Starting out north of Atlanta, GA

[William McGregor]

Hello,

I have been lurking and researching BP and many other resources over the past couple of months. I currently live in Cumming, Georgia and am trying to narrow down on a niche. I want to invest into buy and hold properties and cannot determine if I should aim towards college properties or into SFH.

My current issue is analyzing my market. While I am attempting to determine a niche, I am researching many areas north of Atlanta and am in the max budget of $120k. How do I go upon analyzing the market for these types of investments? I have been searching through the MLS on similar houses and looking at sales prices and DOM. I also have been looking at the rent payments on these types of homes as well. Is there any other resources I should be using to look at similar home values?

I am also hoping some of you could answer what to do in reference to my next steps. I've read mixed posts on here about running my credit to see what types of loans I can acquire. Some have said go to Fannie Mae and do it and others have said wait until I'm ready to buy. I currently own a house and will be tapping into that equity and my savings to begin my investing. I'm going to get a HELOC next week so I can have that line of credit prepared. In reference to LLC's and business operations, should I have all of that set before I make a deal on a property or should I hold off.

Sorry for all of the questions, but I want to be very thorough. Thank you guys for all of your help.  This website and forum is an incredible resource! I hope that I one day have the knowledge to help out others like myself.

[Leland Nicholson]

Great post William. What you should do with regard to the various questions you have posed here depends on your long term investment goals and your situation (generally your life, work, the time you expect to devote to this etc). What possibilities are you going to create for your life by investing? The possibilities you want to create will lead you backwards to the answers to your questions. 

I am a Real Estate Broker and Mortgage Broker. I live in Alpharetta off of Webb Bridge Rd. I helped design the acquisition systems & methods several of the now publicly traded Wall Street firms used to build massive rental portfolio's. I have brokered many hundreds of cash flowing single family home rentals since the money began pouring into the industry in 2011. These were all in metro Atlanta. We even built 47 new homes as rentals. 

If you are working with $120K cash I would suggest acquiring several low dollar homes with financing in place. Not having all your eggs in a 1-house basket will help you with cash flow. Financing rentals obviously restricts cash flow on each home, but owning several would help with stability of your finances over the life of your holding of these assets. It helps because you may have a vacancy or other issue at one home at any time that interrupts cash flow on that house. If you only own one you will be in the red until the problem is resolved. If you have multiple properties, a collection issue at one home will be completely or partially offset by the positive cash flow from the others. 

I would stay away from college properties. An item that is sometimes overlooked by new rental investors, but that can easily kill your returns for years, is turn cost. You need tenants who will be easy on your asset, and by extension your wallet. Most college students are NOT EASY on a home. College students are also transient tenants. They come and go with the years of schooling or the semesters and this means frequent turns. If you have a home that cash flows $300/month and the tenant ruins just the carpet and paint you could be looking at a $4000 turn in between tenants. If that tenant was only in the property for a year and posted a $1,000 deposit which you keep to cover the damage they will have contributed $3600 net rental income + $1000 deposit = $4600. This means after locating, leasing and managing a property for an entire year you netted just $600. 

I would suggest looking in an area that is likely to provide a long-term low-key tenant. If you lease to a single tenant for 5 years and never have to turn the property you will make out MUCH better even if the rent is a little lower. To best avoid the cash-killing "Capital Expenditures" you have to pick the right type of house, find the right tenant, and take other pre-leasing measures that will reduce your long run turn costs. I have proposed, enacted and vetted many ideas to invest in ways that take all of these things into account through my work with the big firms. some of my ideas helped them with their bond ratings and long term performance relative to their competitors. 

Write me back! We can meet and get a coffee or lunch to talk this through. I can find you properties, hook up the right financing options (Fannie Mae is the best option until you own more than 4 homes),  manage your rehabs (or connect you with experienced rehab folks), and lease your homes. 

Now that the "big boys" are not buying anything anymore there is an abundance of talent you as a new investor can benefit from.