Georgia Tech ATL, am I making a terrible mistake?

12 Replies

Hey gang, I am a would-be, turned soon-to-be first time investor, and I'm about to move forward on a property right in the shadow of Georgia tech. it's a small duplex, 1br/1ba each, one of those smaller homes nearby. asking price is 250,000. condition is ok. I've run some numbers, and my realtor is going to run some more with me, but I wanted to see what other Atlanta Investors might tell me? is there something I should know about the area? I'm nervous, but excited, so let me know what you think!

My property is in the suburbs and I'm still new to this as well, but I would be worried about all of the crime that happens on techs campus. Obviously, I'm sure you'll be renting to college students, which isn't a big deal to me.

Good Morning @Kyle Meadors

Surely your agent can evaluate the price of the unit based upon comparable solds in the area and also provide data on the pricing trend for that area (is it increasing or decreasing). The bigger question is whether or not this is a good buy for you? What are the rental rates for this unit? Already leased? What kind of tenants? Is this the best return on your money? $250K for 2 bedrooms worth of rent seems heavy especially with all of the other areas around Atlanta where you could get your feet wet for a much lower price of admission.

I’m not sure how high the crime rate is over in that area. But something is always happening over there. Cruise through the area during the day. If you see a lot of people hanging out during the day. Then they probably don’t have any jobs. Unless you want some headaches you don’t want to be in that type of area. They’ve done a lot of revitalization in that area. Look at the homes on your street and the streets over. See if they have been rehabbed yet. Talk to the neighbors...find out how they like the area.

Lets look at this from an investor perspective. Offer much lower first of all. Secondly you need rent total of at least $2500 for this to be a starting point of an ok deal. If you aren using a loan or house hacking the cash on cash return might be ok if you actually collect $1250 rent per unit. Taxes are likely wonderful. Investors are helping to dry up supply and keep paying higher prices. Comps will not help you because they will only confirm impatient investors are buoying stuff up. You can get a couple condos in Athens, Ga for the same price where the students will definitely be tenants, rents will be $2500 or more. That might also mean 2 loans. Or even get a quad if one comes available for $220,000 in some neighborhoods where rents should be $700 per unit. On the other hand you can keep looking in that's area and go to the Atlanta REIA and Georgia REIA to find some deals.

It's all about risk versus reward.

If you are worth 2 million and buy a 200k property on a hunch with debt and some down and it doesn't work out you usually stub your toe.

If you are worth 250k and putting down 25 to 30% of your worth to buy this property then the consequences of a failed property purchase could be much more amplified.

Your regeneration of capital is key.

If you have 200k that took 5 years to save and make say 70k a year from job or business then having a failed property could derail your investing for future years to come before you recover. If you are making 300k,400k etc. a year then you can build up more capital to overcome mistakes as you learn.

Not mentioned yet is capital costs. Those in town areas tend to have very high property taxes compared to outlining suburban areas. The older buildings could have a lot of future high cost repairs lurking in the walls,ground, ceilings,etc. Those repairs can wipe out years of projected cash flow even if the tenant is paying rent on time. If the tenant is not and you have lost rent, reconditioning the unit costs, and eviction and legal costs, then unforseen capital repairs can put things over the top in a bad way.

Not trying to scare or anything you just need to go into the purchase with eyes wide open. Get opinions from other investors that are not involved in the purchase. Brokers and agents (some,not all) need those transactions to keep happening to pay the bills. It is hard for them to sometimes be objective when they desperately need the money.    

I think the main thing is to really know the neighborhood and even more specifically the few blocks surrounding the duplex. I live very close to the Georgia Tech campus and can tell you there is a wide range of properties within just a couple blocks of each other. That area in particular is one I would make sure you know intimately before taking further action. What is the current rent for this duplex? What is the market rate for rent of a similar 1/1 in a duplex in the area? Are the units rented or vacant? I'd be happy to talk more offline as I own some properties in this area and have boots on the ground around here almost daily.

Thanks for the thoughtful advice! it's certainly an exciting time to be alive! I have run through the numbers myself and I'll be sure to protect myself and not over extend, thanks again for all the propmtness!

@Kyle Meadors The chances of a newbie stumbling across a great deal on MLS that's near GT is close to zero. Keep looking at so many deals in the area that you have little doubt when you see a good one.

Student rentals are more challenging.  Make sure you consider this as you take the plunge.

Thanks Will! I'll definitely read up!

Most GA tech students pay anywhere from from $600 to $900 per room, so $1,250 might be high. Please note I am saying most. I am sure there are a number of them that pay well over $1,000 a month. I know about this because  I have been paying those rents for seven years now.  :)   ( And yes,  I tried a house hack at some time)

Most insurance will NOT let one have insurance renting to college students.  After all, parties, expulsion from housing, drugs, most insurance companies have enough headaches and experience not support investors. 

Free eBook from BiggerPockets!

Ultimate Beginner's Guide Book Cover

Join BiggerPockets and get The Ultimate Beginner's Guide to Real Estate Investing for FREE - read by more than 100,000 people - AND get exclusive real estate investing tips, tricks and techniques delivered straight to your inbox twice weekly!

  • Actionable advice for getting started,
  • Discover the 10 Most Lucrative Real Estate Niches,
  • Learn how to get started with or without money,
  • Explore Real-Life Strategies for Building Wealth,
  • And a LOT more.

Lock We hate spam just as much as you

Create Lasting Wealth Through Real Estate

Join the millions of people achieving financial freedom through the power of real estate investing

Start here