We all know the old saying in real estate: “Location, location, location.” There are many factors that can contribute to a prime location—good schools, low crime rate, population increase, job growth, attractions, and more.
The Atlanta Metropolitan Statistical Area (MSA) is seeing incredible population increase and job growth right now, making it a good potential location for your next investment.
Why invest in the Atlanta housing market?
Atlanta has been deemed one of the hottest real estate markets in the country for a while now. Just take a look at all of the positives it has going for it.
Median home prices have increased
Here is a chart depicting the median price in Atlanta housing sales:
As shown in the chart above, the median home price in Atlanta sat at $330,000 as of September 2021. In June 2021, Atlanta saw a 27.4% year-over-year (YoY) growth rate in sales price.
Here is a bar graph that illustrates the YoY growth:
Atlanta’s tremendous growth in sales price clearly makes it a great market for appreciation. In just the last five years, the median sales price in Atlanta has increased 50%! That’s right: In September 2016, the median sales price was $220,000, and in September 2021, the median sales price was $330,000. This median sales price is still lower than a lot of other MSAs that are similar in size to Atlanta.
This city has become a desirable location for investors and owner-occupants over the past few years for several reasons.
- Job and wage growth
- Strong university system
- Net population increase
The population and rent are growing
Atlanta has seen incredible population growth. Since the last census in 2010, Atlanta has experienced a 24.78% population increase.
In addition to appreciating home prices, Atlanta has seen strong rent growth:
As of October 2021, Atlanta has experienced 9.6% YoY rent growth. The median rent in October 2020 was $1,721. As of October 2021, it is $1,887. Furthermore, the five-year rent growth is an astonishing 38.6%.
Major corporations are moving in
Atlanta has seen a plethora of companies announce that they are either moving here or expanding their operations in the area. Here are just a few recent examples.
- Microsoft announced they are building an East Coast tech headquarters. They purchased 90 acres to develop the campus.
- Cisco announced they are expanding in Atlanta with 700+ jobs.
- Airbnb announced in February 2021 that they plan to open an Atlanta technical hub.
- Google confirmed in March 2021 their plans for a massive Atlanta expansion, which will occupy 500,000 square feet in Midtown Atlanta.
- Facebook acquired 36,000 square feet of office space to expand in Atlanta.
- State Farm completed the final tower of their Dunwoody campus in 2020, which offers space for 8,500 employees across 1.7 million feet of office space.
Occupancy rates are high
One of the major pros of investing in Atlanta is that the rental occupancy rates are high. While occupancy rates have generally been high in this city, they have become even higher in recent months. This means you don’t have to worry about loss of income due to vacancies as much as in some other markets.
With higher occupancy rates, your investment property creates a positive cash flow. Besides having a secure investment, you have a greater opportunity to pick and choose who your tenants are due to the competitive rental market.
Additionally, the competitive market means landlords can raise the rental rates of their tenants.
Georgia has a strong higher education system
Not only is there new growth in Atlanta, but also a strong and rich history that brings the community to life. Among these historical examples is the Georgia higher education system. You may be familiar with some of the 26 public institutions. They include top schools such as the Georgia Institute of Technology, University of Georgia, Georgia State University, and Kennesaw State University.
What to consider when investing in the Atlanta housing market
All of this data means that cash flow investments are hard to find in Atlanta. Even though rent is up drastically over the last several months, it has not kept pace with property price appreciation.
Below is a heat map that shows the average rent to price ratio (RTP) within the city of Atlanta by ZIP code. RTP is a great proxy for cash flow. As a reminder, an RTP of above 0.6 has the potential for cash flow, and anything near 1% is considered very strong cash flow. As you can see, there are only a few areas with higher RTP:
Buyers should also consider property taxes. Atlanta has moderate to low taxes relative to other comparable-size MSAs. Take a look at this heat map of property taxes in Atlanta:
Is hard-to-find cash flow bad for investors?
Not necessarily! Just because Atlanta doesn’t offer strong cash flow prospects as measured by RTP doesn’t mean that real estate investors should ignore this housing market.
Instead, note that Atlanta is an excellent appreciation market and can actually offer cash flow to investors interested in several different types of investment strategies.
- Short-term rental property investing
- Rent-by-the-room situations
- Traditional rentals with lower cash flow but a better chance of stability and appreciation
- Other creative investing strategies
Key facts to know about Atlanta
- High-quality education: Most of the schools in North Atlanta Metro boast great ratings on net quality education scores, making this area more desirable for families.
- Jobs are in high demand: Skilled labor is in high demand due to the increase in tech companies, so there are no job shortages right now.
- Activities: Atlanta has an active community with many outlets for recreation for people of all ages. Some activities include hiking trails, lakes for water sports, biking routes, boating, parks, and picnic areas.
- Access to Hartsfield-Jackson Atlanta International Airport: This is the world’s busiest airport by passenger traffic.
What investors should consider
- Strong job market: Big tech companies that have moved to Atlanta during the pandemic or are in the course of moving there have greatly increased the value of real estate.
- Amenities: The diversity and plethora of dining, entertainment, educational, and retail opportunities make Atlanta a great destination for families, singles and couples to settle down.
- Increase in skilled laborers: The increase in laborers means higher demand for rental properties in Atlanta.
What sellers should consider
- Increased value in Atlanta home prices: Atlanta is such a hot market right now that there’s an increase in demand. This is wonderful news for a seller because it means you have a greater potential to get above your asking price.
- Competition in Atlanta housing sales: With the increase in demand, competition not only drives your value up, but also means you have a better opportunity to sell your house fast.
Questions for investors to ask themselves
Here is a key list of some questions you need to answer for yourself before you dive into the investment process of Atlanta real estate.
- What is the potential property like?
- Is this potential investment area a good rental market?
- Is there an HOA?
- Am I staying true to my budget?
- Am I properly vetting my prospective rental tenants?
- Do I have an exit strategy?
You need to do your due diligence before jumping, no matter where you are investing. By doing some digging and comparing properties in the area of Atlanta that you are looking to invest in, you are setting yourself up for a successful investment.
The time is now
So, should you, as a real estate investor, consider the Atlanta real estate market right now? In short, absolutely! Why? Because, as the data has shown, the Atlanta real estate market is one of the best real estate markets in the country. The market trend for Atlanta real estate is projecting a continued increase of buyers and renters in the coming months and years, which means the time to invest is now.
With interest rates still being near all-time lows, now is a great time to purchase when you can lock in a 30-year mortgage. Your mortgage payment (principal and interest) will remain the same as rent continues to grow.
2021-11-01 17:47:37
Source link
