Atlanta Investing: Do Deals vary THAT much State to State?

Question

Okay, so i have heard REI is very territorial, and you have to know YOUR market.
My issue is I can't figure out why investors pay so much more in other areas other than in my area of Atlanta....
For example, I have heard local investors here all say you can find deals from 5k to 40k all day long...Some of these actually can rent for 7-900 per month...
As a matter of fact, my coworker just closed on his first house as an owner occupant for 32,000, it's in a decent working class neighborhood subdivision and was built in 2002...wtf? SFH at that....
Then I read on the forums that people from Texas, Va, Fl, AZ, etc, are having to pay 70-100k to get the same cashflow per month. 
Some of the properties here in the 30-40k range are not "war zones" so it cannot be that reason that they are lower compared to other regions.So my question is, can inventory prices really be that different depending on where you are(ignoring the extremes of NY and CA), i mean, it just seems confusing some investor is paying almost double elsewhere for the same monthly rent, for example. Or am i just missing something about these 30k prices here that is negative(bad schools, hard to sell, frequent vacancy)?

My other question, sort of related is:
I see investors always hope for a 10-12% return when holding property, say house is bought at 100k, they want 10-12k per year at least, right? 
This leads me to question if RE is the BEST cashflowing investment? The reason i ask is I know a few car lot owners who can do 10k a MONTH with less than 50k in vehicle inventory, and a few more folks who buy and sell electronics in bulk who do about half that...so is the average return on RE(not the home runs) really that good compared to other investments, or is it the passiveness of renting and appreciation that makes it attractive?

Sorry for the long post....

J Scott · Answer

Doesn't hurt my feelings...I wish every other investor in the world agreed with you and didn't want to come anywhere near this place...  :)

Ned Carey · Answer

You are leaving out two major factors.

1) Work:  - The used car lot is Not an investment. It is a business or a job. Managing rentals can be a full time job also, but rentals can be mostly passive.

2) Financing: - Has the car inventory been financed? Was the property financed? Are you comparing apples to apples?

J Scott · Answer

There are a lot of factors that influence real estate prices.  Among them:

- Amount of available building land in an area
- Amount of inventory in an area
- Cost of living other than real estate
- Cost of building materials
- Cost of insurance for contractors (affects building prices)
- Desirability of location
- Schools
- Employment/Jobs
- Etc.

Real estate in the metro Atlanta area is so cheap because of many of the factors above:  there is lots of buildable land, there's lots of existing housing inventory, cost of living is low here, materials are cheap, labor/insurance rates are cheap, public schools are some of the worst in the country, etc.  Not to mention, but the desirability of living in Snellville is pretty low...  Just kidding...  :-)

In terms of whether real estate is the best cash flowing investment?  Again, there are lots of factors.  Clearly, not every real estate investment beats every other investment, but if you factor in availability of investment, passiveness of investment, barrier to entry, expertise required, etc., I'm guessing you'll find that real estate beats most of types of investments for most criteria.

Joe Delia · Answer

Yes.

Morris Lucas · Answer

Great point Ali! I definitely didn't look at it that way, i will be very cautious of those properties. Thanks for clearing up the passive income question.

William, PM me, i'd like to chat about your experience and throw some ideas out...

George; That's a good reference point, thanks

George Ghiorse · Answer

Morris, your ROI isn't based on the purchase price (unless you paid cash) but on your cash out of pocket.  Also, the return should be net cash flow not gross rents.  I'm assuming that your example house of $100k purchase price and $10-12k year would be rents of $1000-1200/mo.  It appears that the numbers do work differently depending on location.  Here is an example for my area.  If you buy a property and the total out of pocket cost for you is $20k and your cash flow is $417/mo = $5k/year that is a 25% ROI.

Ali Boone · Answer

I'm from Atlanta, own properties there, and was there for about 5 months over the holidays working with investors. I guarantee you, there is a huge difference between a $25k house and a $100k house, and I'll go for the $100k house over the $25k house any day. Even if you aren't in a horrible area with the cheaper house, it is most likely that the house needs extensive work, or is older, or something. Even more of a guarantee is if it's listed on Trulia for sale, something is major wrong with it. Especially in Atlanta right now, the inventory is getting so thin and there are so many big boy buyers there right now scouting for all of it, if there is one left over that has made it as far as Trulia, it means the big boy professionals passed it up, so it's fairly safe to assume you should too. And they are ones who can rehab quickly and extensively, so that means something is reeeeally wrong with the house. Further, you have to consider the tenants of a $25k house. That is where your investment can fail. I'd be very leery about a $25k house getting $900 in rent, I'd double-check that with an agent or manager.

And yes, the benefit to rental properties is the passivity, the extreme tax benefits, and potential equity rolling.

Dawn Anastasi · Answer

I never liked the Atlanta area, especially Cobb County.  (Sorry J Scott!)  Never invested there, just visited many times over the past 15 years.

J Scott · Answer

There might be a ton of buildable land here, but 99% of it isn't going to be profitable to develop right now.  Those making money building here are either buying tear-downs at below land value or are building on land bought in 2008-2010 for pennies on the dollar.

William Hall · Answer

If you happen to still check this topic, I can give you my experience in Atlanta.  Atlanta is dirt cheap compared to where I'm from, LA.  I got soaked in Atlanta big time, here's why: In the LA or Vegas markets, if you have $, someone will deal with you quickly. Atlanta is a lot slower, and they don't tend to trust outsiders, even though they feel more affiliation with Yankees than Westerners.  You need to kind of be "boots on the ground" and socialize with the locals, and gain their trust.  It's very "clique-ish", the good deals tend to circulate in special circles.  But yes, you can make a killing (knowing what I know now) there in low-cost, decent neighborhoods that will return high yield on rents.There is still a ton of buildable land there (LA is bursting at the seams in comparison), I would look towards the outskirts.

Atlanta Investing: Do Deals vary THAT much State to State?

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