All Forum Posts by: Dan Mahoney

@Michael C. Yes, I know the area.  I wouldn't bank on the Tyler Perry project revitalizing the broader area, though it's certainly a positive factor.  Keep in mind that the former Fort McPherson is still a walled-in facility with a security gate.  At least for now, outside of the wall you have no connection to what is going on inside.

It sounds like you are thinking about this reasonably and trying to understand the risks.  Good luck.

@Michael C. This is a typical deal for certain intown neighborhoods in SE and SW Atlanta.  You can buy a habitable house for less than $100k but not one in good shape.  In today's market, there is enough demand for rentals that the numbers work.  As your analysis shows, you can make money if you don't get unlucky with tenants or repairs.

You said it was close to MARTA, which stop?

You know you'll have to replace the roof, wiring and tree, but you don't know exactly when.  That seems like an acceptable risk as long as you have the cash to fund these as they come up.  I agree with other posters that this is going to cost substantially more than $3,000.  The roof alone will be more than that.

You didn't mention the condition of the HVAC/mechanical system.  Often times houses at this price point have an HVAC system near the end of it's useful life.  That's another $5,000 check you'll eventually have to write.

Re: @Greg Scott suggestion, you could probably drive value over $100k if you renovated everything, but I would not recommend using hard money and counting on a refinance. Appraisers in Atlanta can't seem to figure out valuation in neighborhoods where recent sales range from $20k-$150k. Sometimes they'll comp you against a boarded up REO and blow up your refi. That risk is ok if you are trying to pull out your own cash but not if you have a HML with the meter running and a looming balloon payment.

@Colin Easterbrook Yes, at a high level, this is a viable strategy, and can provide a strong return on investment if you execute well.  Here are a few things to keep in mind:

1) SW Atlanta is a big place.  Neighborhoods (and individual blocks) vary significantly in terms of crime, mix of renters vs. owner occupants, quality of housing stock, demographics, etc.  You'd be well served to focus on getting to know specific neighborhoods.

2) At the price point you are talking about you will probably find homes that are habitable, but run down, with tenants who pay something like $750/month.  Roofs, HVACs, etc., may be near the end of useful life.  The condition will result in higher repair cost and capital expenditures.

3) These properties take more effort to manage than higher-end rentals.

4) Since most properties at this price point will not pass muster for FHA loans, your exit is going to be to another investor (unless you do a major rehab).

Like with most investments, there is a trade off between risk, reward, time, and effort.  Your choice of where to participate depends on your own preferences.

Hello again @Ruben Kanya.  Georgia requires all real estate closings be handled by lawyers, so you need to find a real estate attorney, not a title company.

I don't know anything about Fayette County but thought it might help you to know what to search for.

@Krista Goodrich @Jorge Kuzmicic  I don't think there is a City of South Atlanta.  If you're talking about the South Atlanta neighborhood within the City of Atlanta, then I agree with you on the potential opportunity. I manage an LLC that owns three properties there in a buy, rehab, rent strategy. I just finished my first rehab in the neighborhood and plan to do a second this year. The third one has title issues that I'm working on. There are only about 500 residential lots in South Atlanta so each renovation makes a difference.

One of the distinctive characteristics of South Atlanta is the presence of an organization called Focused Community Strategies, a Christian ministry that has been working to improve the neighborhood for over 15 years. As a result of this partnership, the neighborhood now has a grocery store, a coffee shop, a bike shop, and an active community association.  FCS has also renovated many blighted properties in the area and sold them to good neighbors.

There are still pockets of blight, but that creates an opportunity to buy abandoned houses and fix them up.  Happy to talk offline if helpful.

@Ruben Kanya I'm focused on the City of Atlanta, so once you expand the discussion to the suburbs I am out of my depth.  

Also, when you said multi-family I was thinking of apartments.  If you are talking about buying a duplex with an owner-occupied mortgage and living in one side of it, that's a whole different discussion.  The question then becomes more about where you want to live (or are willing to tolerate) than the return on investment.  

This may be obvious to you but the most important advice I could give anyone about where to live in metro Atlanta is:  Minimize Your Commute.

@Ruben Kanya Welcome to Atlanta!  I'm curious why you are focused on multi-family.  Cap rates have been trending down and thousands of new apartments are being built right now, which may put downward pressure on rents in the next few years, especially for older buildings.

I'm seeing more opportunity in single-family right now in Atlanta.  That's just my opinion.  Let us know what you are seeing!

@Ara Jo I can't tell whether you are asking whether the neighborhood is safe (i.e., risk of crime) or whether it is a safe investment (i.e., risk of losing money).  Either way, I think Bankhead would be a challenging neighborhood for a beginner investor based in California.  

I guess the possible exception would be if you were working with someone in Atlanta that you know and trust and who has relevant experience.  

If you are relying on strangers from the internet to evaluate, inspect, and repair properties and to find and manage tenants, there are just too many ways you could get scammed (including by the tenants themselves).

@Jamarr Lee @Rene Montelongo I guess a slight difference in Georgia is that attorneys are required to do real estate closings.  So you can't work directly with the title company, you need to contact a real estate attorney and follow their instructions.

I guess the other question is whether you are doing a contract assignment or double closing.  

@Will Chitwood  Yes, that is doable.

Keep in mind that, by definition, you are talking about a neighborhood where houses sell for $100k and rent for $1,000.  I don't know if that counts as "transitional," but you're not talking about an affluent neighborhood in a good school district.  You also aren't talking about newer construction or a high quality renovation, since $100k is less than the build cost for a new house.

On the higher end of your range at $160k, the rent won't be $1,600, it will be more like $1,200-1,300.  This is consistent with @Michaela G.'s observation about cash flow and risk.