Reposition Class C Multi-Family to Class B: Definition & Opportunity

Class B apartments can be defined as those housing units that fit the definition of "working class" housing, serving from 80% to 120% of an areas medium income.  This target market tends to be renters by necessity, not by choice, and tend not to move as often as other tenant classes.   

One easy way to serve the market is not with new units but with Class C properties that are retrofitted into Class B properties.  This type of retrofit typically involves upgrading both the units (kitchen cabinets, countertops, appliances, carpet, and vinyl flooring) and the complex (new landscaping, renovated clubhouse, new fitness center, theater, and Internet Cafe.)

The Laramar Group, a Chicago-based apartment investment and management company, for a typical 300 unit retrofit, will spend between  $10,000 to $15,000 per unit on renovation costs; limiting total retrofit costs to no more than 70% of replacement cost.  

The Bozzuto Group, a Maryland based Mid-Atlantic real estate services organization will spend between $7,000 and $8,000 per unit, replacing windows, heating systems, roofs and siding; and increasing rents 10% to 15%.  

Source: Apartment Finance Today, March 2007 p 36-38

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