The words “risk” and “reward” are two of the most popular terms in the lexicon of real estate investing.
As simple as they sound, defining these terms requires an in depth assessment of the physical and financial characteristics of a property, such as its age, location, amenities, growth prospects, tenant income level, appreciation, and rental income, to name a few.
After these factors are considered, a commercial property is often given one of three property ratings: A, B, or C.
WHAT THE PROPERTY RATINGS MEAN?
A, B, and C property ratings make it easy for real estate investment brokers and investors to communicate the value of commercial properties when discussing investment opportunities.
When an investor is considering investing in a B rated property, he knows he is facing more risk and less reward than an A rated property would likely offer, but more reward and less risk than a C rated property would likely offer. Below is a basic overview of what constitutes each rating.
An A rating is given to properties that have the best buildings in their market and area. A rated properties have usually been built within the last 15 years and feature excellent amenities, high-income tenants, and low vacancy rates. A rated properties also demand the highest rent.
B rated properties are typically over 15 years old, have lower income tenants than A rated properties, and have lower rental income than A rated properties. Nevertheless, some investors see these properties as a bargain, as they can often be renovated and turned into A properties.
Commercial properties that have a C rating are typically over 20 years old, have less desirable locations than A rated and B rated properties, and are often in obvious need of renovation. Consequently, the properties generate the lowest rents and have the highest vacancy rates.
NEED HELP FINDING PROPERTIES?
If so, contact the real estate investment brokers at Westwood Net Lease Advisors. We have years of experience in helping investors acquire commercial properties that meet their investment goals.
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