Investor · Suwanee, GA · Member since 2020 · 182 posts · 151 votes
Curious how others are viewing
Valdosta right now.
I've built most of my portfolio here because the numbers still lean heavily toward cash flow. You can find solid SFRs that rent well relative to price, and DSCR deals can still make sense.
But appreciation has been steady, not explosive.
So I’m wondering:
Are you buying Valdosta purely for yield? Rents in the area can only go so high.
Or do you see real long-term appreciation upside? On 3/2 in 1500+ sqft properties seems to have good appreciation in the right neighborhood.
At today’s rates, which matters more in this market to me is appreciation, but need rents to support time it takes to appreciate.
Would love to hear from anyone actively investing here.
I've built most of my portfolio here because the numbers still lean heavily toward cash flow. You can find solid SFRs that rent well relative to price, and DSCR deals can still make sense.
But appreciation has been steady, not explosive.
So I’m wondering:
Are you buying Valdosta purely for yield? Rents in the area can only go so high.
Or do you see real long-term appreciation upside? On 3/2 in 1500+ sqft properties seems to have good appreciation in the right neighborhood.
At today’s rates, which matters more in this market to me is appreciation, but need rents to support time it takes to appreciate.
Would love to hear from anyone actively investing here.
Being a national forum, I’m not from GA, but I think the answer to your question is more global than you think, so will throw one out… but I get you are looking for your local market.
For the most part, you hit the nail on the head… most investors need cash flow to retain their units for time to go by, for appreciation to take place.
I personally live off the cash flow that my portfolio provides me (invested in Central Florida… mostly from purchases between 2018-2021).
What I have seen is that relative appreciation works for all types of properties in all types of markets similarly… but there are differences in starting prices depending on what part of the country you are in. It’s a bit like having different priced stocks in the stock market. A cheap stock at say $65/ share goes up by 30% and saw an increase of $18-20. An expensive stock that maybe costs $650/share also went up by 30%, but saw an increase of $180-200. Stocks usually move similar percentages irrelevant to price. Broadly, I think housing does the same thing. In my market my houses in worse areas increased just as much percentage-wise as did those in nicer neighborhoods.
In my example, the expensive stock is akin to California, versus the cheaper one perhaps Georgia or Ohio? Will there be variances between geography? Yes. But globally if you are seeing appreciation in one market, it’s likely it a wider trend. Obviously other factors can influence the analogy… but the country as a whole has seen significant increase in property values across the recent span - but will vary from region to region based on the same factors that have always influenced real estate prices. Any given market can overheat and need to settle some though, so I’m not claiming a 1 to 1 relationship everywhere… but we are all playing with a similar set of circumstances…. Interest rates, consumer sentiment, etc.
I would tell you that we have always made more money off of appreciation - with it literally going quite insane through the pandemic. Some of our properties more or less tripled in value in a matter of 3-5 years! Several times we sold a single property and used those gains to pay off 2 other properties in our portfolio to boost cash flow immensely!
The norm is steady appreciation…probably 3% per year. That’s what you should likely expect. But outside factors can unexpectedly jump in… just like the pandemic did. With the current administration, it’s hard to know what to expect because politics could be just as disruptive as the pandemic was. Trump wants to force rates down… obviously pressing hard on Powell (even if misguided!), and his new guy comes in this summer to head the Fed. I think the wider board will try to hold neutral (relative to being pushed over)… but that doesn’t mean some unexpected executive order doesn’t come rolling down that turns things upside down. Just like the “board of peace” appears to be trying to displace the UN (my opinion) … imagine if the same thing happened with the Fed… maybe we get a new agency whose purpose is to lend money at a lower rate, because the president has a pen?!?! To that end you have the Freddie/Fannie order to buy billions in mortgages; and look at what happened with large corporations getting locked out of SFRs with the same pen! I’m obviously just grasping at straws, until I’m not! You just can’t know these days! Lol! But the point is it’s harder today to see into the future than in the past because the math has gone more 3-dimensional in the past year.
Regardless, appreciation happens on the much larger number (the purchase price). Cash flow happens on the smaller number (rent). A reasonable 3%/ year increase in appreciation (let’s say on a $300,000 house) is going to give you an extra $45,000 in 5 years if you keep the math simple and not compound, etc. A 5% appreciation in rent/ year - (say it’s on $1,500/month) is going to see rent increase by $415/month at the end of 5 years (compounding). That’s less than $5,000 extra a year in year 5. So I think appreciation is always going to be more valuable and easier to achieve than rental appreciation (as it’s unlikely you could sustain continual compounded 5% increases in rent year after year… as you say, there is only so high you can push them)… but you do need some increase just to keep up with taxes & insurance always moving upward, not to mention keeping up with inflation. But market / property appreciation even at an even-keeled 3% would seem more achievable and will yield significant results over time.
My proposition to you is that regardless of it being Valdosta GA, or central Florida, or California, the same relationships between rent and appreciation hold on some level. I would also suggest that (long term) rental rates have to adjust to market conditions that support the ability for a property owner to rent their property and at least break even (and ideally profit). So as property appreciation continues, so must rent appreciation to some degree. Otherwise new landlords would ultimately not be able to by a house at all, which seems infeasible (long term). Right now, (in the short term) though, many places are out of balance as to that! (Mostly due to the higher mortgage rates and home prices over-heating from the pandemic era.) So some adjustment also has to take place in those cases… which will likely be owners with inflated equity from that pandemic era tire of waiting for their over-priced house to sell and agree to accept less (and still book great appreciation). So maybe it’s a little short term deflation in the over-heated areas, but generally low single digit appreciation.
I haven’t personally invested in Valdosta, and I don’t have many close contacts operating there, but I did want to reach out and say it’s great to hear you’ve had success in that market. That says a lot about your execution and understanding of the local landscape.
I’ve typically stayed away from Valdosta because of concerns around long-term economic drivers and population growth trends. That said, real estate is very nuanced, and there are multiple ways to create returns depending on your strategy, basis, and how well you understand your tenant base. Strong operators can do well in markets others overlook.
If you’ve found a model that works there, then that's great! Success is often more about clarity and consistency in one market than chasing what’s popular elsewhere.
