Single Family Home Investing in North Atlanta Suburbs in the current market environment

[Ananda Rajeurs]

North Atlanta (Cumming, Alpharetta, Woodstock, Roswell) Single Family (SFH) homes have appreciated tremendously from the housing bottom in 2012 to 2015. With the prices high or higher than the real estate peak, is it smart to invest in SFH's with the intention of renting the house. The appreciation potential in the SFH is very minimal. The investment from private equity sector in SFH's effectively decreased the supply of homes tremendously driving up the prices in the market. What happens when the private equity funds release these homes into the market and when might that be - does anyone know?

Given this situation in SFH's, is it any better to invest in commercial properties - strip malls, professional buildings. Have these types of properties also appreciated tremendously in value from market bottom or are they still good investment? Thanks

[Azeez K.]

Hi @Ananda Rajeurs

Welcome to BiggerPockets! In regards to your question my thoughts below:

Atlanta months of inventory based on closed sales (July 2015) stands at about 3.9 months. 6 months is considered as normal market conditions. Basically, the inventory levels (Supply) low and demand is high. This is causing prices to go high for SFR..the Average Sales Price is up by 51% from bottom of 2011.

In response to your question is it smart to invest in SFH's with the intention of renting?

With the high prices the numbers won't make sense in renting the homes as it would be extremely difficult to cash flow. Read this interesting post Poof -2 Years of Cash Flow on 3 houses gone in a day. I have seen a lot of investors grabbing homes in the 50K price point in Stone Mountain type areas and rent it to Section 8 tenants for about $700-$800. This strategy works for a few but can also present you with hassle factor and time. Even with this strategy you would need to buy a lot of SFR's to make it worth your while. Also check out the post by @James Park on North Atlanta Market Update you will get a good insight in regards to the overall market conditions, population trends, demographics etc. Look at this interesting article on how Blackstone is selling 1300 Atlanta houses in a strategy shift. In addition, I also feel the interest rates will rise soon so the prices will come down and to me it does not make sense to buy a SFR (unless its just a steal which is very very rare) at high price given you will be upside down based on some of these projected trends. 

So does it make sense to invest in commercial properties? Depends.. This year we acquired two commercial properties (32 units & 100 units) only because it was a good off-market deal that made sense from our strategy point of view. However, MF prices have soared and most apartments in Atlanta are selling at low cap rates and at these low cap rates its very hard for an individual to cash flow on these apartments. Read this interesting post by @Joel Owens MF Getting Frothy.. so Apartment investing is not making a whole lot of sense in most cases. I don't know much about strip malls and Joel is our resident expert in commercial sector so will be in a position to shed some light on that front. 

Hope this helps shed some light on your question. Feel free to ping me or message me if you want to share notes/brainstorm ideas or simply talk RE. 

Good Luck and Welcome to BiggerPockets!