Hotlanta is a hot bed for real estate investors acquiring “buy and hold” single family houses. Don’t get confused by misleading statistics and always remember to consider the source, including me. The residential real estate market in Atlanta was one of the nation’s leading foreclosure markets in 2012 and in 2014, investors were bidding auction houses to prerecession prices in some cases. It was crazy watching these snotnose kids at auction bidding houses up wildly for faceless hedge funds.
From personal experience, I’m sure glad they’re gone! Yes, they’re mostly gone with smaller investors picking up the bidding slack at auction.
As you might expect, auctions are no longer the source for the greatest discounts on single family houses. When everyone is fishing in the same pond, you have to change your bait or look for another pond. We’ve done exactly that by seeking houses to buy prior to them being available to the public. When you buy off the MLS, you compete against investors and home buyers alike. When you buy at auction, you primarily compete against investors because you must have all the cash at the time of sale and most homebuyers require bank financing.
Thus, that old rule about cash being king is always true in a free market.
Our experience doesn’t come out of the books or articles I’ve read. It comes from being in “the game” and constantly adjusting our approach to the market as well as our marketing efforts. I don’t place my faith in what people tell me, what the government says or what the media sensationalizes. I believe what I see and touch along with my experiences from being on the streets and doing multiple transactions every week. We take what the market gives us and right now, retail sales are back in the Metropolitan Atlanta area. Appraisals are finally starting to become more realistic as the market continues to grow in value. Never forget one of the most basic rules of business and that is: the law of supply and demand, which is: as demand for housing increases, the supply is reduced and prices go up. This is very evident as builders have re-entered the Metro Atlanta area.
I know this to be true because I just sold 78 lots to the former D.R. Horton, now called Crown Builders. I was going to develop these lots in Douglasville, GA but, developing lots and building is very complicated and there are many ways to screw up. Considering the fact that I built my first 8 houses with a builder and he found a way to cheat me out of $45,000 profit by inflating his cost. My next round of developing was a joint venture with another builder and I sold my lots to him and I was cashed out when the hedge fund closed on the finished houses. This worked out extremely well for my side and we built 65 houses together and they all closed within 6 months of each other. That was easy to do when I was able to acquire lots for almost free 4 years ago. But, those days are gone and I recognize my own limitations and I leave building for the big boys. After all, I’m not a Big Shot, just a Little Shot that keeps shooting.
It’s a lot easier for me to negotiate an attractive price or terms on a property, rehab it and sell it then it is for me to build houses. We’ve come to recognize that we do one thing really well and we no longer operate trying to be everything to everyone.
Realtor.com stated earlier this month, in July, that Atlanta would be one of the hottest housing markets of 2015!
That’s no surprise to me as we have hosted 3 international house buying bus tours already this year and have 4 more scheduled before November. Why? Because other countries’ economies and currencies are shitting the bed! Look at Europe! South America! Russia! China! Are you kidding? The U.S. is perceived to have the safest economy in the world and others are losing buying power as our dollar gets stronger against their currencies.
Don’t listen to your stockbroker that is selling stocks or the gold advocates that will sell gold based on fear. I read an article recently and an investor called gold a pet rock! I couldn’t agree more because our investors’ only buy investments that pay them monthly – that would be single family houses.
So trend #1, the foreigners are not slowing down buying our real estate and I know this to be true because we sell to them.
Trend #2 is that first time home buyers have returned to the market. This is a segment of our buying population that we never lose sight of because houses at these prices can sell quickly. The fact that many people choose to rent is good for us investors. A good point to take into consideration is that one day you may want to sell so keep that in mind when you buy. Always have an idea who your end buyer will be and why they would someday want your house. The millennials will join in to purchase homes soon along with the previous homeowners that were foreclosed on. Sooner or later, they will have credit again and in most markets throughout the U.S., its best to own rather than rent – provided interest rates remain low.
One of the great aspects about investing in Atlanta is the low entry point into the market. The average sales price in Atlanta last year was $259,577 which is lot less than other trophy markets. However, the bedroom communities surrounding Atlanta have lower price points. First time home buyer price points can be $80,000 – $180,000 for really nice houses in good areas. There are much lower price points throughout the country in what I consider 2nd tier markets. These markets probably will not see similar appreciation and are composed of older housing stock. Many have brutal winters which takes a toll on houses and these houses simply don’t offer the quality of life provided in the South.
The 3rd trend to look for is continued appreciation as consumer confidence increases. The investors aren’t going away and end users for houses will continue to battle with cash offers and no contingency offers made by investors. Price appreciation may be slowing in the “core” of Atlanta but my eyes tell me a different story in the bedroom communities of the Metro Atlanta area.
While we don’t have the super bargains of yesteryear, we have a more balanced market of buying and selling that is very interesting to be a part of, especially when you can list a house and have offers within 24 hours. That’s where the market is moving right now until the Federal Reserve raises interest rates. When that happens, the price appreciation will be limited and the market could slow down.
If you’re buying houses to hold as rentals, who cares! We’re not selling, we’re collecting. That’s the mindset our investors have and you may want to consider that. The key is to buy quality, well-located houses in an area of growth to obtain predictable residual income. You’ve worked long and hard enough for your money. It’s time for your money to work for you.