Georgia Tech ATL, am I making a terrible mistake?

Question

Joel Owens · Answer

It's all about risk versus reward.

If you are worth 2 million and buy a 200k property on a hunch with debt and some down and it doesn't work out you usually stub your toe.

If you are worth 250k and putting down 25 to 30% of your worth to buy this property then the consequences of a failed property purchase could be much more amplified.

Your regeneration of capital is key.

If you have 200k that took 5 years to save and make say 70k a year from job or business then having a failed property could derail your investing for future years to come before you recover. If you are making 300k,400k etc. a year then you can build up more capital to overcome mistakes as you learn.

Not mentioned yet is capital costs. Those in town areas tend to have very high property taxes compared to outlining suburban areas. The older buildings could have a lot of future high cost repairs lurking in the walls,ground, ceilings,etc. Those repairs can wipe out years of projected cash flow even if the tenant is paying rent on time. If the tenant is not and you have lost rent, reconditioning the unit costs, and eviction and legal costs, then unforseen capital repairs can put things over the top in a bad way.

Not trying to scare or anything you just need to go into the purchase with eyes wide open. Get opinions from other investors that are not involved in the purchase. Brokers and agents (some,not all) need those transactions to keep happening to pay the bills. It is hard for them to sometimes be objective when they desperately need the money.

Micah Redden · Answer

Good Morning @Kyle Meadors

Surely your agent can evaluate the price of the unit based upon comparable solds in the area and also provide data on the pricing trend for that area (is it increasing or decreasing). The bigger question is whether or not this is a good buy for you? What are the rental rates for this unit? Already leased? What kind of tenants? Is this the best return on your money? $250K for 2 bedrooms worth of rent seems heavy especially with all of the other areas around Atlanta where you could get your feet wet for a much lower price of admission.

Will Gaston · Answer

@Kyle Meadors Solid advice from @Rick Baggenstoss. Student rentals are definitely more challenging, which is putting it nicely.

This thread may help if you go that route: https://www.biggerpockets.com/forums/52/topics/491...

Rick Baggenstoss · Answer

@Kyle Meadors  The chances of a newbie stumbling across a great deal on MLS that's near GT is close to zero.   Keep looking at so many deals in the area that you have little doubt when you see a good one.

Student rentals are more challenging.  Make sure you consider this as you take the plunge.

Ethan Atkinson · Answer

Lets look at this from an investor perspective. Offer much lower first of all. Secondly you need rent total of at least $2500 for this to be a starting point of an ok deal. If you aren using a loan or house hacking the cash on cash return might be ok if you actually collect $1250 rent per unit.  Taxes are likely wonderful.  Investors are helping to dry up supply and keep paying higher prices. Comps will not help you because they will only confirm impatient investors are buoying stuff up.  You can get a couple condos in Athens, Ga for the same price where the students will definitely be tenants, rents will be $2500 or more.  That might also mean 2 loans. Or even get a quad if one comes available for $220,000 in some neighborhoods where rents should be $700 per unit.  On the other hand you can keep looking in that’s area and go to the Atlanta REIA and Georgia REIA to find some deals.

Sher J. · Answer

@Dean M. i am pretty familiar with the area. Feel free to reach out.

Dean M. · Answer

Hi Everybody!

My son is starting at GA Tech in the Fall 2021 and we are considering buying a property in the area vs. living on campus.

I'm curious to know if Kyle moved forward with this?

Also, If anyone else is familiar with investing in this area, or is also interested in investing in this area,  please reach out to me.

Regards,

Dean

Sam Shueh · Answer

Most insurance will NOT let one have insurance renting to college students.  After all, parties, expulsion from housing, drugs, most insurance companies have enough headaches and experience not support investors.

Ed Tamayo · Answer

Most GA tech students pay anywhere from from $600 to $900 per room, so $1,250 might be high. Please note I am saying most. I am sure there are a number of them that pay well over $1,000 a month. I know about this  because  I have been paying those rents for seven years now.  :)   ( And yes,  I tried a house hack at some time)

Kyle Meadors · Answer

Thanks Will! I'll definitely read up!

Georgia Tech ATL, am I making a terrible mistake?

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