Tag Archives: investment

Heave Ho, Industrial – Here Come the Hipsters

16 Wednesday Nov 2016

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Heave Ho, Industrial – Here Come the Hipsters

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

 

Industrial is IN!!! If you haven’t noticed, industrial areas are hot right now, particularly if close in town. Case in point is the Armour Ottley area, where you can find Sweetwater Brewery, Mason Art Gallery, and the new ARMOUR YARDS which bills itself as “Atlanta’s newest restaurant district.” It’s in an area under I-85 near Monroe and Morningside that was, until very recently, ALL INDUSTRIAL. Now it is the cool “in” place to play and will soon be “the” place to live as well.  But note this – the industrial areas are “in” for other uses, meaning they are no longer all industrial.

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Hipster interests, then, are giving the old heave ho to industrial uses.  But of course the areas in question retain a certain industrial vibe; that’s part of the appeal. Consider Castleberry Hill, near the Falcons Stadium: still lots of warehouse space, but more and more condos, art galleries, and restaurants (like No Mas, an awesome Mexican restaurant and shop/museum – if you haven’t been there, go!)  There’s even a regular “Art Stroll.”

But let’s talk about that misplaced industrial – where is it going? There’s more and more demand for e-commerce space. After all, when you order online and want your goods delivered fast, they’ve got to be warehoused somewhere close. The worse Atlanta traffic gets, the closer those goods must be to the end user. This greater demand for industrial space, with more of former industrial space being used for “something else,” means that industrial space in Atlanta is getting more and more pricey. It’s a landlord’s market for industrial, for sure.

At a recent panel discussion before the Atlanta Commercial Board of Realtors, the panel of experts indicated that the biggest demand and most activity in the industrial sphere is in the NE Quadrant (Doraville, Buford Highway, up to Norcross), I-20 west (but inside the Perimeter), and I-85 south (airport area and south). While you might think the movie industry coming to Atlanta is driving a lot of this, it’s not. The experts indicated that the movie folks can move and store their stuff even farther out. It’s the e-commerce that is driving most of the activity.  Amazon advertises “AMAZON PRIME NOW” not “Amazon Prime whenever we can get it to you.”  Amazon and other e-commerce retailers know where development is likely to happen. It behooves us to watch where the industrial sector is hot and consider investment nearby (or investing in some industrial space).

If you are looking for industrial space for your use or for investment, give us a call. We are always happy to help!

 

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 & commercial real estate and her legal expertise allow her to offer great value to her clients. Mary Anne 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

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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.

 

 

Investing in Atlanta Real Estate

10 Thursday Mar 2016

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A 2014 Gallup Poll shows that Americans believe that REAL ESTATE is the best investment, above stocks, mutual funds, bonds, gold, CDs or money market accounts.   I agree – with the proviso that it is the best investment only when the real estate is chosen very carefully and with expert guidance.  Here’s my “short” guide to real estate investment, with an emphasis on Atlanta.  While your primary residence can be an excellent investment, in this piece the emphasis will be on investing in real estate you do not plan to live in personally.

For many, the best approach is to buy and hold, renting out for a continuous income stream.  Some investors make great money “flipping” houses, but by and large I believe to do that well and profitably, it is best that you be well versed in building and renovation personally, and have a larger amount of time to spend overseeing the project.  So today we’ll concentrate on the investor who wants to buy and hold for some period of time.

For the first time or casual investor (i.e., the person for whom real estate investing or building, developing, or contracting is not a full time job), it is vitally important that you know what you are getting into.  Real estate is not a “passive” investment, even when you have a property manager.  It will most likely take more of your time than other sorts of investments, but it can produce wonderful returns, both monetarily and psychologically.  There is a lot to be said, for instance, for taking an unloved undervalued home and turning it into something beautiful, or choosing a property in a rundown area of town and watching it get better and better as the years go by.  Just ask anyone who is sixty years old or older here in Atlanta.  When that generation was of first time homebuying age (in their mid twenties), Virginia Highland was considered by many to be a rundown, scary area of town and not worthy of purchasing.  Those who did NOT feel that way are the extremely lucky ones who either had foresight or luck or both.  Now those homes are worth many multiples of what was paid for them back in the 1970s.

My husband and I own four rental properties, all in different neighborhoods and different areas of town.  I started with rental properties by holding onto my primary residence when my husband and I got married and bought a home together.  The home I still own is one I loved in a neighborhood that I couldn’t bear to totally leave.  Over the years, I have rented that home to a series of young professionals who have given us an excellent return while generally taking very good care of the place.  From there, for further investment properties I chose areas, communities and properties that I felt were on the “cusp” of becoming something great.

And that is how real estate investors often begin – by holding on to the property they lived in when they go to purchase their next principal residence.  Sometimes they hold onto the old because the market is down and they cannot get what they want or need from the “old” house, and sometimes they hold onto it because it can become an income producing asset.   More often, for both reasons.  And that’s a good way to start.  The home is in a neighborhood you know – and you KNOW the home; its intricacies and quirks – in short, you know what you are getting into.

But say you’re interested in exploring rental property for its own sake apart from your former residence.  Obviously, a great time to do so was in the period between 2008 and 2013 when the mortgage meltdown brought property values down across the board.  But even now that it’s a seller’s market, there are still bargains to be had – you just have to know where to look and choose carefully.

My favorite investment areas right now are the communities straddling the future West Side Beltline.  As you know, the Beltline is a 22 plus mile trail around the city core that will one day link neighborhood to neighborhood and neighbor to neighbor.  When the east side Beltline was completed just a few years ago, property values skyrocketed around the new Ponce City Market, Krog Street Market, and all the neighborhoods nearby.  Indeed, the increase has continued and today properties are being sold with multiple offers above list price – and in some instances, buyers are even taking off appraisal contingencies so that they will win in the midst of a bidding war.

I believe that the west side is poised for the same sort of growth, and it’s getting a leg up from public officials who are espousing the benefits of developing these communities.  In fact, City Council Member Mary Norwood has held bus tours of these neighborhoods to show potential investors and forward thinking city leaders the potential there.

To continue the Virginia Highland example, there are awesome examples of the same type of architecture found in that neighborhood elsewhere in Atlanta for a lot less money.   For instance, the West End and Westview have Va/Hi bungalows built at about the same time; but of course those neighborhoods did not experience the incredible growth and popularity (yet) that Va/Hi has.  In West End and Westview one can purchase one of those bungalows for less than $250,000.  The same bungalow in Va/Hi would cost $650,000 or more.

Once you identify an area of town that is ripe for investment, like the West End, how do you choose the “right” property?  You will want to calculate your ROI, or return on investment.   It’s easiest to illustrate this by example.  Say you decide to buy a property for $200,000.  Your closing costs and some basic repairs on the property cost you about $20,000.  So your cost so far is $220,000.  If you rent out that property for $2,000/monthly, you calculate your return on investment as follows:

$24,000 (yearly income) divided by $220,000 (total investment) = 0.109, or 10.9% ROI

A great return (although keep in mind that you also want to factor in taxes and insurance on the property as investment costs).

Cash is king, and many investors find it easiest to obtain great rental properties by paying cash or using private equity, but if you leverage your investment your return looks even better.  For example:

On that same deal, if I put down 20% for a down payment, my investment is only $40,000 plus closing and repair costs.  With a loan, my closing costs will be higher, so by way of example let’s say repair and closing costs are $23,000 instead of $20,000.  So I’m up to $63,000 cash out of pocket and I’m borrowing the rest.  Say I use a 30 year loan at 4.5% interest – my monthly loan payment would be $811.  If my tenant pays $2,000 a month, that nets me $1,189 monthly, and my ROI looks like this:

$14,268 divided by $63,000 = .22, or 22% ROI.  Unlike the stock market, this is a return that is regular, predictable and which gives you some control over your investment.  And there are other benefits, as John Adams recently pointed out:

  • TAX BENEFITS. You can take a loss for depreciation and apply that loss to rental income OR to regular earned income, lowering your income taxes.  Rental income is not subject to social security tax, and when sold your gain is “long term capital gain” taxes at only 20% federally and 6% in Georgia.
  • BUILDUP of EQUITY. Your tenants’ payments are helping to pay down the balance of your loan, thus increasing your net worth.  This is unique to real estate.
  • This is the tendency of real estate to increase in value over time.  Average appreciation is 4-5% per year.
  • With real estate, you are able to borrow money to buy a larger investment than you might be able to pay cash for.

Real estate can be an amazing investment.  Be sure you have the right professionals on your side, choose carefully, and go for 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 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.