Investment Real Estate 102: What is a Cap Rate?

Previously, I posted a blog that addressed investment real estate for beginners.  In general, I wanted to outline some key things to consider when purchasing real estate as an investment.  Now I would I like to delve a little more into determining a value for investment property.  Value and price are obviously important components of buying an investment property, and there are many tools that people can use to find a value.  In general, I do not adhere to one set rule for finding value.  I have found that each property is different and there are numerous factors you need to consider. download  But many investors use certain methods to evaluate properties.  For instance, gross rent multipliers, internal rate of return, and cap rates.  All three are useful ways to compare and value investments. But the most commonly used is probably the “cap rate” or “capitalization rate”.  You may or may not have heard people use this term.  It can be confusing and misleading to buyers or new investors.  I am not a text book writer, but I will try to explain or clarify the term and its use in real estate.

Generally, speaking the capitalization rate is a valuation used to compare real estate investments.  A cap rate seeks to find a ratio in the relationship between a property’s income and its purchase price or value.  To find the cap rate, you need to determine a property’s “net operating income” or NOI.  Net operating income is all the income for a property minus the operating costs.  For the purposes of a rental property, the operating costs include: property taxes, insurance, hoa costs, management fees, and other maintenance.  When calculating NOI they DO NOT INCLUDE:  debt, depreciation, income tax, and improvements.  For example, if a property makes $18,000 a year after property taxes, insurance, etc. than the Net Operating Income (NOI) is $18,000.  Please remember this DOES NOT INCLUDE a mortgage payment.  Once you know the NOI you can find a cap rate.  Below is a simple formula used to calculate a cap rate:

Net Operating Income(yearly) / Price = Cap Rate

Conversely

Cap Rate X Price = Net Operating Income

It is a fairly simple formula. But you may have noticed something about this formula.  Where do you get a number for price? CAP-Rate-balance Without price you cannot determine a cap rate.  So essentially, you can make a cap rate whatever you want.  One could simply make the price as high or as low as they want.  What you need to understand is that the “cap rate” is just a way to express the relationship between the price and income.  It is not ideal for finding value but better used to compare properties.  Sellers offer investments at a price with a cap rate in mind but the real price is not determined until it is sold.  In general, a higher cap rate means a lower value, but that could be a sign of a good buy depending on the market.  You need to remember that cap rates are specific to the area.  If cap rates are 7% in your area, and you find something at 9% than you may have found a good deal.  But if cap rates are 11% in an area, and you find something at 9% than it may or may not be a good deal.  Be sure to understand all the circumstances surrounding a property.  This is another reason why it is helpful to find a professional to help you because knowing the local market is crucial when looking at cap rates.

I never like to talk over a client’s head, and cap rates seldom come up when I am working with someone to buy student rental property in Athens, GA.  But it is a tool for many investors, and it never hurts any investor large or small to understand value methods.  In the end, I am not a huge fan of cap rates.  Expenses can vary year to year especially for large items and the interest rate on the mortgage is not considered.  There are many types of investment properties.  Hotels, warehouses, and commercial office buildings just to name a few. And cap rates are often be more applicable to these larger income properties.  They can be useful, but it is not necessary for new investors to get too caught up with cap rates when buying individual rental properties.

If you have any questions or real estate needs, please don’t hesitate to contact me or visit my real estate brokerage firm, 5 Market Realty.

College Football Week 4: Final Thoughts & A Look Ahead

Georgia- Saturday’s game was about what we expected.  Georgia came out a little flat, but overall they took care of business.  There is not much to say about the Southern game.  I was glad to see Nick Chubb(pictured) get his 12th 100 yard game, but I was a little concerned about the O-line’s slow start.  Chubb vs southernLet’s hope that will not be the case this Saturday.  Hard to write anything about UGA this week and not talk about Bama.  So what hell, I am going to go ahead and talk Bama.  This is a big one for both teams but for different reasons.  The game was always going to be a huge match up, but now it means different things for these teams.  Georgia needs a win because they need to validate their ranking.  So far, UGA hasn’t really played anyone, and the smart fans know it’s true.  In addition, Mark Richt has developed a reputation of losing big games.  One could argue if this is fair or not, but losing this game will not help that perception.  The UGA fan base needs this win too.  Last year fans suffered through 3 bad losses to South Carolina, Florida, and Tech.   Georgia needs a win on Saturday to prove to the fans that the program is progressing in the right direction.   For all of these reasons, Saturday is important for Georgia.  But it may be even more important for Alabama.

Ole Miss handed Alabama an early loss, and the natives are growing restless.  Some fools are even calling for a new head coach. You have to understand that Alabama fans tend have a short memory.  Most seem to have no recollection of 1994 to about 2006.  That and many other reasons are why Bama’s fan base is one of the most despised in all of football.  Don’t get me wrong there are plenty of lovely Bama fans.  But too many are just over the top, and Paul Finebaum has made a nice career for himself by introducing these rabid fans to America.  Fan base aside, Bama needs to win this game more than Georgia.ala_georgia  Alabama expects to win the SEC West and contend for a national championship every year.  If they lose this game those aspirations are likely done.  Granted, if any team can win it all with 2 losses it would be Alabama.   Nevertheless, winning the SEC West becomes very difficult with 2 losses, and LSU looming in the future.   So basically, Alabama has to win Saturday to stay relevant this year.  That is a scary thing if you are Georgia fan.  Before the season began, I called for UGA to win this game.  I am going to have to go back on that one.  I think the circumstances have changed and Alabama may pull this one out.   I really hope that I am wrong, and nothing would be please me greater than to be wrong.   However, if I am right, and the Bulldogs lose on Saturday don’t fret.  All is not lost.  Losing to Alabama will not matter if Georgia can take care of business the rest of the season.  Regardless, pull hard for the Dawgs on Saturday and let’s see if they can win a big game at home.  GO DAWGS!

Tennessee– WOWSER!  Can you believe they lost that game?  What happened to brick by brick?  893110I mean come on man.  I didn’t get to watch all of this game Saturday because the wife and I had an unexpected opportunity to leave the kids and go out.  We went to NONA downtown, and I kept an eye on this game until the 4th quarter.  I really thought Tennessee was going to win, but when I came back to check on the score they had lost the lead.  In spite of that, they still had a shot to win with a field goal.  Hell, they even got two attempts at the field goal and still lost.  GEEZ!  I am no Tennessee fan, but I really can’t stand Florida.  So I was pulling for the Vols.  I could go on to discuss Butch Jones as their coach.  But I will hold off on any further Tennessee comments until next week.

Georgia Tech– They lost to Duke and it was great.  That makes two losses in a row for Coach Paul Johnson who had no problem hanging 60 plus points on lesser opponents earlier this year.  I am not a big fan of blowing out a team by 55 + points.   Georgia+Tech+v+Duke+XLkTi78gLUqlSome argue that it is the other team’s job to stop them from scoring.  That is true up to a point. For example, if a boxer knocks someone down three times in a round they call it a TKO.  When a team is winning by 45 Points it is essentially the TKO of football.  A class act would not keeping scoring.  You may have inferred that I do not care for Tech or Paul Johnson.  But I will be fair and admit that he is a good coach.  I will also admit that they lost to good teams.  But that is all I will do.  Boo Tech, Boo Paul Johnson, and Boo their offense.

Oregon– This past weekend was full of delights.  Tech and Auburn lost which is always fun for a Georgia fan, but no one saw Oregon losing so badly.  Utah, who is apparently pretty darn good, blew them away 60 to 20.  Living in the Southeast, I should not really care too much about Oregon.  As a child, I kind of liked them because they never played UGA and their mascot looked like Donald Duck, a childhood favorite.   Of course, Oregon would eventually establish themselves as a legitimate college football power.  I had no issue with Oregon initially, but now I can’t stand them.  I am just TOTALLY fed up with the damn uniforms(pictured). 630x420_OregonDucks They are AWFUL.  Oregon and Nike are responsible for all of these awful looking uniforms.  Remember that terrible Nike Pro-Combat get up that UGA wore against Boise State?  Worst Uniforms EVER!  Do you know who is to blame? Phil Knight, Nike, and Oregon are to blame.  So BOO Oregon.  In addition, my oldest son now wants to wear neon colored shoes and socks.  Therefore, not only do I have to see great uniforms ruined, but I have to argue with my son about sock color.  I long for the day when Oregon fades back into college football obscurity.  But I fear that day may never come.

So Called “Football Geniuses”- I must be in a bad mood because a lot of this post seems to be a gripe.  Oh well, I guess I will keep on griping.  Are you familiar with how often the term “genius” is thrown around today? It is so overused but especially when it comes to football.  Aren’t you sick and tired of hearing how some football coach is a “genius”?  I know I am. Allow me to clarify a few things.  Albert Einstein was a genius.  albert-einsteinStephen Hawking is a genius, but Gus Malzahn is NOT A GENIUS.  And guess what?  Neither are Steve Spurrier, Nick Saban, and Chip Kelly.  They are football coaches not geniuses.  Are they good football coaches? Yes, and I am sure they are very smart men.  But how in the world does winning some football games make one a genius?   Well guess what? These four so called geniuses have combined for 7 losses this year and it’s not even October.

5 Points: Thoughts on the Springdale Rezone Proposal

You may or may not be aware, but a proposal to rezone a tract of land on Springdale was recently denied here in Athens.  The property is located at 348 Springdale street(pictured) right in front of Stanton Way and adjacent to the end of Rocksprings.  Currently, there are two existing houses and a tennis court on the site.  The property was recently for sale and is now under contract with a builder/developer.  348 SpringdaleIn general, the rezone proposal was submitted to increase the density of the land.  The property is currently zoned RS-15 which means it can be subdivided into 15,000 sq. ft. lots.  That would currently yield around 6 houses or lots.  The plan submitted wanted to achieve 14 townhome sites for an “age in place” style development.  Basically, the builder was planning to develop the site into high end town homes targeted to a 50 + age group.  In theory, it would be very similar to the “Villas at 5 Points” which are located where Westview meets Lumpkin.  It sounds simple enough but rezones can sometimes be quite difficult.

The proposal was denied, but in my opinion the overall idea was sound and could fill a much needed void in the market.  I do think that the proposed development was flawed and needed to be improved.  But I do believe the location could be utilized for an “age in place” development if it was done wisely.  In my job, I often talk with clients that would love to live close in to town with plenty of space and low maintenance.14656703  We have a huge population of people that are getting ready to retire.  You may have heard of them.  They are called “baby boomers”.  That being said, Athens is now an ideal place for people to retire.  We all know that Athens has a lot to offer young people and families.  But when you think about it has a lot to offer someone over 60 as well.  In some cases, people just want to come back to live in Athens because they went to school here and love our city.  So what happened? Why wasn’t it approved?

Keep in mind these are just my opinions and you can agree or disagree.  First, of all when someone wants to increase density in Athens people tend to get their guard up.  Their guard goes up because increased density often brings the dreaded “college students”.  I say this with some distain because I don’t understand why so many people in town dislike the students when our entire economy is based on them living here.  In any case, this proposal was not targeted or designed to sell to UGA parents. 348 Springdale Sign Granted, sometimes you cannot keep a parent from buying a nice property in any location.  But I feel confident the builder intended to market this project to older citizens.  However, some folks in town do not agree.  They felt it was a cover to build more student housing.  I have to admit that student housing is not the ideal use for the neighborhood.  Nevertheless, Towne Club, a wildly popular student community, is located on Springdale and has been for many years.  In fact, there are many rental properties in the immediate area.  Regardless, Springdale remains a great street and a desirable location to buy.   On the other hand, there are some that just don’t think it would work because of the site’s location.  I can understand some of those objections, but there just aren’t many sites like this left in the 5 Points area.  The location is a block from Cloverhurst and down the street from Milledge and Baxter.  In theory, any resident could walk to dinner or a football game.

As I stated earlier, I think the plan as proposed would need to be improved, but I was disappointed to see how vehemently it was ridiculed and denied.  Many residents in the area dismissed it immediately and never gave it much of a look.  For instance, many people on the “Friends of Five Points” list serve immediately rejected the idea.  That being said, the builder did not hold an open forum to discuss or educate people in the area about the proposal.  It may have been helpful if residents could have had an opportunity to hear or see the vision for the property.  Every citizen of Athens is entitled to their opinion.  And many of us have different ideas about what is good for our beloved town.  I never want to discourage conversation, and this project is an example of poor communication and little conversation.  It may have had a chance with a little more positive input and of course some changes.

Thanks to our fantastic university we have a very diverse population.  It is one of the best things about our town.   We have so many different people with different world views living in this small college town.  I think Michael Stipe once said, “What makes Athens so great is that it is so very southern yet so very accepting of different people.”  Maybe he never said that, but I was once told that he did and I liked it.  If he didn’t say it than someone did.  So we have a great town with all these great people living here.  But we need to do a better job of communicating and discussing our growth and development.   It seems one segment of the population is quick to dismiss a new development and another segment is a little too quick to embrace it.  Maybe there is a happy medium.  Athens has developed a reputation of not being “business friendly”.  For example, remember the huge objection to the Walmart grocery store downtown?  I am not sure all those people against Wal-Mart were wanting a large student housing development instead. It serves as an example to “be careful what you wish for.” Well this has turned into quite the rant.  In closing, I just think that when someone wants to invest or develop in our community residents and builders both need to listen a little more and yell a little less.

If you have any questions or real estate needs, please don’t hesitate to contact me or visit my real estate brokerage firm, 5 Market Realty.

College Football Week 3:  Final Thoughts

Georgia- What a difference a week makes.  After the Vandy game, most fans were way down on Greyson Lambert, and many were predicting that Brice Ramsey would end up being the starter.  I admit that I was discouraged as well last week, but Saturday night’s game just proves that the coaches know better than us.  There is no need to go through the stats, but in general Lambert was almost perfect and the whole offense looked outstanding.  When an offense performs that well it has to be attributed to the offensive line. lamber vs SC They played fantastic and are a real strength for the Dawgs.  That being said, I am worried because there is not much depth there.  If one or two of the lineman get hurt we may see a big drop off in the next man up.  Let’s hope I am wrong.  Nick Chubb quietly got his yards and 2 touchdowns.  He is in the Heisman trophy race, but he may not be the best player on the team.  That title may have to go to Sony Michel.  He is so versatile, and he creates a lot of problems for any opposing defense.  Georgia is very lucky to have two players of this caliber on the same side of the ball.  The defense looks very athletic and they play a lot kids throughout the game.  Not sure how good they are yet but the future looks bright.  All and all, it was a great night to be a Bulldawg.  But now let’s get over it and move on.  That South Carolina team is NOT good.  Therefore, Georgia doesn’t need to get too excited.  There is a lot of football left.  We will find out a lot more about this team over the next 3 weeks.  I wish I could get more excited about Saturday’s beat down.  But I just don’t know if the Gamecocks are even going to make a bowl game this year.  Regardless, it sure was fun.

Alabama– Man I love watching these guys lose.  Ole Miss surprised many folks last weekend and pulled off the upset in Bryant Denny stadium.  I thought that Ole Miss had a chance, but I didn’t expect them to score so many points. ap_alabama_spring_football_72180864-e1432661495839 Ole Miss looked good, and they deserve a lot of credit for going to Bama and getting the win.  However, I think they are a little over rated now.  I watched most of that game and everything that could went Ole Miss’s way. In fact, they scored on one of the luckiest plays I ever seen in football. Reminiscent of Auburn’s past miracles against UGA and Bama 2 years ago.  Alabama had 5 turnovers and still had a chance to win the game late in the 4th.  Nothing went Bama’s way but they were still around in the end.  So everybody just calm down.  Bama isn’t this bad and Ole Miss isn’t this good.  Similar to UGA, we will know a lot more about Alabama in 2 weeks.  So stay tuned.  But I have to say, it sure is fun to watch Lane Kiffin and Nick Saban lose.  Hotty Toddy!

Auburn & LSU– This game was very similar to the Georgia game.  LSU looked very good, and Leonard Fournette is a real force. It was a great performance.  But how good is Auburn?hi-res-24e89b96987bf017c2d4c71417732a28_crop_north  I thought Auburn was overrated from the start of the season.  Granted, one loss to a good LSU team is not the end of the world, but I think more losses are coming Auburn’s way.  Regardless, in the SEC west, the path to the Georgia dome appears to go through Baton Rouge.

Who’s Actually Good? – I know it’s only week 3, but I have no idea who is actually good?  Ohio State is supposed to be a world beater but their schedule is so easy it’s hard to tell. I know TCU and Baylor are pretty good, but I am not ready to say they are great.  Besides, I still have a hard time accepting that these two teams are powers in college football.  Michigan State could be good.  They beat Oregon, but we won’t learn anything more about them until November when they play Ohio State.  I already said that I think Ole Miss is a little overhyped now.  Georgia, hasn’t played anyone.  I am not buying the Seminoles or Clemson yet. LSU looks good but if Fournette gets hurt they’re not.  Notre Dame? I don’t think so.

The Paul Finebaum Show– If you are not familiar with the “Paul Finebaum Show” you need to get familiar with it this week. This show is famous for the ridiculous fans that call in to voice their opinion.  maxresdefaultNot surprisingly, Auburn and Alabama lead the pack of crazy, rabid, and ridiculous callers.  With Bama and Auburn losing big games, this show is going to be comedy gold.  I suggest you tune in and laugh this week.

Home Buying Process Part 4:  Offer and Negotiation

Making an offer and negotiating a contract are crucial parts of the home buying process.  This is not an area where you want to make a mistake.  Which is why it is so important to have a good agent, and lender working with you before you make an offer. home-sale-negotiation-600  The process of making an offer is fairly easy thanks to uniform contracts.  Here in the state of Georgia, almost all realtors utilize the Georgia Association of Realtors Contract.   It changes a little from year to year but the core components stay the same.  This is good because it helps create uniform practices throughout the state.  Nevertheless, other areas of real estate do not always use uniform contracts.  For example, a condo conversion or a commercial purchase often have special contracts that are unique to the agreement or property.  But that is rarely the case with residential homes.  Your agent will walk you through the contract when you are preparing an offer. Most things are fairly straightforward.  Honestly, the current GAR contract is more of a buyer option than a contract because there are so many contingencies in favor of the buyer.  Regardless, when I work with buyers in any transaction I want them to understand three things:

  • Negotiation tactics vary depending on the property and market conditions
  • An offer price needs to be realistic
  • Time frames are crucial and must be understood

When it comes to negotiating everyone claims to be an expert.  I have worked in real estate for over 10 years, and I have seen all kinds of tactics.   Many of us are naturally competitive, and that seems to come out in people when they negotiate for property.  Someone wants to win.  In reality, both sides should win.  A seller wants to sell and a buyer wants buy. WIn win Puzzle Depending on market conditions, a buyer may get a great deal and other times a seller may get one.  But a good agent can make sure you buy or sell at a price that is either fair or a good deal.   The property and market conditions should influence your offer price.  For example, if the market is slow, and the house has been sitting there may be an opportunity to purchase well below asking price.  Conversely, if the property is well located and highly desirable you need to bring a strong offer.  The type of property influences negotiations as well.  People become emotional about their home where as an investment or commercial property is mainly a business decision.  There is no rule of thumb or secret to negotiation.  It will depend on the situation, the market, and the circumstances around the property.  Try to find a good deal, but also be prepared to pay a fair price for what you want.  A good deal is always preferable, but there is nothing wrong with paying a fair price either.  Sometimes there just aren’t many great deals available.

When it comes to price all the same rules apply.  There is no set rule for the initial offer price.  That being said, most of the time you don’t want to make your best offer in the beginning.  But from time to time you will need too.How-to-Negotiate-the-Best-Price-when-Buying-a-Home-612x281  The last thing you should do is go around making low ball offers to everyone.  First of all, it wastes people’s time which is rude.  And lastly, it often makes you look stupid instead of smart.  Don’t get me wrong, you can make a low offer but do it within reason and when it makes it sense.  Most importantly, understand that it is ok to pay fair market value.  In the end, a good realtor will make sure you either get a fair price or a good deal.

Lastly, you need to understand the time frames of the contract and make sure they are realistic and reasonable.   As a buyer, you will have a due diligence period and a financing contingency.   A due diligence period should be two weeks at the most when buying in the Athens area.  timeThis is the time frame for you to get a licensed inspector into the property and your loan process underway.  14 days is more than enough time to get this accomplished for an existing home.  New construction purchases can be a little different, but 14 days is plenty of time for an existing home purchase.  The loan approval and appraisal can take a little bit longer.  In most cases, 25 days is enough but this can be pushed back a little if necessary.  The appraisal should be done within this timeframe.  Ideally, the appraisal price is equal to or greater than the contract price.  If not, you will have the option to leave the contract, reduce the price, or pay the difference.  It should be noted that most appraisals are usually within a few thousand of the agreed price. Basically, don’t expect the appraisal to be $30,000 over your contract price.  It can happen but it is rare.

In the end, this part of process is very subjective.  The market conditions and circumstances around the property should always be considered when making an offer.  For instance, when a property is in foreclosure you may be able to take advantage.  But beware because many foreclosures are competitive, and you may need to offer list price or better to acquire the property.  One of the biggest things you need to have with your realtor is trust.  You may need to rely heavily on them when it comes to making an offer.  So it is important to find someone that you can trust that is professional.  There are bad people in every profession.  Bad lawyers, bad doctors, bad chefs, and bad hair stylist.  Real estate is no different so find a good person to help you.

If you have any questions or real estate needs, please don’t hesitate to contact me or visit my real estate brokerage firm, 5 Market Realty.

College Football Week 2: Final Thoughts

  • Georgia-Well they won but Saturday was scary at times.  It had all the makings for an upset in Nashville.  The Bulldogs missed field goals, were called for targeting, didn’t throw the ball well, and got awful calls from the officials.  But they won the game and that’s what matters.  And now UGA is ranked either #7 or #8 depending on the poll.  Really!  As a fan, I do not feel like they are a Top 10 team at the moment.  That being said, the next month will go a long way in determining how good Georgia is or how good they can be.  Their first big game is coming up this weekend against South Carolina.  The gamecocks haven’t looked very good to this point, and they just lost their starting quarterback.  Regardless, smart Georgia fans will not underestimate the Gamecocks as long as they are coached by Stevie.  You just have to believe that Spurrier will find a way to rally the team and play well against Georgia.  We have seen it too many times.  I can’t talk about the game without mentioning the quarterback situation.  Greyson Lambert did not have a good game.chubb vandyThe first half was atrocious, but he did a good job of recovering in the 2nd half.  There doesn’t seem to be a QB controversy according the coaches.  They seem set with Lambert, but I think the fans are getting worried and growing restless.  I hope Lambert plays better Saturday and looks a little more comfortable.  Despite what the coaches say, I think Lambert could get pulled if he plays like he did against Vandy.  So far the passing game has looked pretty bad. Right now Georgia looks thin at receiver and not very talented.  Let’s hope they change that perception soon.  Otherwise, Nick Chubb and company are going to have a hard time against better opponents.   The play calling has been very vanilla so far and I hope that will change moving forward.  On a positive note, Nick Chubb(pictured) is very good and quietly ran for 189 yards.
  • Auburn- I do not care for Auburn.  Needless to say, I enjoyed their game on Saturday.  Auburn’s quarterback is overrated plain and simple. MalzahnThey need to get back to running the ball, and if they do that they will get better.   But I still don’t think they can beat LSU or Alabama, and they could easily lose to Texas A&M & Georgia.  How full will the “Gus Bus” be if Auburn loses 4 or more games? On another note, enough with sweater vest Gus.
    Generally, orange sweater vests are not a good fashion choice.  Just saying.
  • SEC Overrated– I do think the conference is a little overrated.  Don’t get me wrong, I still think it is the best conference but just a little overrated.  Many teams looked bad this week.  Arkansas had the biggest humiliation by losing to Toledo.  Where the hell is Toledo anyway?  Ohio?  Auburn, Florida, and Missouri all squeaked by with wins against schools that collected paychecks after the game.  Tennessee was in control against Oklahoma but couldn’t hold on.  I guess they need a few more bricks up in Knoxville.  I have no issue admitting the SEC is a little overrated.  But what I can’t stand is the “ACC Guy”telling me the SEC is overrated. ACC football is like SEC Basketball.  Year and year out there are only 3 relevant teams.  4 in a good year.   So “ACC Guy” needs to shut up and enjoy the Wake Forest vs. Indiana game next week.  That one outta be a good one.
  • Targeting Rule– This is dumbest damn rule in football right now.  It is too subjective and the punishment is too severe.  Last week numerous players were ejected and many of the calls were questionable.  In fact, I have only seen a few calls that I thought correct when it comes to targeting.  In most cases, the defender is simply trying to do their job which is to tackle the man with the ball.  Sadly, I think this rule is here to stay.
  •  Signs at SEC Nation– Vandy what’s with all the Georgia insult signs?  SEC Nation was on site for the Georgia/Vanderbilt game last week.  And many of the Vandy fans were trying hard to insult Georgia.  Two of the signs stand out.  “The only Dawgs here are UGA girls” and “If you can read this sign you didn’t go to Georgia”  I am all for having a little fun at the opponent’s expense but base the insult in some form of reality.   There are many areas people can pick on Georgia, but they have lots of pretty girls. vandy And while UGA is not Vanderbilt, it is a fairly strong school.  Besides, Georgia already has enough rivals so they aren’t interested in hating Vanderbilt.   Overall, the best sign in Nashville last Saturday had to be “You guys are blocking the library”

College Football Week 1: What Did We Learn?

  • Georgia Football– Well we didn’t learn very much last week. Greyson Lambert looked fine and made some good throws, but Georgia fans can’t get too excited over a glorified scrimmage.  Heck, they didn’t even finish the game.  The offense didn’t show much, but what we did see was actually refreshing.  I have no problem running the ball 80% of the time if it is working. Malcolm-Mitchell-UL-Mon-945x774 In other news, Leonard Floyd is still good, Nick Chubb is still good, Sony Michel is still good, and Jordan Jenkins is still good.  Did I mention Lorenzo Carter?  Because he is still good too.  On the positive, it was great to see Malcolm Mitchell (pictured) and Keith Marshall appear to be 100% recovered from injuries.  In the end, Georgia fans may not learn much about the team until South Carolina.   Gotta beat Vanderbilt first though.
  • The Pac 12- Could the conference be overrated? I am guilty of loving the Pac 12 coming into the year.  So I may have to eat some crow.  So many teams just didn’t look good last week.  Arizona State got beat soundly and Arizona wasn’t impressive.  Stanford flat out lost and only managed 6 points. diddy-ucla On the bright side, UCLA looked really good, and P. Diddy didn’t attack anyone on the coaching staff.  A proud a day to be a Bruin indeed.  But the best part is that Roquan Smith was in Athens last Saturday and not at UCLA.
  • Ohio State- Well Dam%#t! They are still pretty good. I guess it really isn’t surprising of course, but they looked good.  And despite a stumble or two early they won by almost 20.  I just really don’t like Urban Meyer and maybe it was too much to hope for a VA Tech win.
  • Alabama– Well Dam%#t! They are still pretty good too. Derrick Henry is going to be yet another bell cow running back for Alabama.  I sure hope Georgia’s defense is deep enough to stop him in the 4th quarter.   Otherwise, you can expect Bama to run away from the Dawgs late come October.
  • Conclusions– The first week seldom tells us very much. Sometimes the teams that look good early are just fooling us.  For example, remember Texas A&M’s blow out of South Carolina last year?  By the way, what ever happened to Kenny Trill?  Oh yeah, Virginia Tech beat Ohio State last year.  Then Ohio State ran the table and Virginia Tech went on to lose 6 games.  So we all need to stay tuned because in reality we haven’t learned diddly squat.

Investment Real Estate 101

Investing in real estate is an absolute must for any person or family.  At the bare minimum, you need to own your home and not rent.  There are too many advantages to owning real estate, and if you don’t take advantage it can hurt you in the long run.  People invest in real estate for many reasons.  Most buyers purchase real estate to build equity and appreciation in their personal home. Others take it a step further and buy real estate solely as an investment and not for any personal use. 101 Real estate investment is often a good idea and a necessary part of a balanced portfolio, but new investors need education on real estate as an investment.  For example, how does one determine a good price or fair value?  There are many ways that investors determine a property’s investment value.  For example, gross rent multipliers, cap rates, and the internal rate of return.  These are all good barometers but require more explanation and may be a little advanced for “Investment 101”.   For now, I only want to discuss the basics to consider when getting starting in real estate investment.

When most people think of an investment they generally think of the stock market, a 401k, or an IRA.  All three can be good tools for investment, but what most people don’t realize is that real estate has been one of the best performing investments throughout history.  Real-Estate-InvestorsTo put it simply, it is a real asset and they aren’t making any more of it.  Meanwhile, the population continues to grow and people continue to live longer.  And all of those people need places to live and work.  There are many areas where you can invest when it comes to real estate.  For example, rental housing, commercial buildings, or land just to name a few.  But one of the best areas to get started is residential rental properties.  Athens, GA is a great college town with a major university.  Therefore, residential and multi-family rentals represent a large part of the investment opportunities in the area.  Having a large state university in Athens creates a strong rental market.  Because of UGA, there is a steady supply of people that need short term housing which makes Athens an ideal place to purchase investment property.  So what do you need to know when it comes to investing in rental properties?  There are numerous factors to consider when investing, but the three most important are location, price, and time frame.

Everyone should understand that location is important in real estate, but it is especially true when purchasing investment property.  The location of a property is directly correlated to its desirability and ultimately the rental income.   If a property is well located it will have less vacancy and more resilient rates.  For example, if you are buying a property to lease to college students make sure it is located in an area desirable to college students.  Conversely, if you want to rent to families than you may want to find a property in a good school district.  It is also important to understand that a well maintained property tends to attract better tenants than a poorly maintained one.  The next thing to consider is the price.  Price is important when it comes to buying anything, but an investor really needs to understand how the price of an investment property relates to cash flow.  Investors use many methods to value investment property.  An old rule of thumb is to take monthly rent and multiply it by 100 or 110 to determine a value.  It is a very basic formula and doesn’t work every time.  But it is a good place to start for a new investor.   Basically, you need to make sure that the investment is not going to lose money.  Be sure to take into account all the expenses along with the mortgage payment.  Many times new investors forget about maintenance or other costs outside of  property taxes and the mortgage.  Lastly, you should have a plan or time frame in mind for the investment.  For example, do you want to pay off the property?  Do you want to hold and sell later, or take advantage of depreciation and cash flow for a number of years?  There are numerous reasons people invest in real estate, but be sure you understand your goal and purpose of investing.

Yes, there are many factors to consider when investing in real estate, but it should not be viewed as a scary endeavor.  It seems most people don’t invest because they worry about an unexpected cost or the maintenance of a property.  This is somewhat understandable because maintenance can be a costly item from time to time.  Nevertheless, if a property is well located, and purchased right with a time frame in mind the advantages will greatly out weigh any risks.

If you have any questions or real estate needs, please don’t hesitate to contact me or visit my real estate brokerage firm, 5 Market Realty.

Home Buying Process: Part 3 Finding a Property

The most fun part of purchasing real estate is locating the property. Unfortunately, too many buyers jump the gun on this stage and start looking before they have an agent or an understanding of their financing. This is understandable because searching for a home or investment property can be a lot of fun. Nowadays, I do a lot of work with investment property and commercial real estate, but I continue to work with residential properties for many reasons.  Generally, I just enjoy helping people buy a house, but it is also a  lot of fun to look at properties.  Most of the time this is a very enjoyable part of the process but there are times where it can become frustrating for home buyers.  Find a HomeFor example, here in Athens the market is strong and good properties do not last long.  In some cases, they can be off the market within days and you can miss out on a property.   If this happens more than once it can be very frustrating.  There are a few ways to avoid this frustration but there are also times where frustration may be unavoidable.

First, it is important to be realistic when searching for a property.  If you have a max budget of $300,000 then do not look at houses priced around $375,000.  If the market is strong than the eventual price will not be close to your budget.  It is sometimes possible to get a house well below asking price but this should not be your expectation.  Try and determine what is most important to you in a house and that along with your budget will guide you in the right direction.  Second, be honest with your real estate agent.  A good agent will ask questions to try and understand what you want but sometimes buyers aren’t good communicators.  I often tell clients to be honest and feel free to tell me when they hate something.  If you are not honest about your opinions or your budget it will be hard for any realtor to help you.  I once had a client tell me they wanted a house for less than $200,000 in a certain area of town.  Well it was just not a very realistic price for the location and as it turned out they bought a house for $300,000 in the desired area.  But we looked at a lot of bad stuff before they finally told me the truth.  It turned out there max budget was well over $300,000, but they thought they may get a better deal if they told me $200,000.  In the end, we got on the same page and it all turned out well.  However, they made the process very hard because they weren’t honest.  I have to give credit to my business partner, Jeb, for this last one. You have to understand that “patience is a virtue.”

handwriting blackboard writings - Patience is a virtue

In most cases wise decisions are not made quickly or hastily.  If you lose out on a house or it takes a while to find what you are looking to find do not fret.  In the end, things have a way of working out the way they should.

Buying or investing in real estate can be a lot of fun.  That is why HGTV and A&E develop so much programming around real estate.  On the other hand, it can be stressful and disappointing.   However, you can avoid a lot of stress and frustration if you are realistic, honest, and patient.  I guess those are three pretty good words to live by in general.  I have to admit that I have a big problem being patient sometimes. In fact, if you ask anyone that knows me well they might say that I am a very impatient person.  Regardless of my shortcomings, it is good advice so do as I say and not as I do.

If you have any questions or real estate needs, please don’t hesitate to contact me or visit my real estate brokerage firm, 5 Market Realty.

College Football: Who is Overrated?

It is finally here!  Tonight the college football season begins.  So last night I thought it would be a good idea to look at the Top 10 and see who might be overrated.  Every year there are 3 to 4 teams in the Top 10 that don’t belong and sometimes more.  When you think about it, all the pre-season polls are really a bit silly.  How can you project rankings when no one has played a game?  overrated In the end, no one cares that it is silly because it is a lot of fun and gives us all something to debate.  As always, these are just my opinions as a fan.  My primary job is real estate and not sports writing.  For the purposes of this blog we will use the Coaches Poll.

  • #1 Ohio State- I don’t really think they are overrated at all. What they did last year was amazing and showed the benefits of a conference championship game.  Are you listening Big 12?  In the end, I just don’t think they can do it 2 years in a row.  They will likely make the playoff, but someone will knock Ohio State off the throne this year.
  • #2 TCU- Overrated at #2. Gary Patterson has done a fantastic job coaching TCU and elevating the program. It really is impressive.  They are a good team but probably not #2.  They should end up in the Top 20 but not the Top 5.  I just don’t see it.
  • #3 Alabama- Overrated! That’s right you heard me.  I am not buying it this year.  They are always well coached and they don’t beat themselves.  Granted, I am a little partial to UGA, but SEC officials don’t like to penalize Bama for anything and that helps them year and year out.   But this year I think they lose 2 or even 3 games.  Don’t sleep on the Wisconsin game either folks.  Could be an early upset.
  • #4 Baylor- They may have this one about right. Baylor is well coached just like the rest of the Top 10, but their offense really separates them in my opinion.  Not calling for a national title, but I do think they will end up around the Top 5 in January.
  • #5 Oregon- They may have this one right too. Oregon is going to be good again, but the new transfer quarterback worries me because he has big shoes to fill. Only time will tell but the Pac 12 conference is really strong.  So it will be hard for them to get through the season without a loss.
  • #6 Michigan State- I really love their coach and admire their style of football. I also just like the color green.  I really hope they find a way to beat Ohio State but this year may not be the year.  I think they got it right and Michigan State is a top 10 team.
  • #7 Auburn- OVERRATED! Some people think their brand new quarterback is already a Heisman front runner.  Well I don’t.  I am not sold on Gus Malzahn either.  It took several miracles for Auburn to play in the title game against FSU and those don’t happen very often.  Frankly, he could easily be 0-4 against UGA and Alabama.  If they lose 4 games this year I wonder how full the “Gus Bus” will be come January?  First loss may come early by way of Louisville.
  • #8 Florida State- This one is close, but I am not sure they are a Top 10 team this year. Maybe they end up just outside the Top 10.  Everett Golson will have to stop throwing the ball to the other team if they are going to win a lot of games. Honestly, I just think another team will win the ACC this year.
  • #9 Georgia- Well everyone knows that I am a Georgia fan. Regardless, I think #9 is just about spot on.  Georgia will lose 2 games in the regular season this year.  They will fall out of the Top 10 early but fight their way back in by January.   Another close but no cigar year for the Dawgs.
  • #10 USC- Just not buying this team yet. All I hear is that USC’s first 22 can play with anybody.  Well that’s great but you need more than 22 to be real good.  Also the Pac-12 is real strong.  Watch out for Stanford and the entire state of Arizona.

So who is underrated?

  • Clemson- I like Clemson in the ACC, and I think they may finish in the Top 10.
  • LSU- I think LSU is going to win the SEC. I know, I know…they never have good quarterback play.  But that hasn’t stopped them from winning in the past.
  • Arizona and Arizona State- Can’t explain it. I guess I am just big on the state of Arizona this year.
  • Virginia Tech- I think they have a bounce back year and contend for the ACC title. Ohio State should be on the lookout early for this team.