Tag Archives: Atlanta market inventory

How is the Atlanta Real Estate Market? “FANTASTIC” (Always)

10 Tuesday Jan 2017

Posted by in real estate

≈ 1 Comment

Tags

, , , , , , , , ,

How is the Atlanta Real Estate Market? “FANTASTIC” (Always)

By Mary Anne Walser, Realtor & Attorney, 404-277-3527, maryannesellshomes@gmail.com

EVERYONE, it seems, is interested in real estate, and the most common question I get is “how’s the real estate market?” I always say, “IT’S FANTASTIC.” Because when you think about it, the market IS always fantastic for SOMEONE. Sometimes it’s fantastic for buyers. Sometimes for sellers. Sometimes it is a fantastically BALANCED market. Right now, as you are likely aware, we are in a strong seller’s market in most locations (since real estate is very local, the “market” varies widely from one location to the next, even within Atlanta, but generally speaking we are in a recovery phase where prices continue to rise).

So given the fact that any real estate market can be “fantastic” in some respect, at a cocktail party if I say the real estate market is “fantastic” I also have got to go beyond the “fantastic” and explain. Right now we’re in an expansion phase in Atlanta. Generally, we are in a fantastic market for Sellers. But eventually and inevitably we will again be in a fantastic market for Buyers.

But our human tendency is to think that when things are good, they will stay good, and when things are bad, they will stay bad. That explains those clients in the years from 2008 to 2012 who would say “I don’t want to buy now – the market is bad.” In that time frame, prices were extremely low and inventory was high. Those buyers were correct that the market was bad…for SELLERS. It was great for buyers. The market has steadily improved since, and those who did buy in that time frame are now reaping the benefits if they are selling, since right now we are in a seller’s market – the market now is great for SELLING a home.

Psychologists have documented many logical fallacies and biases to which humans are prone – one of which is the “status quo bias.” The potential buyers in that time frame often fell into this bias. Making great real estate decisions depends upon recognizing any potential bias you may have, looking at the current market objectively, examining trends, and realizing that things will not always be as they are now.

If you look at real estate pricing over the years, starting when the US starting selling land in 1800, real estate prices peak about every 18 years, and the worst downturns are preceded by high prices and great demand. Here are the two most recent 18 year cycle examples. In 1990, we experienced a downturn after the broad expansion of the Reagan years (when tax incentives helped fuel housing increases). 18 years later – in 2008 – another downturn, this time a huge one. It really needn’t have taken us by surprise; the depth of the disaster was due to banks giving away money far too freely, but most experts would argue that some sort of slump was inevitable. The real estate cycle is somewhat predictable.

So the next downturn? If you follow the 18 year formula, should be in about 2026. But of course it’s never entirely predictable, and it depends upon many factors. Interest rates, for instance. If they go up (they have risen a little, and will likely rise again this year), then buying power is greatly reduced. When the real estate market is improving and expanding and prices are increasing, there is pressure on the Fed to increase interest rates. This makes many new developments financially unfeasible and lessens the buying power of the homebuyer. So interest rates are an easy indicator that we watch weekly and sometimes daily. Right now there’s a huge uptick in activity because interest rates went up and homebuyers became nervous that they will continue to rise.

So for now, in Atlanta, the housing recovery continues. Interest rates rising will restrict that recovery, but there are other factors that will come into play in the next few years, both on the national and local levels. Our President Elect is a real estate developer, so while on the one hand, he will likely do what is good for real estate and loosening regulation might mean real estate financing flows more freely, on the other hand, immigration restrictions will likely increase construction costs and trade limitations could stem the foreign dollars for real estate that has helped bolster pricing.

Here in Atlanta, we are blessed with the fact that more and more companies want to move to Atlanta or expand their Atlanta based operations. This population influx gives us a buffer – even when prices go down again (as they inevitably will) as long as we have net population growth our real estate prices will remain strong.

So when asked “how’s the real estate market” – say FANTASTIC. But then dig a little deeper.

 

Mary Anne Walser is a licensed attorney and full-time REALTOR, serving buyers and sellers in all areas of Metro Atlanta. Her knowledge of residential real estate and her legal expertise allow her to offer great value to her clients. Mary Anne serves on the Committee that drafts and reviews the contracts utilized by all REALTORS in the State of Georgia. In addition, she is a member of the Atlanta Board of Realtors, the Georgia Association of Realtors, the State Bar of Georgia and the Georgia Association of Women Lawyers. Contact Mary Anne at 404-277-3527, or via email: maryannesellshomes@gmail.com.

 

Buy Land – They’re Not Making It Anymore: Investing in Atlanta Real Estate

31 Wednesday Aug 2016

Posted by in real estate

≈ Leave a comment

Tags

, , , , , , , , , ,

BUY LAND – THEY’RE NOT MAKING IT ANYMORE

INVESTING IN ATLANTA REAL ESTATE

Mary Anne Walser, Esq., Realtor 404-277-3527

It’s no secret that Atlanta is rich in real estate investment opportunity. We have experienced a steady rate of population growth and numerous large companies moving into Atlanta bringing thousands of workers with them. The only limitation to this skyrocketing growth might be TRAFFIC – although to date TRAFFIC doesn’t seem to have put the brakes on people moving to Atlanta at all. So Mark Twain’s advice to “BUY LAND, THEY’RE NOT MAKING IT ANYMORE” seems very good advice in our city where population is growing and the demand for housing ever increasing.

So say you want to diversify your portfolio a bit and invest in residential rental property. I help many do this and am asked some common questions that I thought I would compile to help guide others. So think of this as Atlanta real estate investment 101.

First, CAN you invest in rental property? The best scenario is if you have about $200,000 – $300,000 in cash that you can pay for a property. If you want to buy a reasonably priced property that is easy to rent out and likely to appreciate in a reasonably safe neighborhood, that’s about what you will need. Of course, I help plenty of investors who don’t have that much cash lying around. You can also get an investment loan. That allows you to leverage your investment and as long as you are careful not to get in over your head, given how low interest rates are right now, that’s an awesome option. The downside to getting a loan to invest in property is that investment loans carry a higher interest rate than owner occupant loans, and you will have more difficulty getting a great deal in purchasing a property because you will be competing with others who ARE making cash offers. For an investment loan, also, you will still need some cash – a minimum of twenty percent for most investment loans.

I generally suggest that investors consider single family properties rather than condos or townhomes. Most condominiums have rental restrictions under which only 25 to 30 percent of the units can be rented out at any given time. If all the rental permits are taken, you are not allowed to rent the unit. So rather than take that chance and deal with monthly homeowner dues and potential special assessments, with a single family home you have more control over your property and again – God isn’t making more land – so the land itself has greater value. The exception to this advice would be FEE SIMPLE townhomes. If you own a townhome in fee simple, there are no rental restrictions. You own the ground below the unit, the roof above it, and you are free to rent it out. Consider the neighbors, however; if they allow their property to deteriorate, it will directly effect that fee simple townhome.

Once you have determined if you have the financial wherewithal to invest and whether you want to consider single family or condo (or fee simple townhome), the next question becomes WHERE to buy. In a market downswing, there will be many options for good investment. In a more balanced market, you have to be a little more careful.  Right now, though, just about anything you can get under $250,000 that is inside the Perimeter on the North end anywhere or just outside it in Sandy Springs or Dunwoody is going to be a good purchase. I mentioned traffic – it’s not getting any better. And so close in properties are rising in value. Properties in that price range are already few and far between and will be more valuable in the future.

The other area prime for investment is anywhere near The Beltline. We have seen what The Beltline’s Eastside Trail has done for properties around it – property values have skyrocketed there! And “The Beltline effect” has already increased values along the not yet completed West and Southside Beltline Trails. However, there are still values to be had there if you’re quick, savvy and have a great agent.

So, you have narrowed down areas of town and we are out looking at investment property. How do you analyze it? The first thing we determine is your tolerance for repair. Do you want something that is ready for occupancy or something that needs work so you can build equity through labor? Of course the cost of the renovation – which is typically more than you think or originally estimate – must be taken into account.  I usually recommend that a first time investor without construction experience buy a property that is “ready to rent” without too much further work. If you do have some tolerance for renovation, carefully consider the cost in your investment equation.

In addition, it is best to find a property that will provide steady rental income AND will appreciate in value over the years. You cannot count on appreciation, so never bank on that alone – the property must bring in sufficient income to make sense as a purchase on its own whether it appreciates or not. So once we’ve identified the areas that are likely to appreciate, we consider how much income a given property will bring to you as an investor. The Capitalization Rate or “cap rate” is the ratio of the property’s net income to its purchase price and allows you as an investor to compare properties by evaluating a rate of return on that investment. Here is an example of how to calculate cap rate, using a quadraplex at a purchase price of $300,000. We have determined from examining other units rented in the area that each apartment will command $800 per month for rent. So here is how we figure the cap rate:

FIRST, CALCULATE GROSS INCOME

MONTHLY RENT = $3200 (quadraplex of 4 units rented for $800 each)

For ONE YEAR = 12 MONTHS

12 (months) X 3200 (monthly income) = $38,400 yearly gross income

SECOND, CALCULATE NET INCOME

38,400

-2,000 TAXES AND INSURANCE

-5,000 MAINTENANCE & OPERATING EXPENSES

$31,460 net income

THEN, DIVIDE THE NET INCOME BY THE PROPERTY PRICE

31,460 ÷ 300,000 = .104, or TEN PERCENT cap rate

Now, you can probably intuit the disclaimers I will put on this information. The net income can be difficult to figure as your expenses may be higher than anticipated. Maintenance can be a huge question. A property may need more repair than you know. Bad tenants and vacant units can be another pitfall – you may get a tenant who defaults or tears up the unit. There may be several months between tenants before you are able to rent it out again. (So you may decide to reduce the rental gross income by ten percent to account for potential vacancies in-between tenants).  If you do not want to self-manage your property, you should include management costs as part of your operating expenses. Finally, this cap rate example presumes a CASH purchase. If you are financing the purchase then, of course, you must include the costs of financing.

Generally, investors consider a cap rate of ten percent to be a “good” cap rate. You have to make that determination on your own, taking into account other avenues you have for investment. Investment in real estate requires some courage and not a small amount of intuition. But as far as we know, as Tony Soprano said (rephrasing Twain), God ain’t making any more land – so perhaps it is time for you to consider buying more of it!

 

Mary Anne Walser is a licensed attorney and full-time REALTOR, serving buyers and sellers in all areas of Metro Atlanta. Her knowledge of residential real estate and her legal expertise allow her to offer great value to her clients. Mary Anne s a member of the Atlanta Board of Realtors, the Georgia Association of Realtors, the State Bar of Georgia and the Georgia Association of Women Lawyers. Contact Mary Anne at 404-277-3527, or via email: maryannesellshomes@gmail.com.

 

 

THE APPRAISAL PROBLEM

11 Monday Feb 2013

Posted by in real estate

≈ Leave a comment

Tags

, , , , , , , , , , , , , , , , , , , , , , ,

Appraisal BalanceYou have probably heard this by now, but the Atlanta market, in most areas, is rapidly becoming a SELLER’S market again! We have more buyers than we have good, well-priced inventory, and as a consequence listings that are in good condition and well-priced are going quickly, sometimes with multiple bids.

Sounds great for sellers, and it is – but there is also a catch.

Almost every final purchase contract contains an appraisal contingency. The appraisal contingency states that the property must appraise at or above the contract price. If the property does NOT appraise, the buyer presents the appraisal to the seller, and the seller has the opportunity to agree to pay at the reduced appraisal price. If the seller does not agree to that, the buyer may terminate.

Here is where we often get into a big problem. By definition, appraisals are backward looking. The appraiser looks at similar properties that have sold in the recent past within a certain geographic radius. Even when the market is rapidly improving, the appraiser is bound by the sales that took place in the past. So as you can see, prices cannot rebound suddenly and quickly; the appraisal process does not allow that. Prices must rise more slowly and steadily, as appraisals must build upon homes that have already sold. Good appraisers will also research other properties currently under contract and set to close, which is helpful; but cannot completely take into account a market where suddenly there are more buyers willing to pay more for houses.

To illustrate, good well-priced homes are selling with multiple bids within days of being put on the market (or even BEFORE we list them). The contract price is often higher than the home will appraise for, so buyers are even, in some instances, agreeing to pay extra cash to pay ABOVE appraised value. There is one listing where the buyer agreed to pay $75,000 OVER the appraised price; while that is more than most buyers would be willing to cover, there are others willing to pay more than the appraisal says the property is worth.

And it’s not just home sellers who need to take this into consideration. Any homeowner who has a need to determine the current value of the property should take heed of this dynamic.  For instance, divorces. What this means is that if you are the divorcing party accepting a “payout” you may want to either wait some period of time before you agree to appraise the house for  the payout, bargain for a higher payout that might otherwise be negotiated, or provide in the settlement that there will be another appraisal in a year, having the party keeping the house pay you half of the increase in value in the home at that time.

If you are curious what your home might be worth in this market, here are some of the pertinent factors.  If you contact a Realtor, while they are not appraisers, they can pull comparable properties for you and give you an idea of what your property might be worth in this market:

  • How many beds/baths?
  • What type construction (brick, frame, vinyl or stucco?)
  • What style (two story, ranch, split level?)
  • What year was the house built?
  • Any significant upgrades or renovations and if so, what year – and a short description of what was done.
  • Parking – is there a garage or carport?  Two car?
  • Square footage of the home and acreage of the lot.
  • Neighborhood and school districts.

Armed with this information, a Realtor can help you determine whether or not your home is in a high demand area and poised to receive top dollar in this improving market. Just keep in mind that you should also have a strategy for handling the appraisal if it comes in lower than your contract price.