Columbus GA Apartment Buildings

Flipper/Rehabber · West Hartford, CT · Member since 2013 · 128 posts · 52 votes

Does anyone currently invest in Columbus GA? I was sent the financials on a 30+ unit apartment community which appears to have some good upside apart from cashflowing if purchased as-is. All units are 2/2, 1000 sqft and rent for an average of $675. I'm seeing anywhere between $725-$750 for a 2/1, 1000 sqft in the surrounding area.

Can anyone share some thoughts on the area? I know Fort Benning is a staple in the area along with a handful of larger companies including AFLAC. Is this an area worth looking into?

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Andrew Cushman

Apartment Syndication · Southern California · Member since 2015 · 71 posts · 194 votes

@Taylor Shapiro, I have owned a 75 unit property in Columbus for a little over 3 years now. The short version is Columbus is relatively flat in terms of job growth, population growth, and rent growth. And while military spending looks good for the next 4 years, I would be extra cautious about buying a property that relies heavily on a base. Any big budget cuts or troop deployments can quickly put your property in jeopardy.

As is often the case with most cities in the U.S., the north side of town is the better place to be (I have never been able to find a reason for this very prevalent trend!). Higher incomes, better retail, and the majority of the growth. The further south and east you go, overall the demographics get weaker.

Would I buy a property in a market like Columbus? Absolutely. I have in the past and more then doubled the value of the properties, plus created double digit cash flows. The key is to make your money when you buy - your value creation has to be based on finding a property that is well below market and bringing it up to today's market, and not banking on the market to carry you. If the market does increase, that's just a bonus. So that means compared to a booming market like northern Atlanta, in Columbus you would be even pickier about location, demographics, the price you are willing to pay, etc.

For me the bottom line is this - I don't actively hunt for deals in Columbus, but I would definitely buy the right property in the right part of town for the right price. In doing so, I would only plan on improvement from my efforts, and not from an overall increase in the market.

I hope that helps!

Andrew

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Brent Shryock
Real Estate Lender · Jacksonville, FL · Member since 2015 · 86 posts · 51 votes
9y
We are a CRE financing firm with office in Columbus Ga. We have done quite a MF deals in Columbus market and know it well . We are closing an 30 unit tomorrow. If you would like to call to discuss the market hit me up on PM and Ill give you my contact info.
2 Reply
Andrew Cushman
Apartment Syndication · Southern California · Member since 2015 · 71 posts · 194 votes
9y
@Taylor Shapiro, I have owned a 75 unit property in Columbus for a little over 3 years now. The short version is Columbus is relatively flat in terms of job growth, population growth, and rent growth. And while military spending looks good for the next 4 years, I would be extra cautious about buying a property that relies heavily on a base. Any big budget cuts or troop deployments can quickly put your property in jeopardy.
As is often the case with most cities in the U.S., the north side of town is the better place to be (I have never been able to find a reason for this very prevalent trend!). Higher incomes, better retail, and the majority of the growth. The further south and east you go, overall the demographics get weaker.
Would I buy a property in a market like Columbus? Absolutely. I have in the past and more then doubled the value of the properties, plus created double digit cash flows. The key is to make your money when you buy - your value creation has to be based on finding a property that is well below market and bringing it up to today's market, and not banking on the market to carry you. If the market does increase, that's just a bonus. So that means compared to a booming market like northern Atlanta, in Columbus you would be even pickier about location, demographics, the price you are willing to pay, etc.
For me the bottom line is this - I don't actively hunt for deals in Columbus, but I would definitely buy the right property in the right part of town for the right price. In doing so, I would only plan on improvement from my efforts, and not from an overall increase in the market.
I hope that helps!
Andrew
13 Reply
Kanwar Sodhi
Real Estate Agent · Chantilly, VA · Member since 2016 · 245 posts · 61 votes
9y
Great Advice, very inspirational. I hope I can get to your caliber one day @Andrew Cushman
1 Reply
Anthony Dooley
Investor · Columbus, GA · Member since 2014 · 2k+ posts · 1k+ votes
9y
I know the market well and I am not only an agent, but an investor in Columbus, GA. The base is not just an employer of Soldiers, which come and go, but also thousands of DOD civilians and contractors. As with any investment, know your market.
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Taylor Shapiro
OP
Flipper/Rehabber · West Hartford, CT · Member since 2013 · 128 posts · 52 votes
9y
@Andrew Cushman, @Anthony Dooley thank you for sharing some thoughts. I'll need to dig a little further into the area. I was sent a few OMs on some 30-40 unit apartment buildings in Columbus. The financials on several deals show a gross operating expense of 26%-30% GOI, third party management fees included. In Connecticut, expenses typically equiate to 45-50% of GOI.
Is 26-30% expenses typical for Columbus and surrounding areas?
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Account Closed
Professional · Brooklyn, NY · Member since 2017 · 624 posts · 147 votes
9y
@Taylor Shapiro What is the seller trying to get for it in terms of price? At $675 per unit, 30 units, 7% vacancy rate, you are looking at: $225,990 in gross rent from the property per year. Whats gross rent in that range worth to you? How would you be financing? Cash or with some debt?
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Steve Babiak
Real Estate Investor · Audubon, PA · Member since 2009 · 13k+ posts · 8k+ votes
9y
Originally posted by @Andrew Cushman:

@Taylor Shapiro, ...
As is often the case with most cities in the U.S., the north side of town is the better place to be (I have never been able to find a reason for this very prevalent trend!). Higher incomes, better retail, and the majority of the growth. The further south and east you go, overall the demographics get weaker.
...
Clearly you have not been to North Philadelphia ...
2 Reply
Chris K.
Attorney · Nashville, TN · Member since 2015 · 1k+ posts · 1k+ votes
9y
@Steve Babiak
Philadelphia is unique in many ways. :)
1 Reply
Taylor Shapiro
OP
Flipper/Rehabber · West Hartford, CT · Member since 2013 · 128 posts · 52 votes
9y
@Account Closed based on the financials I was given, expenses are $90,000 annually. At a 7.5 CAP the property would be worth $1.813M if average rents are $675, 32 units in total. They're asking $2.6M. It's a smaller market so I could get a freddie backed loan for 75% LTV.
I'm not sure what you mean by "what's gross rent in that range worth to you?". Can you elaborate? I'd be syndicating the deal, raising funds from private investors at a 7% pref, 65/35 split investors/myself.
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Taylor Shapiro
OP
Flipper/Rehabber · West Hartford, CT · Member since 2013 · 128 posts · 52 votes
9y
@Steve Babiak the North end of Hartford CT is nothing to write home about either :)
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Account Closed
Professional · Brooklyn, NY · Member since 2017 · 624 posts · 147 votes
9y
@Taylor Shapiro So it's worth $2.6 million according to the seller but we don't know how they arrived at that amount. What it may be worth to you (or some other investor) may differ hence the question -- whats it worth to you? Would you for instance pay the $2.6 million?
The 7.5% cap rate does seem high -- is that also from seller or based on the market/area? Sellers' expenses and your expenses may also vary although sellers' is very close to 40% which isn't particularly unusual.
The property's revenues could often be used to estimate its value based on market data. So if I look at some 10 publicly traded residential apartment owners in the country: AVB, ESS, CPT etc... as a group, their numbers should reflect ballpark trends within the industry -- keyword being should.
The average price-to-sales for the group = 8.5 and median price-to-sales=8.8 (think gross rent multiplier). So the market seems to be suggesting the value of an apartment complex is or should be about 8.5 to 8.8 times its sales/revenue.
I initially used 30 units to compute the revenue for the property but if its actually 32 units as you mentioned subsequently, assuming the 7% vacancy, then range of market value for the property might be between :
32 * 675 * 12 * .93 * 8.5=$2,048,976 or ($64,030 per door)
32 * 675 * 12 * .93 * 8.8=$2,121,293 or ($66,290 per door)
This might suggest at $2.6 million it may be slightly overpriced. Some may even say that it may still be overpriced at $64,000 to $66,000 per door for the area.
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Joel OwensBusiness Member
Moderator
Real Estate Broker · Canton, GA · Member since 2010 · 15k+ posts · 11k+ votes
9y
30 units at 675 = 20,250 X 12= 243,000 expected gross income
243,000 X .50 = 121,500 at a 10 cap is 1,215,000, 8 cap is about 1,500,000
If landlord pays sewer and water figure about 55 to 60% off of GOI for total expenses.
26 to 30% GOI they are claiming is TRASH. That's laughable.
Some of these operators put lipstick on it and stabilize a few years and claim with (newly rehabbed) expenses are low. Sure maybe the first year or two but all that old stuff that wasn't fixed comes home to roost and crushes your cash flow.
I have lived in GA all of my life and know it well. The Atlanta MSA area is over 20 plus counties where most of the growth is happening. You have a couple other pockets like down by Savannah. I stay away from ONE ECONOMY TOWNS where a major employer can sink an area and leave only some small local businesses that cannot sustain an area.
30 doors is not enough for a remote syndication. You will have a hard time raising capital being newer and for a remote area like that. Syndicating in a major metro tends to make investors feel more comfortable about placing capital and quantifying risk.
Multifamily you typically need about 80 to 100 doors to be able to employ a full time repair person on site for these older buildings.
Frankly the sellers and listing brokers are looking for unsophisticated buyers trying to buy out of state and also 1031 buyers with short fuses. They are looking for these suckers because the local investors know better about how much to pay. The last thing you want to do is buy something at a mediocre cap rate in a marginal weak suburban to rural area at the height of a cycle and be burdened with high debt service.
I saw this happen to a client where I came in later on and helped them sell a 60 unit property. They paid too much at the height of the market so had to short sale it and they were local to the area.
The good areas at high cap rates are already gone in GA. That cycle has passed. Now you have people selling at 4 caps in California and buying in other states at 7 caps directly. 9 or 10 caps is a pipe dream now at least in areas I would buy.
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Joel OwensBusiness Member
Moderator
Real Estate Broker · Canton, GA · Member since 2010 · 15k+ posts · 11k+ votes
9y
The 7% pref you mentioned you would need an 8.5 cap and up or higher. Getting a 7 pref on a remote asset like that sounds difficult. If you were talking main MSA area then maybe. Remote like that likely the investors will want higher returns for the extra perceived risk unless maybe buy in is very small like 20,000 or something.
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Account Closed
Professional · Brooklyn, NY · Member since 2017 · 624 posts · 147 votes
9y
@Joel Owens He mentioned it actually was 32 units. Also, where are you getting 10% cap rate from for Columbus GA? Is that the market rate or just something personal?
Average home values in the area (according to Zillow) is about $88,200 and apparently median rent $850. With a 4.07% mortgage (current rate) and 100% conventional financing, mortgage payment would be about $425.
If we apply the 50% rule here (sure it doesn't apply to every case), both expenses and NOI=$425 each. Cap rate therefore would = (425 * 12)/88200 or 5.78%.
@Taylor Shapiro That seems like some ways from both 7 or 10%.

The article here also suggest a recent walmart buy in Columbus GA at a cap rate
of 4.68% - slightly variant space (retail) from apartments but quite a difference.

http://www.globest.com/sites/jenniferleclaire/2016...
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Joel OwensBusiness Member
Moderator
Real Estate Broker · Canton, GA · Member since 2010 · 15k+ posts · 11k+ votes
9y
It was just an example and has nothing to do with Columbus market.
Personally if I am buying 7 caps it IS NOT in Columbus GA. That would be in areas of Atlanta MSA area that are highly desirable with long term rent growth upside in affluent areas.
To go out in Columbus etc. the cap rate and cash flow would have to be really high to take a look. The investors that pay lower cap rates in those areas tend to be local and understand the market there intimately.
No way would I pay a 4.68% cap for a Wal-Mart in Columbus.
Would rather have a 5 or 6 cap in Johns Creek GA if that was the strategy. If that box ever goes vacant it tends to be worth more in affluent areas for redevelopment.
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Taylor Shapiro
OP
Flipper/Rehabber · West Hartford, CT · Member since 2013 · 128 posts · 52 votes
9y
@Joel Owens and @Account Closed I appreciate the feedback. You mentioned a few variables that I hadn't considered initially. This was a big help.
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Anthony Dooley
Investor · Columbus, GA · Member since 2014 · 2k+ posts · 1k+ votes
9y
6% Cap on a commercial property is about as much as you will see. This would be a class A property with minimal repairs. 7% is a fixer and a 10% cap is a property in a declining area and or with a lot of needed repairs.
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Joel OwensBusiness Member
Moderator
Real Estate Broker · Canton, GA · Member since 2010 · 15k+ posts · 11k+ votes
9y
My point is that I look at over 1,000 properties a week nationally for clients to review. I only like about 10 to 15% of them. Someone buys them but not my clients because I do not want them buying overpriced junk where the stakes are high they will lose money and incur problems in the future.
If I am looking at a 6 to 7 cap in Columbus it doesn't make sense. Give me Johns Creek, give me Woodstock GA, etc. that are growing like crazy with phenomenal median income and population levels.
If I have to take the 6 to 7 cap I want it in a very strong MSA suburban market and not something isolated on the fringes of a state.
I know little to nothing about Columbus GA but I do not see it stacking up toe to toe with many other parts of GA especially for low cap rates.
I just can't be sold on small development pockets for low cap rates. Long term I think it is a risky play. If a local investor has a portfolio there and can mix things up for a blended return then it might make sense.
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Anthony Dooley
Investor · Columbus, GA · Member since 2014 · 2k+ posts · 1k+ votes
9y
@Joel Owens I don't disagree with you. I'm sure there are better markets, especially around Atlanta because there are so many sub-markets to the overall metro. I buy in Columbus, GA because I know it. I wouldn't suggest anyone buy in an area they don't know. I do suggest turn-key stuff for people out of state because it isn't a speculation. The renter is there and under management already, so they know the cash flow going in. I will eventually expand my multi-family shopping to ATL, mainly because there is more to choose from.
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Lynie Arden
Real Estate Investor · Ashland, OR · Member since 2011 · 7 posts · 0 votes
9y
I'm looking at a couple of turnkey rentals near Troy U. I'm OOS and don't normally do buy and holds, but the opportunity appeals to me. Any opinions on the location or SFR rentals in general in Columbus?
0 Reply
Dennis Genaw
Investor · North Wales, PA · Member since 2017 · 3 posts · 0 votes
9y
There are better markets in GA than Columbus. Especially when investing in smaller properties.
0 Reply
Dennis Genaw
Investor · North Wales, PA · Member since 2017 · 3 posts · 0 votes
9y
Originally posted by @Steve Babiak:

Originally posted by @Andrew Cushman:
@Taylor Shapiro, ...
As is often the case with most cities in the U.S., the north side of town is the better place to be (I have never been able to find a reason for this very prevalent trend!). Higher incomes, better retail, and the majority of the growth. The further south and east you go, overall the demographics get weaker.
...
Clearly you have not been to North Philadelphia ...
0 Reply
Dennis Genaw
Investor · North Wales, PA · Member since 2017 · 3 posts · 0 votes
9y
For Philly, go real far North and North West. It gets better
0 Reply
Anthony Dooley
Investor · Columbus, GA · Member since 2014 · 2k+ posts · 1k+ votes
9y
@Taylor Shapiro are you still looking at the deal that you mentioned? Is it under contract? I see that it is not listed for sale anymore.
0 Reply
John Watson
Specialist · Loganville, GA · Member since 2017 · 17 posts · 3 votes
9y
Anthony Dooley , Hey Anthony, I noticed you are from Columbus, I am looking at a deal that way on a 3 unit, and wondering if you know any good property management companies I could get in contact with?
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