The Richmond VA apartment market can be broken down into 3 basic classes.
Class A Apartments in Richmond VA
A property is classified as an A Class Apartment Building when it is newly constructed and in a higher income area. Design and quality of building materials are also taken into account when grading an apartment complex. Properties may still be considered Class A even when 10-15 years old if in an affluent zone, surrounded by quality amenities and has been well maintained.
Examples of Richmond VA Apartment buildings considered Class A properties are the new complexes in Short Pump, Midlothian Corridor and the Shockoe Bottom/Central Business District area. All three areas have strong percentages of high-income households, are close to employment centers and retail centers. Also, where there has been adaptive re-use of former office or warehouse buildings into ‘loft-styled’ apartments in the City of Richmond; these buildings would be considered Class A, as the buildings are first generation upon completion and are located in highly desirable neighborhoods.
Class B Apartments in Richmond VA
Class B buildings/complexes in the Richmond VA apartment market are typically 20 to 35 years old, are of medium finishes and offer some amenities but whose rents will be less than that of Class A. Class B properties may be in affluent neighborhoods but lack either an amenity package or offer dated appliances or older design features.
A good example of a B Class property in Richmond is Ashton Square Apartments on Westover Hills Boulevard. The property is characterized by having good management with well-maintained units and grounds despite its relatively advanced age. Lower Class B properties types of properties are a favorite of many professional investors as the properties offer opportunities for upside value with minimal capital improvements and new management focus on increasing the value.
Class C Apartments in Richmond VA
Class C properties are typically 30+ years old and are located in areas of stagnation or decline.
Many times, a Class C property has been neglected by ownership and is in need of management and maintenance upgrades in order to re-establish their proper place in the market. Investors tend favor these types of buildings when they have strong management organizations capable of turning a project around. Class C properties generally have a healthy ratio of income to price (high CAP rates) and thus can be great cash flowing investments, provided the management team is solid.
The Class C property can many times be repositioned into Class B with capital investment or by addressing deferred maintenance.