In a volatile housing and stock market climate, many investors look for investments that provide stability and predictability. The Atlanta area holds tremendous appeal in terms of short-term stability and long-term potential.
With an economy diversified across many industries, Atlanta is impacted less severely by industry-specific changes. A booming business and financial community is drawing an influx of young adults seeking jobs and an affordable urban lifestyle; this youthful population provides further stimulus for the economy. A sprawling metropolitan area offers plenty of opportunities for investors.
Strong economy and job growth
Atlanta “has a really good job market,” said Suzanne Close, a realtor who specializes in high-end suburban properties. A consistent influx of jobs negates the impact of company layoffs and plant closures such as the recent Ford plant closure, she said. “More and more companies seem to be moving to Atlanta because of the stable economy and affordable housing,” she said.
“Atlanta has affordable housing, there’s lots of jobs here, and I don’t see that ending anywhere in the foreseeable future,” Bob McDonald, an agent who specializes in commercial downtown properties, said.
While much of the nation saw real estate price inflation and a subsequent downturn, Atlanta experienced more of a consistent growth pattern. “We have not had the dips and highs that the rest of the country has,” local realtor Allison Kloster said. Instead, Atlanta has “maintained an even, steady growth pattern, which is what Atlanta has really been known for in the real estate market,” she said.
Kloster, who specializes in the North Fulton County and Alpharetta areas, said Atlanta will continue with the “more conservative trend of maybe 4 to 5 percent a year” with “consistent appreciation over time.” Because of the recent nationwide housing market downturn, “people are just leaning towards a market that offers them more predictability,” she said.
“Atlanta still has very reasonable real estate prices, which is why our market hasn’t been affected like a lot of the other real estate markets,” Close said. “We haven’t had the so-called ‘bubble.’”
“When the rest of the nation’s economy is crashing, we’re still plugging along,” Robert Locke, a local real estate agent, investor and property manager, said.
Atlanta’s tendency toward urban sprawl is one reason for its consistency, Locke said; because Atlanta has no natural boundaries, “it’s easy to drive a little further out” from Atlanta for cheaper land. This means the market is unlikely to experience huge short-term growth, but “you also don’t see the big downturn,” he said. Overall, urban sprawl keeps the Atlanta real estate market less volatile, he said.
Young professional influx
A strong economy with plenty of job opportunities and an affordable urban lifestyle has attracted a young adult demographic of people aged 25 to 34 to the Atlanta area. According to the “Young and Restless” study conducted by Joe Cortright of Impresa Consulting and Carol Coletta of Coletta & Company, Atlanta outpaced the other 20 largest metropolitan centers in growth of this demographic, with a 46 percent increase from 1990 to 2000.
“Young, upwardly mobile professionals,” often want to live in the downtown metro area at first, McDonald said. Locke and McDonald agreed that most young people want to rent in the city for two to three years and settle into a career before buying a home.
Young professionals “like living close to the city, they like being close to the downtown area, but they also like living in neighborhood villages where they’re close to shops and restaurants,” Jody Kell, an agent who specializes in the “intown” Atlanta market, said.
Those who decide to settle “in the perimeter” of the city are often dual-income couples without children, Kell said. When they decide to buy in the city, “they’re looking for starter homes,” he said. This population is most likely to be first-time buyers or occasionally trade-up buyers.
Singles “want to be in town because a lot of them work right downtown and they want to just jump on the train,” and avoid the terrible traffic for which Atlanta is notorious, Close said.
Members of the 25 to 34 age group who marry and decide to start families are more likely to shift to a suburban lifestyle for its safer neighborhoods and better schools. Suburbs within commuting distance to Atlanta will always be in demand, and those with their own employment centers, such as Alpharetta, offer even more stability because they attract residents who work in the suburb as well as those who commute to Atlanta.
Retirees
Young people are not the only demographic trend with a significant impact on the area; the retiree and near-retiree population is undergoing notable changes as well. Like many retirees across the nation, retirees in the Atlanta area are downsizing; many are moving closer to downtown as they downsize. Close said that although it surprised her at first, she has seen “older people selling their houses and moving into town.” They “want to be where they can walk to restaurants,” she said. “They love to go to the theater, or they love to go to the symphony, and they don’t necessarily want to commute” from the suburbs into downtown.
Kloster has seen the development of manor home communities that appeal particularly to retirees. “They’ve done their thing with the house, they’ve had the big house, they’ve raised their family, now their kids are in high school or getting ready to leave for college or have already gone,” and the parents are buying manor homes that have “virtually no lot, but the inside of the home is trimmed in such a fashion that they were accustomed to.” She said these homes are high-end properties that eliminate or reduce the need for landscaping upkeep.
Pre-retiree couples may move from the suburbs to smaller residences closer to downtown after their children leave the nest, and this opens up an opportunity for investors, McDonald said. In neighborhoods that are 25 to 30 years old, investors can purchase a home from downsizing retirees for a good deal, “put it into a rental program and just let it tick right along,” he said.
Atlanta’s many lakes, especially Lake Lanier, offer attractions for retirees who want to live near the water. McDonald noted that the Lake Lanier area is already experiencing increased growth and demand. The Atlanta area is also known for golf, an activity popular with retirees. The year-round warm climate and proximity to their children who are now young adults with families living in the suburbs will provide a strong appeal for retirees to remain in the area, whether in the metro area or the bordering retirement communities.
Rehab and flip opportunities
Atlanta’s urban sprawl means that new construction is constantly occurring around the edges of the greater metropolitan area. This keeps prices relatively low, since inexpensive new properties are always available just a little further out. It also means that profitable rehab and flip opportunities are concentrated close to downtown, as far as possible from the competitive new construction with its low prices and updated amenities. “Inside the perimeter is the hottest area of growth,” Kell said.
The closer a property is to downtown, “the more potential it has to go up quicker, and your return is going to be a little bit better,” Kloster said. Properties closer to downtown Atlanta are older, since less new construction is happening in the city, and older properties require more renovation. “But if you’re willing to do that, that’s the biggest and best return of your money,” Kloster said.
“There are lots of opportunities” near central Atlanta for investors willing to do the work to upgrade a home, Kloster said, “because people are just not willing to do any work now. The buyers that are coming in are just simply wanting to buy a home that’s ready to move in.” They are willing to spend more to get a finished product rather than spend less and upgrade it themselves, she said.
Rehabbing and flipping is less successful in the suburbs, Close said, where new construction is a competitive threat. “The trend seems to be towards new construction,” she said, and “people aren’t interested in old construction” in high-end suburban areas.
Buyers “just want to move in; they don’t want to do anything,” Close said. “They would rather pay more and not have to do anything for a primary residence.” She attributed this to the fact that people are busy and don’t want to deal with construction costs and complications.
The trend in the suburbs, Close said, is “a very different trend than in town.” Renovations in town are much more common and more profitable, she said. Buyers in town “look for the older home that’s on a more prestigious street,” she said, and they are willing to put in the money to renovate it. Even less desirable downtown areas are beginning to undergo renovations; “people are buying those little houses, those little row houses and fixing them up and flipping them,” she said.
Nate Mack, a local real estate investment specialist, warned those looking to flip or rehab property in Atlanta that “the only thing that adds value to your property is square footage and location.” He encouraged investors to focus on the number of bedrooms and bathrooms and the quality of the area rather than amenities.
Buy and hold
A long-term buy and hold strategy is another way for investors to profit in the Atlanta market. “Buy and hold will always be the millionaire strategy,” Mack said. “If you’re going to be in the business, that’s what you’re going to have to learn to do. You have to learn to buy and hold. You have to learn how to access a good purchase price, appreciation, depreciation.”
“The whole trick is to never sell real estate,” Kloster said, “just keep buying it.” Atlanta’s consistent appreciation will enable long-term holders to profit.
Single family homes and multi-family residential properties offer opportunities for investors looking for long-term appreciation and short-term cash flow. In recent years, Close said, “when the interest rates got so low, everybody was buying rental property,” and competition for tenants increased. Now the rental market is recovering, she said. Single family houses are in demand with tenants who have pets, since pets are not allowed in most large multi-family communities, she said.
Overbuilding of condos and townhouses
Most experts do not think condominiums and townhouses offer exciting opportunities in Atlanta’s current market. Close is concerned with overbuilding in general and specifically with multi-family properties. She said she would “definitely be afraid” of investing heavily in a multi-family situation.
“I don’t like condos in Atlanta as an investment with a small exception of a couple of properties,” Kell said. “There’s just such a glut of product on the market.”
Unlike many areas of the nation, where townhouses and condos are in demand because they are all an entry-level buyer can afford, Atlanta is “a sprawling community where single family is the norm,” Locke said.
Because single family homes are affordable, “the townhome community is not what you should be buying as an investment property. They do not appreciate as well in this town,” Locke said. However, “everything is worth buying at a certain price,” he said.
Investment Opportunities in Atlanta
Real Estate: Residential Rentals, Rent-to-Owns (Lease Options) & Foreclosures
As subprime lenders get out of the market or raise their standards, fewer people will qualify for home loans. Atlanta has attractive real estate prices in comparison with other national markets and provides opportunities for cash flow. A young population and high foreclosure rates could provide a good base of people who may not yet qualify for home loans on their own and who may be interested in rentals or lease options. The high foreclosure rates could also provide an opportunity for investors to purchase rental property at below market value.
Business: Capitalizing on Trends
Businesses that cater to metro Atlanta's young adult population are likely to do well. For example, franchises such as Jamba Juice or The Pita Pit could succeed by appealing to this demographic. Wedding-related businesses will probably boom as these young adults find mates, and businesses catering to children and parents will expand as they begin families. Investors wanting to cater to the baby boomer generation may consider active adult services that focus on health, fitness and personal care.
Other Investment Opportunities: Tax Deeds
Patient, long-term investors can profit from Georgia's redeemable tax deeds. Investors receive a flat 20 percent penalty if redemption occurs, which creates the possibility of a 240 percent annual return. If the owner does not redeem, the investor can receive the property. Either strategy can provide excellent returns, as long as investors minimize risk with careful research.
