is more crime but it's typically not violent crimes. And then, and there's a good mix, usually about 50 to 60 to 40 in that range of renters versus owner occupancies. And again there is a lot of. There's more turnover in this class.
Yes.
But again this is the class that has the strong cash flow.
Yeah.
So that's why you like C properties. If you're going to buy those, you're buying them typically for cash flow. D, these are the older, oldest type of properties that are typically stressed and in distressed areas, more of a war zone. High crime vacancy is high. Boarded up properties are very common. Drugs are very common. They're very cheap properties. We had a somebody in our team that's like she bought. That's all she bought is because they were so cheap, they didn't have a ton of money. And she was like, if I'm going to buy a property, I'm going to have to buy in D class. Okay, very cheap, high cash flow properties. But there's lots of maintenance so that give and take, the cash flow is not as high as you think. When you know they're destroying the property and you have to fix it before the next renter comes in, you're going to have minimal access to amenities, jobs and schools. It is going to be a high renter area as opposed to an owner occupied area which means the neighborhoods are typically run down. So you're going to buy a D class property?
Us?
Never. But if you are going to buy it, you might be buying it because you really love cash flow. Just keep in mind the costs of those areas and that the cash flow may be not as high as you want it to be.
So which is best now? A class you get appreciation. Right. C class you get cash flow. B you get a little bit of. So it depends on your goals. It really does. It depends on what you're looking for. I happen to know an investor where he does nothing but A class properties.
Yes.
That's all he does and he loves it. Yeah. So it just depends on what you want and what your goals are.
Yes.
So we like to keep these short and sweet. We have no idea if this one is or not.
Hopefully we did good.
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Yes.
Okay. And we like to keep these short and sweet. So see you later. I'm out of here.
Nothing on the show should be considered specific personal or professional advice. Please consult an appropriate tax, legal, real estate, financial or business professional for individual wise advice. Opinions and information on the show are not guaranteed. All investment strategies have the potential for profit or loss.
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