The Next Move: Why Class B & C Multifamily Is Back in Play

RAI Commercial Group
May 13, 2025
3 min read

Updated: May 14, 2025

For many newer multifamily investors, the last 18 months felt like a holding pattern.

Rates climbed, cap rates expanded, and the once-frenzied multifamily market seemed to enter a freeze. Headlines focused on distressed Class A deals in oversupplied urban cores, while aspiring investors—especially those with one or two properties—hit pause.

But beneath the surface, a shift is happening.

And it’s not in the glitzy towers or institutional deals. It’s in the overlooked, mismanaged, underpriced Class B & C multifamily assets—particularly those within 70 miles of Texas’s major metros.

At RAI Commercial Group, we’re watching a smart capital rotation take place. And the ones who win in this new cycle won’t necessarily be the ones with the biggest balance sheets—they’ll be the ones who move now, with clarity and strategy.

CLASS A MULTIFAMILY IS OVEREXPOSED—AND OVERPRICED

Let’s be blunt: Class A isn’t delivering the yields it used to.

Operating costs are higher

Insurance premiums are up

Rent growth is slowing in many core urban centers

And many new builds are facing higher vacancy rates than expected

Institutional capital may still chase trophy assets, but for first-time and small-portfolio investors, Class A rarely pencils without heavy risk exposure.

WHY CLASS B & C MULTIFAMILY ASSETS MAKE SENSE NOW

The value of Class B/C assets lies in their resilience.

Serve essential housing demand for working-class renters

Often operate well below replacement cost

Offer real upside through rehab, lease-up, or operational efficiency

Even more importantly, these assets continue to trade at prices that make sense—even in today’s rate environment. And in markets like East Montgomery County, Waco, Denton, New Braunfels, and the outskirts of Katy and Spring, rental demand is strong, supply is limited, and population growth isn’t slowing.

Cash Flow First. Appreciation Second.

For first-time investors, stability matters more than speculation.

We’re seeing a renewed focus on cap rate spreads—how the income on a deal compares to the cost of debt. That’s why stabilized B/C deals with predictable rent rolls, minimal capex needs, and in-place property management are gaining attention.

Value-add isn’t going away—but it’s no longer the “fix and flip” mindset of 2019. It’s about buying smart, improving operations, and holding for long-term yield and scale.

The Advantage for Small-Scale Buyers

Here’s the good news: institutional groups aren’t chasing 10- to 40-unit buildings in Katy, Denton, or Conroe.

You are.

That means less competition, more negotiation power, and the ability to carve out equity growth in overlooked corners of strong submarkets.

It’s no longer about getting in cheap—it’s about getting in intelligently.

INVESTOR INSIGHTS

The multifamily market is recalibrating—and that’s exactly where smart, early-stage investors gain ground. While Class A struggles with oversupply and softening returns, Class B and C assets in high-growth submarkets are showing strength through consistency, rent resilience, and value-add potential. For new investors or those ready to scale beyond their first deal, this is where the math still works, and the upside is real.

READY TO INVEST IN MULTIFAMILY WHERE GROWTH IS HAPPENING?

At RAI Commercial Group, we help first-time and small portfolio investors identify the right multifamily opportunities—properties that generate income today and build portfolio strength for tomorrow. From stabilized Class B units to value-add C-class rehabs, our focus on emerging Texas submarkets gives you access to deals most overlook.

Whether you’re acquiring your first 10 doors or scaling from 2 to 20, the window is open—but it won’t stay that way.

Want to know where we see deal flow heating up next? Book a strategy call here.

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Written by RAI Commercial Group