BEIL Investor Spotlight on Atlanta, Georgia [Interview and Analysis]

| December 14, 2013 | More

Atlanta, Georgia, is a hot market for investors these days. A local agent talked to us about what he thinks is truth and what is just media hype.

Atlanta, Georgia has been at the top of a lot of lists these days, and that makes its real estate of prime interest to investors. For starters, according to a recently-published Forbes study, more than half (54 percent) of all real estate purchases in Atlanta are for cash and made by investors, indicating that the investing community in the area is still both flush and active. Furthermore,  Atlanta and Atlanta-area home values have climbed significantly over the past year, posting 17 percent gains in October 2013 over October 2012. At time of publication, Atlanta’s average home value was $137,600, up from $118,000 in 2012. Atlanta’s real estate market did not really take a hard, hard hit until mid- to late 2008, sometime after many other hot markets like Las Vegas, Nevada; Phoenix, Arizona, and numerous California metros had already tanked. As a result, Atlanta home prices did not really hit rock bottom until 2012, so values are just now starting to head upward again[1].

Clearly, investors are excited about Atlanta real estate and, as a result, the media loves to cover Atlanta’s numbers. Sometimes, however, we’ve found that the cold, hard numbers and the cold, hard truth are not always exactly the same. To try and determine just how Atlanta real estate activity is measuring up to the hype, we talked to Bob Southard, a local real estate agent and associate broker at Solid Source Realty who works with homebuyers and investors all over the Atlanta area. He had a great deal of interesting insights into his personal experiences with investors and owner-occupants in Atlanta’s real estate market, and how they’re all working together to make this housing market thrive.

BEIL: According to the National Association of Realtors, about 54 percent of purchases in Atlanta are for cash. Other data groups say this number might actually be more like 70 percent. Is it fact or fiction?

Bob: In my experience, the number of cash buyers is not that high – probably more in the range of 25 percent. But it is certainly much higher than five or 10 years ago when nobody paid cash. Of course, all my clients are individual buyers. Some pay cash of course, but many put 20 percent or more down for a down payment and finance the rest. Contrary to popular opinion, traditional investor financing is available to many of these individuals.

I contended for years that the key to the real estate recovery would be investors buying up excess inventory, but what I did not foresee is the amount and scope of the institutional investors in today’s market. Traditionally large funds have not invested in single-family homes, but we are seeing large investor groups buying hundreds and sometimes thousands of homes at once. That is probably where these huge numbers in the media are coming from.

BEIL: What kinds of deals are investors buying these days, and how do their target properties compare with what traditional owner-occupants are buying?

Bob: I definitely have a few investors who are actively seeking flip deals, but far and away the most are on a buy-and-hold strategy. Even with the increase in prices in Atlanta over the last year, they can still get a very good rate of return on rentals and flips.

BEIL: How has the larger presence of investors in Atlanta affected your business model?

Bob: I’ve been dealing with investors and owner occupants for years, so it’s not really a big change. However, I did recently spend a lot of time on continuing education focusing on landlord/tenant laws and property management so that I can give my clients sound advice before, during, and after they buy to hold.

BEIL: What is the biggest mistake you see investors make in this market?

Bob: The most common mistake I see from both flippers and rental investors is that they try to do too much themselves to “save money.” Unless they are actually full-time contractors (and most are not), it takes longer to get the property back on the market than it’s worth, and time is money.

BEIL: How can real estate professionals best prosper in the Atlanta area market?

Bob: Well, if you’re buying here in the ‘burbs then almost any home is a good potential flip, which is nice. When it comes to rentals, though, I really like split foyer designs because you get a lot of house for the money and terrace level adds a lot of value for the rental. When I’m looking for potential rentals for my investor clients, I try to locate homes that need just enough in repairs that a typical owner-occupant won’t want to mess with the property, so they tend to be lower-priced and the owners are more motivated to sell.

As far as professionals on my end of the business, investors are a huge part of the market right now and the real key to a strong recovery in the real market. Agents need to embrace investor business and arm themselves with the right knowledge to properly advise investor buyers. Investor buyers need to educate themselves as well. Although many will do well in our market and other markets like it, without a good management team and a strategy that is a good fit for the individual investor or the specific fund making the purchases, investors will get their butt handed to them.

Are you buying in Atlanta? Know someone who is? Tell us about your southern strategy in the space below.

Want to tell BEIL about your real estate market? Leave us a message in the comment section with details about what makes your local market interesting, and you could be contacted for a Q&A feature.

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[1] http://www.zillow.com/local-info/GA-Atlanta-home-value/r_37211/#metric=mt%3D34%26dt%3D1%26tp%3D6%26rt%3D8%26r%3D37211%252C269381%252C269306%252C269397%26el%3D0

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Category: Real Estate