Is this a good buy for East Point, GA?

Question

Hi there,

Found what appears to be a great house for our 5th investment property - a 5bd/2bath a few blocks from MARTA (Atlanta's "subway") and 2 stops from the airport. There is an upstairs loft with two additional rooms that could be used as bedrooms or a second living room + bedroom.   House is a 1920s 2 story brick in the Jefferson Park area of East Point (Atlanta) on Harris st, near the medical center.

They were asking $99.9k and we agreed on $90k. ARV: $120k(?).  It needs $10-15k of work to be rentable as all of the electrical needs to be replaced.

We rent exclusively to commuting airline personnel so the main concerns are their safety, space, proximity to airport and public transit.

When I run the numbers, they work BUT this is a bigger project and rougher area than we've ever dealt in. We've also heard horror stories about East Point bldg inspectors - very nit picky and hard to work with.  The house next door is boarded up but everything else in the area looks solid, no bars, well kept.  They refuse to come down any more on price.  Should we take the leap or keep looking?

Cost Assumptions

Purchase Price

$  90,000

Improvements

$  15,000

Closing Costs

$  4,500

Total Cost

$  109,500

ARV

$  120,000

Revenues

Monthly

Rental Income

$  2,400

Vacancy/Loss   Rate

25%

Vacancy/Loss   Value

$  (600)

Gross Income

$  1,800

Expenses

30%

Net Income

$  1,260

Cap rate

Gross Rent

Monthly

$  2,400

Annually

$  28,800

Effective   Gross Rent (minus vacancies)

$  21,600

NOI   (Effective Gross Rent Minus Operating Overhead)

$  21,112

CAP rate   = NOI/Total Acquisition Costs. GOAL: Cap rate of at least 5%

19%

Jake Fouts · Answer

Hi Ericka,

I have a rehab in East Point...it has been the greatest horror story of my investing career.  I'd never invest there again.  What you've heard about the City of East Point has been what I've experienced.  Very challenging so you'd need the right contractor to navigate through that process.  One caveat...I'm an out of state investor so I have some hurdles right out of the gate.  You're local so I assume you'd be able to keep close tabs on any project.  Huge advantage.

Looks like you have some rental experience, so I'm guessing you are confident in the $2,400/month.  Seems high to me, but it is a popular location for flight personnel and the Woodward Academy.

I know a great REA and East Point/College Park is her specialty.  She's super cool and will help you out.  Give her a call before you decide anything.

Message me tomorrow and we can chat and I'll give you her info.

Thanks, Jake

Brandon Fisher · Answer

Ericka - did you ever purchase in East Point? How did the investment play out? thank you.

Lilly Stan · Answer

East point seems to be up and coming. Have you seen the redevelopment plans posted on Curbed. Also how do you source renters that work at the airport?

Ericka G. · Answer

Thanks @Jay Ragland very good point - in all fairness, the electrician did say we could find someone to do the job for $6-7k...all the other stuff beyond wall repair work after electrical has been done.  There are also some overgrown trees that need to be cut back and we'd need to put in appliances.

I think we're going to pass on this one and keep looking...

Jay Ragland · Answer

just wanna chime in

A total electrical replacement including meter box,poll, and breaker box  and house wiring could easily be $10k.  You have to have inspected  BEFORE you close up the walls.   Then the wall work, plumbing,  paintinng, carpet, new HVAC.  Sounds more like a $30k rehab too me

cant say i agree with this .. shouldn't cost 10k for wiring etc

sounds like some of your are being robbed by your GC... contact me anytime and maybe i can help you. Happy New Year.

Rick Baggenstoss · Answer

@Ericka Grant  Jefferson Park is its own animal.   I think you should keep researching the deal verify the elementary school.  ARV sounds low too based upon the flips being sold there.   I'd prefer Hapeville over East Point, but I'm no expert on the area.

Ericka G. · Answer

Quick update.  @Benjamin Emerson - spoke with Mary Ann and she was leukwarm on the deal/location.  She said it could probably work for our flight crew rental model BUT that the house is in the rough pocket of Jefferson Park, so we'd need to be in it for the long haul to see appreciation.  Thanks for the reco, she was very helpful.

I also posted a dummy ad for the property on our normal tenant finding sites and have gotten a TON of response from large families who want the house but not a peep from our usual pilot/FA sources (though granted this is a bad time of month to get a response from that crowd).

Overall, I'm thinking that perhaps this isn't the right location/deal for what we're trying to do.

The folks who have called about the dummy ad are super eager, willing to pay $1150-$1300, but none of them sound very desirable (large families with 4-6 kids, credit issues, etc)...

I just heard a successful investor say last night to stop waiting for the perfect deal - if it is 90% right it is a go.  This feels like it's right on the cusp of 90% but I'm hesitating to pull the trigger as I want to feel more sure about this.  Is there always an element of fear/doubt when doing a bigger riskier deal than before or should I just move on?

Ericka G. · Answer

@Benjamin Emerson  Thanks! So odd, I don't see anything in my inbox...maybe I'm looking in the wrong place?  Are you allowed to post the names here in the discussion?

Benjamin Emerson · Answer

@Ericka Grant, sent you a PM with the names of the agents who are the clear winners in Jefferson Park.  I hope this helps!

Ericka G. · Answer

@Benjamin Emerson - thanks, would love to get the names of the local players you'd recommend.  I've been working with Alice Williams of A&T Realty and she seems very in the loop on all the nuances of EP, CP, an Hapeville - she's been pretty candid on which blocks/pockets are solid and which are risks.  We've also been looking in Hapeville pretty extensively.

@Stan Sugarman - these are all good points.  we know there are other similar airline pads in EP that seem to be working ok, but the boarded up house is definitely a big concern.  We looked into buying it too but it isn't on the market...

Such a bummer that the local government makes it difficult for owners and investors to get things done, especially since this property will need much more work than any of the other deals we've done in cities that were easy to work with.

Is this a good buy for East Point, GA?

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