Should I invest in North Atlanta?

Question

I have an opportunity to invest in the North Atlanta area. I’m currently out of state but I have a friend in ATL who would live at and rent the property for a minimum of 2-3 years. My preference would be to continue renting if he would ever have to leave but would also like to have an exit strategy to sell if necessary.

Current areas considered would be within striking distance of the Perimeter mall area, i.e. Brookhaven, Chamblee, Doraville, Sandy Springs, Dunwoody, Vinnings, Norcross. Open to all suggestions within this general area considering current or potential future rents, ease of renting, up and coming neighborhoods, etc? RE taxes seem to be real high in some of the towns vs. others

Target property would preferably be max of $250-275k, have 3-4 beds, 2+bath and anywhere from 1600-2400 sq feet. Also trying to figure out what type of property would be the better investment in this area, SFH or condo/townhome?

Also, would anyone suggest this area wouldn’t be a good investment?

Would appreciate any insight!

Azeez K. · Answer

Hi @Matthew SuretteIn general the higher the price of the SFR the more challenging it would be for the property to cash flow and be a good investment. The areas you specified are all good areas with high price points. For example - Median prices in the areas you mentioned are below:Dunwoody $350KBrookhaven $360KChamblee - $310KSandy Springs - $360KVinings - $260KNorcross - $148KSpeaking generally, if you were to rent at the median prices from a cash flow stand point at the current rent rates it would be hard for the properties to truly cash flow. I don't know if you plan on making this as your permanent residence or simply use it as a rental. If you are going to use it as a rental look for lower $ property in an upcoming area and at least target 1.6% of purchase price for the property to cash flow (For example 148K Norcross property you should target to get rents of $2300). However, average Norcross rents are between $800-$1600 so most likely you will break-even and even will have to put money into the property (taxes/PM etc). Again I am speaking generally and there are many variables that can change such as the terms of your particular deal, financing etc. The above areas are all great and very mature so it would be parking your money. Your money may not work hard as you will most likely be buying retail. Keep in mind property taxes are pretty high in the above areas as well. I would stick with a SFR over a town house or condo simply because of HOA. The rental restrictions vary and in some instances HOA can change the rule on # of renters vs. owners or can completely disallow rental apartments. To summarize, the above areas are all good especially Brookhaven, Dunwoody, Sandy Springs and Vinings. If you are going to move into the house as your primary residence then you cannot go with the above areas. If you are looking from an investment cash flow standpoint then I would look else where. Buy a SFR over a townhome/condo simply because you are buying land and not an air pocket. Good Luck

Matthew Surette · Answer

great, thanks Allen! I'll have to expand my research into those areas

Allen Thomas · Answer

Not far at all. Just go down a few exits on 285, or up 75. You can find those properties in Cobb County for sure.

Matthew Surette · Answer

@Allen ThomasThanks for your input. I wish I had the team on the ground there to be able to do some flips. How far outside of the Sandy Springs/Dunwoody area do you have to go to find the A class properties in that price range?

Allen Thomas · Answer

It's not easy to cash flow in that price range... North Atlanta is great for flips, but that's not your current scenario. I wouldn't do it. Then again, regardless of locale I wouldn't ever buy any rental in that price range. This isn't the northeast or westcoast. 100-150K is perfect for A class properties in GA that you would like to rent out.

Matthew Surette · Answer

@Annette Cokerthanks for your input on the school systems@Richard BalsamGreat points on HOA restrictions and thank you sharing your story on your first home, it certainly gives me something to think through a little further. Additionally, your points on ROI reinforce what I'm seeing the more I research, it seems very difficult to find any home to really come close to 1% in these specific areas. I'm guessing many of the buyers from 3-5 years ago are seeing safe returns at the current rental prices but getting in now seems much more difficult.

Richard Balsam · Answer

I have mixed opinions as to renting higher priced houses, and adding friendship to the mix. Many reasons are stated above. Here's my two cents:I live just north of the areas you mentioned. In most cases, the higher the price point of the home, the greater the chance of full time owners - not renters. Owners are paying for location, schools, etc. Renters usually want location. The schools are lower on their list for the exact reason they are renting- its temporary. What I would look out for are HOA restrictions on renting. Some HOA's go so far as to limit the number of renters per year. If your friend leaves, and you re-rent, and this tenant stops paying - or worse, you evict, and possible cannot rent again for the year. Not saying this will happen- but it depends on the HOA rules. The second point I have is the ROI on higher priced homes. A good starting point ( it varies based on location) is: The first $100K - you can expect 1% of the value in monthly rent ($1000/mo) The next $100K - you can expect half this amount ( $500). The third $100K - much less...I've heard up to another $300-400/month. Now- this changes based on hot locations, etc. But- to be used as an "average" starting point - which shows the reduced rental amount each successive $100K returns. Compare this to three $100K homes bringing in $1000/month.The final point I want to make: I did exactly this to my first home I had in south Florida many years ago. My friend and his new wife rented for two years, with the understanding that I do not want an empty house when they move out- I wanted (her) experience as a real estate agent to help me sell the home when they are ready to move out. Never happened. House was so filthy when they moved out that it took me a full day ( only 1600 sq ft) to clean, and had to hire painters at $1500 to clean up all the walls. Took me three months to sell at $1000/month (back in '95!) making my clean up and holding costs $4500 back then. And...this was a friend with good intentions. Just be careful- outcomes can be different than expected especially mixing friends and business.

Annette Coker · Answer

Dekalb county schools are not the best overall in Georgia, but it doesn't appear to hurt values in those areas. North Dekalb schools are way stronger than South Dekalb. Chamblee has charter schools that are tough to get into but excellent. Norcross schools are all over the place depending on what part of Norcross you are looking at - Doraville/Brookhaven are average. Dunwoody, Sandy Springs schools are very good. Vinings Im not familiar with but cobb county overall have good schools.

Matthew Surette · Answer

Thanks for the responses. Maxwell, that is correct I would prefer to be somewhat passive and not have to worry about what problems could arise with the higher spreads as you've stated.@Azeez K.thanks for the detailed response. For the next few years at least, I know the person that would be staying at the property. They would be able to maintain it and pay rent. Obviously I still would account for capex, etc but would not have to worry about general upkeep, minor repairs or vacancy for approx 2-3 years at a minimum. The scenario would be getting a 30yr note around 4% with 20% down. I know cashflow would be low, but if the market is highly stable I'd prefer it to be in a safer A-B+ location to start. I know no one can truly project appreciation but it seems there still should be small growth year over year going forward based on some of my research but it's always great to get opinions from people on the ground there. Also, good to know about SFH vs condos, that was my initial thought but every market is different.@Annette CokerThanks Annette, good to know. How are the school systems there? that seems to play a big part since the SFH investing is big down there compared to parts around me where no one invests in SFH and only MFH

Annette Coker · Answer

I like Chamblee & Doraville . They are a little cheaper and both have a lot of exciting mixed use developments in progress. Not as trendy yet as Brookhaven, Dunwoody etc but well on the way. I think a 3/2 brick ranch in either of these places would serve you well.