Class A Real Estate: An Investor’s Guide – Motley Fool

Benefits of investing in Class A real estate

Whether you are buying stocks, suits, or cars, you can hardly go wrong buying the best quality. The same is true with investing in real estate. And just as some people only buy luxury cars, some investors only purchase Class A real estate. The assumption here is that while they may pay a high price, they should also be getting good quality and hopefully some solid rental income.

Knowing just the class of a property is going to give you a good initial sense of what its surrounding neighborhood, amenities, and transportation links are probably like. A Class A designation should also indicate the presence of the latest design features and technology. Your maintenance budget should also be lower than if you were to invest in a Class B property.

A Class A property is often considered a good investment because it should appeal to tenants and so have more consistent rental income, and if the owner decides to sell, it should appeal to a large group of potential investors. Particularly in the commercial real estate market, a number of institutional investors, such as real estate investment trusts (REITs) or pension funds, will want to invest in Class A real estate because it is considered to have a steady income. As an example, shopping malls in nice neighborhoods often have not only full parking lots but also a long list of retail tenants looking to secure a lease.

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