Property grading system A/B/C - how does it work?

Discussion in 'What to buy' started by Emmz, 16th Apr, 2022.

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  1. Emmz

    Emmz Well-Known Member

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    Hi All!

    I often see updates here referring to A grade properties or comparing them to C grade properties.
    Has someone got a loose definition of this grading system?

    In the current market, is there a good mix of each property type?

    I'm seeing a lot of semi rundown properties getting list - Is this people 'offloading non-keepers' and taking profits?

    Cheers!
    Em
     
  2. Scott No Mates

    Scott No Mates Well-Known Member

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    I've only seen it used for commercial property.

    Residential is too subjective.
     
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  3. AndyPandy

    AndyPandy Well-Known Member

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    In my opinion B grade property would be one that's on a busy road, next to a high voltage power line, next to train tracks, has any sort of restriction on the use of the block such as easements.
     
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  4. spludgey

    spludgey Well-Known Member

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    I find entirely subjective ratings like this pretty counterproductive.

    I don't think these grades actually exist and even if they did a grade C property could easily outperform a grade A, so what's the point?
     
  5. Ruby Tuesday

    Ruby Tuesday Well-Known Member

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    The reality is they dont exist other than in the lexicon of D grade property spruickers. Metrics vary at different points in time.
     
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  6. Emmz

    Emmz Well-Known Member

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  7. thatbum

    thatbum Well-Known Member

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    But the "thing" might just be gimmicky spruiker talk rather than anything a real investor or developer would use.
     
  8. Emmz

    Emmz Well-Known Member

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    The domain article seems fairly common sense.. I dont think they were spruiking.. On these forums I see it quite a bit too ?!
     
  9. See Change

    See Change Well-Known Member

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    IMHO it’s a marketing ploy by some people to suggest that only they know which properties to buy and you should trust .

    Anyone who suggests that you should only invest in what they call A grade investment properties is a ****** …

    under any form of categories , we’ve bought a,b,c class properties and done equally well financially with all of them .

    not something I think about

    cliff
     
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  10. db9

    db9 Well-Known Member

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    I think it helps frame properties broadly. For example, the way I see it in a given suburb it goes a bit like:

    A grade - One of the best streets eg elevated position, block size in line with average or greater for the area, dwelling type to suit the demographic of the area eg character house. Really these assets are scarce and have high owner occupier appeal.

    C grade - Property with some type of issue eg. Backing on train line, main road, flood affected, dwelling type not suiting demographic of the area.

    B grade - somewhere in between. For example an average street in a suburb but perhaps the dwelling type doesn't quite suit the area or a block size that is 400m2 where the suburb averages 400-800m2. This one is quite subjective a lot of the time IMO.

    I think if it's a B grade property due to dwelling issues that can change, then this could provide opportunity. Also, some C grade properties could be way more valuable than an A grade property for example allowing for development, rezoning etc.
     
  11. AndyPandy

    AndyPandy Well-Known Member

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    Surely you wouldn't pay the same price (in the same market) for properties with the issues that I've mentioned compared to properties that are not affected by them?

    Also, at least some buyers would consider properties with these issues to be inferior and may not be interested in buying, so that reduces the pool of buyers?
     
  12. thatbum

    thatbum Well-Known Member

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    Yes which is reflected in a lower price usually. At purchase and sale. So it's a bit of a wash really isn't it?
     
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  13. AndyPandy

    AndyPandy Well-Known Member

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    True, anything can be sold at the right price. But a difference in desirability does exist. It will have a smaller pool of buyers than a property without these issues.
     
    Last edited: 18th Apr, 2022
  14. Thebiglebowski

    Thebiglebowski Well-Known Member

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    A grade properties should have continual capital growth year on year irrespective of the market conditions as there is still a strong demand for them. In down periods they would still be going at 3%.

    Even in markets like Perth I found many properties that were doing 3-5% pa over the 10 year period. These are the properties you want and therefore easier to identify in bear markets.

    what is A grade will depend on the location. Inner city is likely to be a renovated 100 year old period home rather than some new build. Middle ring would be different but you will always find a crowd at the open inspection. In a “normal” market My strategy is always make sure you attend that 1st inspection to confirm how deep the buyer pool will be as it should give you an idea about desirability.
     
  15. See Change

    See Change Well-Known Member

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    Of course I’m going to pay the same price for a falling down s….. box compared to a house in perfect conditions ….

    sheeeze .. what sort of idiot do you think I am …

    there are so many variables I think it’s an artificial and useless constraint that achieves nothing except maybe giving some people an air of superiority to say they’ve bought an “ a grade “ investment property .

    The first place I saw this being used was in the hands of a couple guru’s who would source you A grade investment properties because they knew which ones to buy because “ you “ didn’t know what to buy .

    I’m not going to name the two who spring to mind but they’ve both been members here , but they hold consistently put down people who bought in “ non “ a grade localities such as 2770 and Logan .

    Ask @skater how well she’s done by buying in c grade localities .

    If you’re buying ip’s the bottom line is profit and % wise we’ve done as well buying cheapies vs “nice “ properties . Ironically our nicest property ( Mosman ) 1/2 a street back from waterfront with stunning views cause us more headaches than all our others combined .



    cliff
     
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  16. sash

    sash Well-Known Member

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    In a good market....yes..irrelevant. But in a bad market different story....grade A also maintains value better.
     
  17. Scott No Mates

    Scott No Mates Well-Known Member

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    The little known theory of price relatively would put that into question. To believe that one suburb will increase to infinity at the rate of x% pa yet the suburb across the road (different name, different postcode) will increase at a different rate, is not sustainable. Surely, you would consider the cheaper option as it cannot become substantially cheaper than next door.

    Exactly

    Undisputable. The land holds value based on it's location & utility. This applies equally to apartments which may already have been exploited/developed to their maximum potential based on the land size & planning constraints but value added in terms of inclusions.
     
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  18. See Change

    See Change Well-Known Member

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    Well , if that’s the case there are no a grade properties in Sydney , Melbourne or Brisbane .

    No property , regardless of how good it is is going to increase every year .

    which guru told you that …..

    Cliff
     
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  19. John_BridgeToBricks

    John_BridgeToBricks Buyer's Agent Business Member

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    Interestingly, my wife (who is a lawyer) forbids me from using the expression "Investment grade property", because it sounds like a formal designation from a ratings agency such as Moody's or S&P. In reality, A or B grade properties are just informal designations some people give (and perhaps shouldn't) to denote a property absent certain adverse qualities ( eg main road etc) and usually in a better socio-economic area. But it is certainly not a property that goes up all the time, and it is really subjective vocabulary we shouldn't use.
     
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  20. See Change

    See Change Well-Known Member

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    tell that to people in Sydney ( upper echelon ) who were selling their properties ( or trying to ) when the GCF hit .

    Cliff
     
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