Athens Area Real Estate: Market Outlook Mid-Year 2018

Well it looks like it has been six months since I last posted an article on this site.  For the most part, that is a good thing because we have been extremely busy this year, and I have not found much time to write or post to this blog.  Meanwhile, I am sure no one has really missed these articles riddled with my grammatical mistakes.  From what I can tell, people enjoy the posts on Georgia football much more than my thoughts on Athens real estate, but rest assured I will be ready to talk some Georgia football next month.   For now, let me focus on the real estate portion of this blog because I realized today that we are just about half way through 2018 which is an ideal time to look back at what has happened so far this year.

Overall our real estate market remains strong, and we have continued to see appreciation in many price points.  For example, the 5 Points area is still seeing $250 per square foot or more for remodeled homes.  The Normaltown area is trending just behind this price point and moving just as fast.  However, this is not a universal number you can apply to each home.  In most cases, anything below  $650,000 will still move well in the 5 Points area.  But we have seen the highest price point start to level off.  Right now, I would classify anything above $600,000 as our top price level in Athens.  While we are still seeing these homes sell, it appears the price appreciation at this level has finally cooled off.  I believe this to be a good thing in the long run.  As I have said many times on this blog, “trees do not grow to the sky”.  It is good to see the price values calm down in one area of the market.  Another contributing factor is the current pricing by sellers.  There are some properties on the market asking for a little too much money which is understandable given our market trend over the last two years.  This is typical of any market going as hard and as fast as Athens and Oconee.  Interest rates are ticking up, but demand remains high for home buyers therefore I don’t see our market tanking anytime soon.  In fact, I am relieved and encouraged to see a slight cool down in appreciation.

On the other hand, the condo market around town has been incredible with some of the biggest gains in value over the last 12 months.  Our company and myself deal with a lot of condo properties throughout the area.  It usually works out to be about 1/3 of my personal business year end and year out.  For example, inside of one-year condos in downtown Athens have gone from $240 per square foot to over $280 per square foot or more.   On the westside of town, condos at Woodlake have appreciated 8.5% in less than a year.   If you cross the river to the eastside on Barnett Shoals road the results are the same.  The Summit, The Woodlands, Brookwood Mill, and Drayton Square have all seen a big increase in value of the last year.  The condo market was hit hardest by the recession due to new banking regulations and fear amongst buyers.  Thankfully, the fear is gone, and lenders are now able to lend money on most condos in our area.  But the lending is not the same as a traditional home so be sure to work with a professional when buying or selling condo units.  A loan approval from a buyer doesn’t exactly mean that loan will work for a condo purchase.

Lastly, Athens-Clarke County has seen a large increase in property taxes all over town.  The amount will vary property to property, but overall the county saw an increase somewhere around 5 to 6%.  Tax values going up is inevitable when we are seeing properties appreciate this way, but I do think it can have a negative effect.  Obviously, the typical home owner is burdened with increased taxes and their mortgage payments will go up.  In some cases, this is easy to absorb, but in many cases, it becomes a real difficulty on families.   Another thing to consider is that many property owners in Athens are not local to the area.  We have a large amount of property investors or landlords living outside the county, the state, and even outside the country.  These increased costs will be noticed by property managers and landlords alike because they effect the bottom line.  And most of the time these landlords will pass through the increased cost to their tenants by raising the rent.  Many people in town are concerned with affordable housing, and this will do nothing to help that issue.  I don’t know our county’s budget needs off hand, but revenue going up doesn’t necessarily mean spending should as well.  With our increased tax revenues, it may be time for our elected officials and the county to consider reducing the millage rate used to calculate taxes on our property.  All things considered, we are still lucky to live and work here in the Classic City.  Hopefully, we can keep ourselves from messing it all up.  Thanks for reading, and I will try to share a post on a football topic next month.  Enjoy your summer.

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Athens Real Estate: Heaven Help the Home Buyers

My basement is full of firewood that I have yet to burn because the weather been has so warm this winter, and just like the weather in Athens the real estate market has been historically HOT in 2017.  It is truly amazing just how fast some things are moving.  I have lived in Athens for 18 years now, and I cannot recall a time where the supply was this low or the demand so high.  In many ways this would seem a like a good thing for our area, but honestly it has caused a lot frustration in the real estate world. As a real estate broker, one of my primary jobs is to help buyers and sellers come together, and that has seemed harder lately than I can remember which has surprised me.  The main reason seems to be the lack of supply.  Many buyers have found it hard just to get inside a property before it is under contract, and many sellers have remained firm at high list prices resulting in low appraisals.  At the end of day, my job is to help people navigate these hurdles, and today it seems the buyers have many more hurdles than the sellers.  So I want to talk a little about our market and what a buyer should be doing to find their ideal property.

First of all, why do we have such a large amount of home buyers in our market?  In my opinion, this is due to the return of seller equity and low interest rates.  Many sellers were not able to sell when the market was down, but now they can exit their own property without taking a loss.  It seems a lot of these sellers become Athens area home buyers, because so many people want to move here and so few want to leave the area.  Long and short, we have it pretty good in the classic city, but what do you need to do to buy in the area you prefer?  I would start by telling any home buyer to reach out to a good local and experienced realtor for many reasons.  But most of all, for their expertise and knowledge in the market where you are trying to move.  When the market is up you need strong advice on prices, appraisal values, and when to act fast.  This is not the time to call your best friend who sells two houses a year or less.  You need to call people that have the experience in the market you want to buy.  Don’t ask your buddy if he knows someone unless your buddy knows a lot of people in real estate.   In most cases, an out of town agent simply cannot know a market well when they live hours away.   Our town can be very close knit, and a local realtor often will know of homes for sale that are not on the market.  Here at 5Market, we frequently have seller clients that reach out and ask us to bring an offer from a qualified buyer instead of listing their house.  Despite the efforts of many, our real estate market is heavily based on experience and strong local relationships.

The next thing to do is to tell the truth.  I often start with telling my clients to be honest with me about properties so I can better understand how to help.  It is ok to say, “I hate this house or I don’t care for this street”.  Please tell your agent what you want and why.  Another part of being a home buyer is being prepared to act.  Buyers need to have a conversation with their lender before stepping foot in one home.  That way you have an idea of what you can afford and what cash outlay is best for you. Therefore, you can act quickly on a hot property.   In most cases, your realtor will know several good lenders to speak with before getting started.  Home buyer’s now need to be proactive on the home search as well by using websites like Zillow and Realtor.com.   Many real estate brokers are often frustrated with Zillow and Trulia because the sites can be inaccurate and sometimes advertise homes that are not for sale.  Furthermore, they can mislead buyers and sellers on home values especially here in Athens.  While this is true, I appreciate these sites because it gives my clients a place to search homes on their schedule.  A good agent will have more than a few clients, and they can’t be expected to sit at the computer to wait for new homes all day every day.  For example, I encourage buyers to use these sites, but we also encourage them to download the MLS app which can verify listings they might find.

In closing, I think the most important thing I typically discuss with clients is that things have a tendency of working out the way they should.  In my experience, when a client loses a house or an inspection goes badly it seems to work out for the best.  So many buyers lose out on houses, but they often find another one they like even better.  I am a big fan of learning and borrowing from others.  When I hear something wise I try to remember it and internalize it.  One of the best things I have heard my co-worker, Jeb Bradberry say is that, “Patience is a Virtue”.  This is true in life, and true in real estate.  So remember try not to be discouraged and remain patient because if you deal with good people in business it has a tendency to work out for the best.

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The State of Athens Real Estate: Low Supply & High Demand

We are a few days away from 2017 which is an ideal time to look back at the year that was in Athens real estate.  Clearly, 2016 was an interesting year, and the overwhelming story of 2016 would have to be the Presidential election because it was very polarizing and ultimately quite surprising.  It seems half of the country is optimistic and the other half believes the end is near.  Despite your feelings about the year in politics, I can assure you that the Athens real estate market had a great year in 2016 thanks to many contributing factors.

First of all, we reside in a fairly desirable area with a major university and that never hurts.  Furthermore, interest rates have remained low which continues to fuel the market since money is currently cheap.  Lastly, many neighborhoods have seen more and more appreciation because availability remains scarce.  While all of this is generally good for the greater Athens area it has proven to be difficult for buyers.  And it is primarily due to the very low supply of homes in the market place.  Let me be clear that I am usually a big fan of low supply in real estate.  In fact, that is exactly what sellers want when they go to market.  However, working in real estate allows me to see both sides of the coin.  We work with many home buyers that are desperate to find what they need in the area, and right now many of them are frustrated.   Generally, the more affordable houses remain the hardest to find.  Right now in Oconee most properties under $300,000 are gone in a week.  Additionally, the in town areas like 5 Points and Normaltown barely have any listings under $400,000.  Meanwhile, the local market for investment is also highly competitive because workable properties are almost nonexistent right now. It has been a long time since the Athens real estate market was this low on product.  All this being said, the Athens market is seasonal especially when it comes to residential homes.   Usually, the New Year brings more homes to market, and I am confident we will see that trend continue in 2017.  So what does all this mean? Will this appreciation continue or not?

The truth is that no real estate agent really knows for sure, but we can try to make educated predictions based on what we know about our local market along with the economic factors.  As I mentioned earlier, the election was kind of a big deal this year, but its impact for good or bad may not be felt immediately.  I am not a stockbroker, but if I was I might advise people to get into financial stocks and stay there for a while.  But you know what?  I am no stockbroker, but I am fairly knowledgeable about Athens real estate.  So here are some predictions for 2017 in our area.

Interest rates are going up without a doubt.  Good sense tells us that they can’t stay so low for so long, but they also can’t grow too high too quick because our economy just can’t handle it.  The real estate market has been fueled by these low rates.  On the other hand,  I don’t believe reasonable rate hikes will kill the market.  In fact, it may even make it stronger at first.  There is a lot of interest rate fear with buyers right now which could bring even more people to the table.  On the other hand, higher rates could also create some price stabilization which will help these buyers.  I have said it before that, “trees don’t grow to the sky”, and while that is true, I don’t’ think prices stabilizing will be a bad thing.  Given the lack of availability in several neighborhoods we should see appreciation slow down without prices falling off.  So while trees don’t grow to the sky they can still stand pretty tall.  Conversely, the Athens investment market might be a little harder to read.  The Athens investment market has come back since 2010, but we have not seen the prices return to the highs of 2007.  Low interest rates have forced most investors into the stock market to gain an actual return on their money.  However, investment real estate provides a great alternative to the stock market which should continue.  Nevertheless, we may see the same price stabilization with investment properties that we could see with residential homes.  Rental rates have been growing in our market, but more student bedrooms are coming soon.  In all honesty, it is hard to know which rental development it will immediately impact until it all plays out.  But I can assure you that location is all that matters when the chips are down so be sure to keep that in mind.  And there you have it, a brief recap with a look ahead.  Here’s to hoping my predictions are correct.   Have a great new year, and an even better 2017.

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The Athens Condo Market: What You Need to Know

Most of you probably have an idea or at least a decent understanding of what constitutes a condominium, but just in case I will try to clarify it a little bit.  In general, a condominium is a unit or space that can be purchased inside a larger building.  When a person owns a condo they have exclusive ownership of a specific space or unit inside a building while also owning a small percentage or shared ownership in the rest of the building.  All the owners in a condominium share in the cost or upkeep of the entire building or complex. For example, condo owners pay HOA fees that cover building insurance, maintenance, and often the cost of amenities.  They can be attractive real estate because they are often more affordable than traditional homes, they offer low maintenance, and are often ideal second home purchases.  Nevertheless, many condo owners are suffering due to the recent recession.  In many areas condo values have dropped drastically, and while most real estate has appreciated in Athens not every condo development has recovered.  In fact, many areas are still close to the values of 2011. On the other hand, certain developments have seen values grow back quickly.   So why have some condos appreciated while others have not?  To understand why you have to go back to the recession.

Hopefully, you haven’t forgotten what happened eight years ago.  The mortgage crisis devastated our national economy resulting with a sharp decline in real estate values.  We saw massive foreclosures across the country, and condos were a major part of the foreclosure market.   First, you have to understand that many condos are developed to be vacation or second homes.  For instance, many coastal areas are covered with condo developments that are owned by people that do not occupy the units full time.   And if someone owns two propertiessimi_valley_foreclosures-sign when money becomes tight, the second home is usually the first thing they can live without.  As a result, numerous condos went on the market in 2010 when most people could not afford to buy them or were scared to buy due to the recession.  Consequently, property values plummeted, and many homeowners had to let their condo go into foreclosure.  Banks across the county took massive losses on condos, and now many large banks will not finance a condo.  And that’s the problem many condo owners face today. The financing has become more difficult which shrinks the pool of buyers resulting in depressed values.  Here in Athens, we have some condos appreciating and others that are not.  So back to the question, Why?

 

The answer is simple, and it is almost always the same LOCATION, LOCATION, LOCATION.  You may think I am beating a dead horse, but it is the truth.  All properties are valued based on their location, but condo values are even more dependent on the location.  As an example, look at downtown Athens whereWelcome-to-Downtown-Athens many condos have appreciated over the last couple of years because downtown Athens is a prime location where many condo buyers are looking to purchase.  Meanwhile, the east side of town has an abundance of condos that are valued much less due to location and the overall supply.  For instance, on Barnett Shoals road there are four large condo developments:  The Woodlands, The Summit, Stones Creek, and Brookwood Mill.  All of these developments were originally targeted to investors or parents of UGA students.  They are well built, spacious, and fairly close to campus. However, the supply greatly exceeds the demand keeping the prices low around $100,000.  Conversely, condos at Lumpkin Square or East Cloverhurst are worth around $150,000 for a smaller and older two bedroom unit.  These condos are worth more because they are right next to campus and walkable to restaurants and Sanford Stadium.

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Lumpkin Square Condos

So does this mean you should not buy a condo?  Heavens no!  Condos are still a very good purchase depending on the price, the location, and the purpose.  The values on the eastside of town offer a really low price point for investment.  In some cases, buyers can still purchase a three bedroom condo in the low $100s. And remember, a condo in an ideal location will always have value.  Additionally, we are starting to see condo financing improve, and I believe it will continue to get better over the next couple of years.  In closing, if you have a condo to sell or are looking to buy one don’t worry because either is very doable.  But I suggest you find someone in the area that really knows their stuff because you will need help to navigate the market and the current financing climate.

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Athens Area Real Estate: 2015 in Review  

Well here we are at the end of another year, and pretty soon 2015 will be over and in the books.  As I get older, I find the old sayings are often very true.  For instance, people often say, “The older you get the faster time seems to move”, and I totally agree.  Maybe it happens because we get busy or maybe we just get accustomed to time.  Regardless, it seems to move faster and faster every year.  Just 5 years ago, I was single with no children.  Now I am married with 3 kids, a dog, and two car payments.  And of course, I wouldn’t trade it for anything, but how in the hell did this happen?  Honestly, my 29 year old self would be blown away if he knew how fast his next 5 years would go.  It really does move fast, but it is a lot of fun as well.

I always enjoy looking back at the year.  And the end of the year is always full of TV shows and specials that review what has happened over the past year.  In addition, you can also always find a good amount of best and worst list too.  With that in mind, why not take a look back with regards to real estate in the area.

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5 Points Athens, GA

Overall, you could say 2015 was a great year in Athens with the exception of Georgia football.  But that’s a subject for another post.  And you can rest assured I will write that one as well.  This year we saw the real estate market continue to thrive throughout most of the area.  Centrally located areas like 5 Points and Normaltown have become competitive markets.  As I mentioned before, both areas are seeing a lot of renovations and flips.  In Normaltown, you may see prices around $175 to $180 PSF at the top of market.  While some parts of 5 Points may achieve values over $200 PSF.  These prices are of course great for sellers, but can pose challenges for buyers.  I am glad to see this appreciation, but we need to be cautiously optimistic.  Location is

Normal Hardware On Prince Ave
Normal Hardware On Prince Ave

the driving factor for Normaltown and 5 Points and that is not going away.  But the current low interest rates have also played a major role in this market.  While I do not expect rates to go up drastically they will probably tick up a little bit over the next year.  No one has a crystal ball of course, but these two areas will surely remain popular in the years to come.

 

The Eastside of Athens has also experienced some appreciation, but overall the prices on the Eastside still provide a good value for a buyer.  Without a doubt, there are some areas on the eastside that need to improve.  But many neighborhoods are doing very well, and the Vet School is just another positive for the area going forward.   Moving a little further out is also a good option for buyers.  The west side of Athens has also seen some appreciation, and great older neighborhoods like Kingswood and High Ridge are still doing well.  Lastly, Oconee County continues to grow and reap the benefits of more space and good schools.  Oconee remains a fantastic option for families, but there is still a large supply of buildable lots in the county. As a result, appreciation may move a little slower in this area.  In general, Athens residential real estate had a good year in 2015.  But what about commercial and investment real estate?

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Epps Bridge Centre

When it comes to commercial real estate in the Athens area, it’s impossible not to talk about Atlanta Highway & Epps Bridge Parkway.  Most people in the area consider the Epps Bridge corridor to be growing and Atlanta Highway to be declining.  The growth on Epps is great for the area and Oconee County will benefit from the taxes.  However, much of the growth on Epps came at a cost to the Atlanta Highway corridor.  Basically, many big box retailers moved from one road to the other.  While the Epps Bridge area has grown significantly over the last couple of years, we should not be so quick to dismiss Atlanta Highway.  I think this will be a temporary setback for Atlanta Highway because the area has too much traffic not to attract more business.  In fact, there are some projects underway that will bring more customers, and other plans are in the works as well.  In reality, both of these roads are positioned for success. It’s important for everyone to understand that Athens and Oconee are not in competition.  They need each other to be successful, and if we are not smart with growth we may turn ourselves into a congested Atlanta suburb lacking in charm and character.   That being said, downtown Athens is another market to watch when it comes to commercial real estate.  And in 2015, we saw  a lot of changes to the area.

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GA Theatre Downtown Athens

Downtown represents the heart of Athens.  It hasn’t always been this way, but in the 90’s we saw more restaurants, shops, and bars come into the district.  Since then it is been a huge asset to Athens and one of the areas that helps make Athens unique.  Nowadays, it seems to be the most popular area for development.  There are so many things going on downtown it is hard to keep up with at times.  Commercial real estate has done well and overall rental rates are up.  However, this is not always a good thing for everyone.  I am happy to see any business small or large be successful in downtown.  But I never want to see Athens lose its local and small town feel.  Recently, we have seen some larger stores like J. Crew and Urban Outfitters come into downtown.  This is good for real estate, but I hope we are able to keep our small local stores as well.  And maybe one day we might see some form of a grocery store for all these new residents in the area.

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The Standard in Downtown Athens

Lastly, you can’t talk about Athens real estate and not discuss student housing or investment property.  And it seems all the students want to live downtown, and developers are rushing to fill the need.  Recently, we saw “The Standard” become the first truly high end student housing development in the area.  It has been tremendously successful, and now “The Mark” is underway on the old Armstrong Dobbs site.  ‘The Mark” will be another high end development, but will also include commercial space some of which will be used for offices.  These are just two examples, but there are many more student housing properties that are either already developed or on the way. Only time will tell if there is enough demand for all this housing.  Nevertheless, the new developments downtown currently achieve a very high rental rate.  This has had a positive impact on some other student properties or investment real estate.  For example, Athens has a good bit of cottages or small houses that are dedicated to students. Many of these locations have seen rents go up over the past year.  It is only natural that investors and property managers would try to grow rents.  But the high rental rates downtown seem to have created a “perceived value” at some of the other more affordable locations.  Subsequently, I have seen many investors get back into the market purchasing more properties as a long term investment plan.

In general, 2015 was a good year across the board for real estate in Athens.  However, we are not too far removed from the lows of the mortgage crisis.  Therefore, our gains in real estate may seem a little bigger than they are in reality.  Nevertheless, you should feel good about the current state of the Athens market.  Let’s just hope 2016 keeps us on the same track despite outside factors like the election, interest rates, and health care costs.  Happy New Year!

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

UGA’s Impact on Athens Real Estate

This blog hasn’t been up for very long, but if you have read even a couple articles you should be able to tell how much I love the city of Athens, UGA, and especially Georgia Football.  While this blog is officially dedicated to Athens real estate, it is already apparent that Georgia athletics will always be a major topic for many posts. Arch For me, it is impossible to live or work in Athens and not care about the university and its future.   Here in Athens, we are so fortunate to have this great university right in the heart of our town. Small college towns are often unique and vibrant communities throughout the entire country.  I am of course somewhat bias, but I don’t think there are any better than Athens, GA.  The university brings so much to our town it is hard to really quantify.  It impacts our entire economy, and therefore it also impacts our real estate and its value.  With that in mind, I thought it would be a good idea to explore and discuss some of the ways UGA impacts Athens real estate.

First of all, the university brings stability to our local economy.  UGA has an enrollment of around 35,000 students.  That doesn’t include all the staff, and professors employed by the university which makes it an incredible employer and engine to the area.  The university isn’t exactly the kind of employer that is going to pack up and leave either.  If the University of Georgia goes out of business we will likely have bigger problems in the world than a lack of jobs.  So it brings people and jobs, but how does that effect Athens real estate.  Well obviously, it has a positive impact.  There are so many ways that UGA influences the real estate market that it is hard to cover entirely.  Maybe the best approach is to discuss UGA’s impact on residential, investment, and commercial real estate throughout the area.

Residential property is generally any property where people reside.  This could include your house, a condo, or an apartment complex. But for the purposes of this discussion we will classify residential property as a house in a residential neighborhood.  In previous posts, I have discussed residential markets in Normaltown and 5 Points.  Both areas of town are seeing a good bit of renovation and growth in value.  The driving factor behind this is location, and what makes their location desirable is their proximity to the university.  On the other side of Athens, the university has a similar impact on the east side of town.  As I mentioned earlier, the east side provides buyers with a different type of value.  Basically, more bang for your buck.  In addition, the east side is now DSC04143editedhome to the Veterinary Medical Center which is yet another example of the university impacting the area.  UGA is the heartbeat of Athens.  So many things center on it like employment, education, and entertainment.  It is only natural that people would want to reside in close proximity.  This creates a demand which in turn can increase property value.  Nevertheless, residential neighborhoods that are located a little further out benefit as well.  Just look to the growth in Oconee.  The Watkinsville area has become a very desirable place to live thanks to the new homes and good schools.  Many of the people that purchase homes in Oconee either work for UGA or have businesses that benefit from the school.  So whatever the value of your home is today just be glad it is in proximity to UGA because if not it would likely be worth less.

In many cases, commercial and investment property can be thrown into the same category.  Commercial real estate involves properties that are used for business purposes like retail stores, restaurants, or office space.  Almost every business owner in the area has to have a commercial space to operate their business.  For example, Athens is blessed with a unique downtown filled with bars, shops, and restaurants.  Downtown Athens is located right next to UGA’s north campus which is a major reason the downtown area does so well.  Every restaurant Welcome-to-Downtown-Athensdowntown depends on students, professors, and parents to make money.  Every retail space downtown needs students to shop in their store.  Every bar owner needs students to hang out in their bar to be successful.  If you think about it, without UGA downtown Athens would likely have a lot of vacant space.  In fact, how do think local retailers feel about Georgia football?  If they are smart they want Georgia football to succeed.  The better UGA does in sports the more people come to visit.  Consider a restaurant owner or bar owner during the football season.  They need that business to thrive, and without Georgia football many local businesses may not be here. But downtown is just one example of UGA’s impact on commercial real estate.   Go a little further out, and look at the Alps road area or the development around College Station.  Those are more examples of thriving commercial locations thanks to UGA.  So remember the next time you are eating in your favorite restaurant that it is probably still in business thanks to the university.

While most commercial properties are often investment properties, many residential properties are used for investment as well. When it comes to rental or investment property the correlation with UGA is fairly evident.  The student population provides a huge rental market in the area, and many people purchase residential properties to rent as an investment.   This market can be a little tricky from time to time because rental properties and their income are more sensitive to outside factors.  For instance, a property’s income will change over the years based on its age and the overall supply of housing.  In the end, the same old rule applies.  The better the location the more likely a property will have a higher return and higher value.

Here at 5 Market we are no different.  We work with residential, commercial, and investment properties that all benefit from UGA.  Truthfully, this information should be fairly evident to most people.  But sometimes we all need a reminder of how lucky we are here in Athens.  So be thankful to UGA, and be excited a new coach is coming.  Because even Georgia football is important to our real estate.

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.

Athens, GA Real Estate: East Side Value

Athens is a great community that is driven by our wonderful university.  As I have mentioned before, the university brings many different people to Athens which helps create a unique population here in town.  Even though Athens is geographically small there are many different areas one can choose to live.  Each one of these areas has its own advantages that may or may not appeal to different people.  But the east side of Athens is an area of town that is often undervalued and under appreciated.  And that can provide buyers in Athens an opportunity.  We all know that the real estate market is recovering.  In some areas it has fully recovered and other areas aren’t quite there but are progressing.  Here in Athens, you hear a lot about 5 Points, Normaltown, and Oconee County.  And we just don’t hear as much about the east side, but that doesn’t mean it is without value.  In fact, the east side offers a lot of value and may offer more as time goes on.  I am not referring to value with regards to its worth or price.  But value in terms of what you get for what you pay.  So this week let’s take a look at the growth and value on the eastside of Athens.

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University Heights Entrance

Athens’ east side of town is a fairly large area, but in general it begins once you cross the North Oconee River heading east.  To the north, that begins on Oconee Street just past downtown, and to the south it begins where College Station road and The Loop intersect.  The east side of town is primarily comprised of residential neighborhoods. For example, University Heights, Green Acres, Cedar Creek, and Falling Shoals just to name a few.  However, the east side like most of Athens has plenty of student areas as well.  The student housing areas are concentrated on Barnett Shoals between Lexington road and Gaines School, yet those are not the only student housing options.  Nevertheless, the majority of east Athens is comprised of residential neighborhoods.

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Vet School on College Station

You don’t have to be a real estate agent to know that real estate seems to be more affordable on the east side of town. Over the years, that has generally been the case and there are reasons for the difference in price.  One main reason maybe that Atlanta is located to the west of Athens.  It is only natural that Athens would see more growth towards Atlanta than Augusta over the last 40 or 50 years.  When I was in school the eastside had a lot less to offer than it does now. First of all, there were less amenities and fewer places to eat,  but now the east side has two great grocery stores, several restaurants, and even a few places to grab a drink.  These are all good things, but the biggest thing to happen on the east side of town has come very recently. And that is the opening of UGA’s new Veterinary Medical Center.  Better amenities and the new vet school serve as two good examples of where the east side can offer convenience and good location.  But what are the real estate costs?

In other areas of town, buyers often have to pay well over $250,000 just to get a house in need of work with no upgrades.  On the eastside of town, buyers can pay much less and receive more.  Falling Shoals serves as a good example of an east side value.  Falling Shoals is a swim/tennis neighborhood with great amenities located about 10 mins from UGA.

Falling Shoals Tennis Court
Falling Shoals Tennis Court

That is much closer than many west side locations and Oconee neighborhoods.  But the price tag is much lower.  In Falling Shoals, resale homes with over 2,000 sq. ft. sell around $230k, and there are still a few new homes available that can be purchased around $250k.  The price per square foot makes Falling Shoals a real value for many home buyers and families.  A similar value is offered in some of the older neighborhoods as well.  For instance, Green Acres and Cedar Creek are located closer in and still offer a good value per square foot. In Green Acres, a large house on a basement would probably sell close to $170,000.  Meanwhile, a smaller brick house with no upgrades might be purchased below $130,000.  At today’s interest rates, these prices make home ownership available to many more buyers.  In my opinion, there may be real opportunity in other areas as well.

DSC04135edited
Vet School on College Station

As I mentioned before, UGA recently opened its new Veterinary Medical Center on the corner of Barnett Shoals and College Station.  This is a good thing for the whole area and UGA.  But its impact on the east side could be fantastic.  Essentially, the university now extends to the end of College Station road making all of the east side more convenient for vet students and professors.  More importantly, University Heights is now situated between the vet school and UGA’s main campus.  In case you didn’t know, University Heights is the neighborhood located off of College Station road between Research Drive and the vet school.  I don’t have a crystal ball, but the vet school could increase prices in University Heights over time.  The homes are older and many are rentals.  But the location is close to campus, 5 points, and not far from downtown.  And of course, it is right next to the vet school.  Given that prices in University Heights range from $100k to $150k it provides more value and opportunity than many other areas in Athens.  Granted, most east side homes will likely never have a price tag as high as some other locations. But that doesn’t mean it is a bad investment.  In the end, it may offer the most bang for your buck in all of Athens.

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.

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.

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.

Welcome Back Students and Thank You

In Athens, August marks the return of the student population.  I have lived and worked in Athens for 16 years and one thing has always bothered me regarding our student population.   I don’t think they are too loud.  I don’t think they drink

UGA Students Cheer on the Dawgs

too much, and I don’t think they are a nuisance.  But I do think people here in Athens do not appreciate our students as much as they should.  Athens, GA is known as one of the nation’s best college towns.  It has made numerous top 10 lists through the years claiming it to be true.  Depending on who you talk to this can be perceived as a negative or a positive.  The reality is that most college towns have a lot to offer residents because of the university.  There are some great college towns that would still be great areas without a major university like an Austin, TX but Athens, GA is not one of those places.  As great as Athens is without UGA it would likely be a small railroad intersection about 20 miles Southeast of I-85.  Fortunately, that is not the case because UGA is located in Athens.

It is not uncommon to hear an adult Athens resident complain about the students. For example, some people complain about the traffic, the amount of bars downtown, and of course the hated fraternities just to name a few.  These common complaints have always bothered me and they seem to bother me more and more as I get older.  Granted people between the ages of 18 and 22 aren’t known for making wise decisions but they sure bring a great energy to our town.   First of all, the university is far and away our biggest employer.  UGA brings many visitors to Athens all year long and every fall it provides Athens with a new batch of students that are going to love Athens for the rest of their life. What other Georgia town has such a strong engine fueling its community? Thanks to the university Athens has a major government employer, a strong economic base, and a culture rarely found in a small town.

I think the students are one of the best things going in our community and welcome them every year.  Thanks to our university Athens remains a wonderful place to live, start a business, or invest in real estate.  We have wonderful neighborhoods, strong outlying communities, and a steady pool of renters that need affordable housing.  This helps make the Athens area a great place to live, retire, or invest.  So in closing, I want to thank all the college kids that live in Athens year in and year out.  I am so glad you are back because without you Athens just wouldn’t be Athens.

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.