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More property investors are turning to workforce housing in 2018

In today’s highly competitive, low-inventory real estate markets, property investors are recognizing an unlikely solution to keep them competitive in 2018;  Class B assets targeted at the workforce rental market.

In previous years, Class B rental properties were acquired more as a complementary, value-added piece in investors’ strategies to compete with new luxury rental construction.  Now, forecasts are projecting older, but still well maintained buildings as primary options in 2018.

Tapping a latent potential

The term “Class B” is an informal classification that refers to buildings that fall just a notch below the market’s newest and highest-quality construction.  Class B structures are generally well managed and retain good tenancy.

In recent years, investors banked on Class B assets by renovating and upgrading amenities inside the units, as well as investing largely in structural refurbishing to raise the building to a Class A level.

However, investors are bringing a fresh perspective toward Class B assets in 2018, which is to appreciate them for what they are.

Acknowledging workforce housing needs

Instead of focusing on luxury tenants, property investors are seeing equal value in targeting workforce residents with Class B assets.

“Workforce housing is always a relevant market,” says Carl Lambert, president of California investment property brokerage Lambert Investments, Inc. “There will always be a need for quality, but reasonably priced rental property.”

Property buyers and managers can invest in modest renovations on Class B properties. By holding back on extensive restorations and luxury upgrades, while still providing better amenities, property managers can offer more reasonable rents that will appeal to workforce renters.

Rewards await players of the long game

The reinvigorated interest in Class B assets is arriving at a time when rental market growth is beginning to slow down while concessions extended to renters are steadily rising. While investment sales have been critical in spurring the recovery of the US economy after the crisis of the late 2000s, many markets are reaching their peak in the construction of new, high end supply.

Even if the real estate market is on its path to recovery, Lambert points out that homeownership rates remain at historically low levels.

“For many people, owning a home remains beyond arm’s reach, especially in or near employment or economic centers. You will find ‘renters-by-necessity’ anywhere you look.”

In addition, Lambert believes that while it will demand a great deal of patience, capitalizing on Class B assets remains a worthy venture.

“Over time, investing on workforce housing and renters-by-necessity will prove a profitable endeavor,” Lambert adds. “In fact, compared to high-end properties in luxury markets, owners can see stronger rent growth rates over an extended period.”Lambert Investment, Inc. is your go-to resource for the latest crucial developments, updates, and expert analyses concerning the Southern California real estate market. Connect with our team today – call 310-453-9656 or email