---
id: "claim-class-c-too-risky"
type: "claim"
source_timestamps: ["00:31:00", "00:34:00"]
tags: ["asset-class", "investment-strategy"]
related: ["concept-replacement-cost-margin", "framework-deal-evaluation-triad"]
confidence: "medium"
testable: true
speakers: ["Ken McElroy"]
sources: ["mcelroy"]
sourceVaultSlug: "mcelroy-multifamily-distress-playbook-2026Jun25"
originDay: 9
---
# Older Class C value-add properties are currently a poor investment

## Claim

[[entity-ken-mcelroy]] has shifted his strategy away from buying **1980s-era Class C properties**. He claims these older assets:

- Require too much ongoing capital expenditure (CapEx) just to maintain, let alone improve.
- Trade at compressed cap-rate spreads vs. Class A, narrowing the risk-adjusted return.

He argues it is safer and more profitable to buy **newer Class A properties at a discount**, since they require less maintenance and attract a more stable tenant base. This dovetails with the broader thesis in [[concept-replacement-cost-margin]] and the screening criteria in [[framework-deal-evaluation-triad]].

## Confidence: Medium

### Supporting Logic

- High CapEx + narrow yield spread + higher debt costs can indeed make many 1980s Class C value-add deals unattractive relative to discounted newer product.
- Inflation in labor and materials has made roof, plumbing, system, and code-compliance work materially more expensive.

### Counter-Perspectives from Enrichment

- Many institutions argue **workforce / Class B–C housing** is *more* resilient due to chronic affordability demand and limited new supply at that price point.
- MMG sees opportunistic buying broadly across multifamily without singling Class C as categorically worse.
- Several funds are explicitly raising capital to buy distressed Class B/C in 2025–2027.

### Synthesis

The preference for discounted Class A over aging Class C is **one defensible viewpoint** in this cycle, especially for investors concerned about CapEx and financing costs. It is **not industry consensus** that Class C is inherently a poor investment — outcomes are highly market-, basis-, and operator-specific.