Breaking Down the Different Classifications of Apartment Buildings

New construction - Brand new from the developer

Core - A property with very light renovations to be made. This may be a relatively new build which is nice but you can make it better.

Core-plus - Properties usually a few years old with light to moderate renovation potential.

Value Add - Deals where the primary source of the profit is the value add. One example would be 1980s product with most or all of the units still being in classic condition.

Opportunistic - Heavy value add, usually worse than a class C deal or has some kind of major operational issue for instance 50% occupied. The play is to have a massive change to the look or operations of the property.

Redevelopment - When you completely gut the property and keep the bones. Then go in and completely rebuild the asset. This can be seen when no new permits in the city are allowed, instances where office buildings are converted to apartments, historic buildings with tax credits, etc.

Garden style - usually a 1-2 story apartment building. Can also be considered low-rise.

Residential multifamily - 2-4 units. These are valued based on comps similar to how residential single family homes are valued.

Commercial Multifamily - 5 units and up. These are valued like a business by taking the NOI divided by the market cap rate.

Wrap - usually a 4 story or more apartment building. Wrap refers to the property being wrapped around the parking lot.

Mid Rise: Apartments between 5-11 stories.

High Rise - What you might think of as an apartment building in New York City. 12 stories or more.

Mansard - This refers to the "Mansard roof" of a property. This was popularly done in the 1970's on apartment buildings. It's where the roof of the building comes down to the sides of the buildings and makes it look kind of like a cottage

Class A - a property in very good condition. Usually around 15 years old or newer. Located in a quality area with upper quality unit finishes.

Class B - a property in good condition. Usually between 35 and 15 years old. The property is well located and still in good condition. Rents are moderate and some units and amenities may have been upgraded recently.

Class C - a property in functional condition. Usually 35 years or older. Many aspects of the property may be towards the end of their lifespan and need more maintenance or replacement. Rents are affordable.

Notes:

The class of assets A, B, C are objective to some extent. They can also be classified for instance as B+, B, or B-.

There are several other style labels of apartments based on where the parking lot is located.

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