The Hidden Income Source of C Class Multifamily Assets

Late Fees.

C Class assets typically attract a working class demographic. You're providing housing for people who are often living paycheck to paycheck. They can often pay the rent, however many months they choose to pay late if an unexpected expense comes up. Although it's harsh, it's the reality of their situation.

Late fees are often the biggest profit source in the other income category. Utility income may be a higher income amount, but there is an offsetting expense. With late fees, there is no offsetting expense.

With A class deals, the ratio of rent collection to late fees is typically less. From a pure profit standpoint, having a demographic that is less financially well off can actually be an advantage to the numbers.