Target Market

“Class B” multi-family residences, with 3 or 4 units per building

Here is our reasoning for focusing on the middle of the market:

  1. The middle of the market is bigger and more stable.
  2. Class C struggles with paying rent.
  3. Class A tenants are finicky and demanding, and complain about everything.
  4. Class B has a wide range of rent tolerance; you can clean up a Class B property and raise the rents much more readily than other classes.
  5. Class B tenants tend to be easy to manage and reliable.
  6. Small property improvements can make a big difference in rental income in this class.
  7. Once a building has 5 units or higher, it falls into commercial class and the banks will require 20 year notes and higher interest. That means the mortgage payments are higher, so they don’t cash flow as well.

An example of what we do. We painted the kitchen walls our standard color, put a vinyl plank floor over the crappy linoleum, added a dishwasher purchased on Craigslist for $75 and relocated the cabinet thus freed up, added a built-in microwave ($200), and added pulls to the cabinets and drawers.  Obviously we cleaned up the other rooms too, but we were able to DOUBLE the rent with less than two weeks of vacancy and focused work.  No rental revenue was lost because it was made up in the first month.

The reaction from potential tenants was “wow, this place is nice!”  Exactly the reaction we want.

Our focus is on “Class B” multi-family residences, with 3 or 4 units per building

In our experience, the greatest opportunity for wealth creation and preservation is with the Class B properties where average and decent people like to live.  

Class A Property

An example of a Class A property is Portsmouth’s West End Yards. Their tenants are fickle, finicky, and demanding. 

These properties empty out first when the economy suffers. 

Class B Property

In the middle lies the Class B property, where average working and retired people prefer to live if they cannot afford their own place. These properties are generally in good shape, and a little cosmetic work (paint, carpet, etc.) can have a dramatic impact on the rent we can charge. 

We know what makes a difference and what does not. We know what rents we can get in this market.

Class C Property

Class C properties are poorly maintained, grim places where tenants often struggle to pay their meager rents. There is no joy and no money to be made in such places and we will steer clear of them.