Tag Archives: real estate

So, You Want To Be a Real Estate Investor…

Monday, 13 May 2013 09:08

Written by Lane Bailey

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I had a call recently from a “would-be” real estate investor. He wanted me to find a few properties for him to flip. He’s been looking at the Atlanta market for a few years (his words) and decided that now was the time to jump in and flip some properties.

Atlanta (Photo credit: Lima Pix)

Specifically, he was looking for entry level homes that he could pick up needing a little work, maybe in the $50-75k range, needing $10-15k worth of renovation. His goal was then to sell them for $100-$125k. East peasy.

Except, it isn’t…

In fact, right now that would be ANYTHING except easy peasy. It would be quite difficult. And here’s why…

A few Billion Dollars in “hedge fund money” floating around the Atlanta market
A market turn that while not “complete”, is far from unnoticed.
A limited inventory, especially on the entry level end.
Lack of easily available financing.

Billion Dollar Car (Photo credit: soul_motor)

This was a guy without a load of cash, unable to offer quicker closes than “the next guy”, and unable to out-spend the competition. He was not only convinced that there was a glut of homes, but that he was completely in the driver’s seat on these types of deals.

That is NOT the case. In fact, small investors are regularly SHOCKED at what the hedge funds are paying for houses right now. They are bidding them up on the open market. They are bidding them up on the Courthouse steps. They are willing to pay top dollar whenever and where ever they find them.

They don’t care what they can sell them for right now. They are looking at 5 year turns… with rental income in the mean time. The “over-payment” will be erased by the rental income and the increase in values over the next few years.

If you want to compete right now, THAT is what you have to compete with. A few years ago, you might have been able to pick up a cheap property and flip it… not so much any more.

Lilburn, GA Market Report, March, 2013

Friday, 10 May 2013 12:26

Written by Lane Bailey

1 Comment

Market stats for Lilburn, GA, March, 2013, indicate that there were 188 properties on the market, up 5 from last month. Overall, there was about an 3.8 month supply of properties and 58 properties that closed (sold) in March. It was a slight increase from last year’s sales (51) and from February (47 sales). The Absorption Rate notched down slightly. Lilburn had been among the weakest of Gwinnett County, GA, cities I track. But, at 3.76 months of inventory, it is strong now. Six months is considered balanced, lower is a seller’s market and higher is a buyer’s market.

In the sub-$200k arena, there were 123 listings, with about an 3.1 month supply with 44 sales. This represents most of the sales in the market area. Sales were up a little from last month (39), and from last year (41). While the Absorption Rate isn’t as low as many other areas, sales are strong, and I’m think we are in a comeback for Lilburn. At 3.10 months of inventory, with a few months of stats getting better, we’re there.

Between $200k and $400k, there are 53 listings for sale, and about 5.3 months of supply. This segment had been quite weak for months, and had stalled a little, but came back with a vengeance… only to stall a bit again. There were 14 sales compared to 7 last month and 9 last year. Lilburn has never been seen as a luxury market. The decrease in listings has really helped. I’m still not as confident about this portion of the Lilburn market coming back quite yet… It is strengthening, just not as consistently as I’d like. July month was quite strong. April was strong… We are slightly in Seller’s Market territory.

From $400k to $600k, there are just 9 homes on the market. The absorption rate is 27 months. There were 0 sales in March. Poised for a comeback, but an increase in listings and weak sales don’t give the right ingredients for that to happen. To start with, we can’t have 7 month blank spots in sales (none from Aug11 through Feb12). If we can keep up a sale each month on average, this one will be back.

From $600k to $800k, $800k to $1M and Above $1M, there are 3 listings (combined), but too few sales to have any sort of reliable number of months of inventory. March posted the first sale since August, 2010. It was in the $600-$800k range. One of the listings is above $1M and one between $800k and $1M, and there is no market activity in the last 12 months for those ranges…

Lilburn is in Gwinnett County, GA, just outside of Atlanta. As of the 2000 Census, there were 11,307 people in Lilburn, but that is only including people in the city limits, and there has been a lot of growth since 2000 in Gwinnett County. It was incorporated in 1910. Lilburn is home to Parkview High School, and also has students in the Brookwood, Berkmar and Meadowcreek clusters. It is also home to Killian Hill Christian School, Providence Chrisian Academy, St. John Neumann Catholic School and Parkview Christian School. Possibly the most famous resident of Lilburn is General Beauregard Lee, a groundhog with a better winter prediction record that Puxatawnee Phil up in PA. Dominique Wilkins, formerly of the Atlanta Hawks also lives in Lilburn.

Atlanta Metro Zillow Home Value Index

Atlanta Metro Home Values – Interactive chart

I have a page dedicated to Lilburn Market Data.

Garage Values…

Wednesday, 08 May 2013 11:45

Written by Lane Bailey

1 Comment

I’ve been working on some statistics for valuing additional garages. It is tough. They are a specialized addition, not unlike equestrian facilities, pool or tennis courts are for other families…

ROD WORKS SHOP (Photo credit: ATOMIC Hot Links)

Appraisers have been all over the map, but for the last couple of years they have consistently under-valued enthusiast garages. I have seen $50k-$70k garages valued under $10k during the appraisal process.

A large part of that is due to the fact that actual market value numbers are seldom worked up for specialty garages. The buyers see the additional value, and of course the sellers see the additional value. But too often, the appraisal gets in the way of completing the sale.

As a real estate agent, I can NOT do appraisals, but I can provide limited guidance to appraisers to help them see the additional value that should be added for an enthusiast garage.

For a recent property, I worked up an area wide study of similar garages. The results were a little surprising. Keep in mind, these were specific to the type of garage I was trying to find comps for… in this case, the house had an attached, over-sized 2 car garage and a detached VERY over-sized workshop garage (around 900square feet). I controlled price range to be similar to the subject home. Looking for direct comps was fruitless, but I was able to find other homes with detached garages, generally in the 500sf range. In each case, there was only one home with the bonus garage. So, I looked for comparable homes without the bonus garage to compare the difference in prices.

Subdivision 1 – Average difference was $23,300.
Subdivision 2 – Average difference was $10,500.
Subdivision 3 – Average difference was $53,615.

An aerial view of housing developments near Markham, Ontario. Photo by IDuke, November 2005. (Photo credit: Wikipedia)

In the case of subdivision 2, there were only two houses, one with and one without the big garage. The house without the big garage had been fully updated with a new kitchen, granite counters, stainless steel appliances, upgraded bathrooms, etc. The house with the garage had laminate counters, old appliances and had not been updated for at least 15 or 20 years of its 33 year life. That would lead me to believe that the market values of the homes was actually considerably wider than it first looks. And, I believe the opposite to be true of Subdivision 3… the Garage Home was considerable nicer than the non-garage comparables.

However, this shows pretty solidly that the additional garage is more likely worth $20k-$30k, rather than the $5k-$10k that many appraisers will initially allow for the structure. That also puts it in line with Remodeling Magazine’s annual Cost vs Value study garage data. That puts the mid-range garage cost at around $46k while the value at sale is around $30k.

Appraisals are great when you are looking at a cookie cutter home. Those are easy… it’s when the mold is a little different that things get sticky. Of course… you need an agent that is willing to invest the time to fight a low appraisal. Even as a buyer, if the appraisal doesn’t come back at a price the seller can work with, you won’t be able to get financing… Give Lane a call.

Norcross, GA, Market Report, March 2013

Monday, 06 May 2013 11:02

Written by Lane Bailey

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Market stats for Norcross GA, March, 2013 indicate that there were 136 properties on the market, down 7 from last month. Overall, there is about a 3.6 month supply of properties. The last year has been fairy strong… it hasn’t slowed much, if at all. March saw 44 sales, well up compared to the 32 for February, but down compared to the 51 for March last year.

In the sub-$200k arena, there were 72 listings, with about 3.0 month supply. Sales are up from last month and way down from a year ago in this segment, which is the main driver of sales in this area (25 v 20 in Feb13 & 42 Mar12). For the last two years, the AR has been tilted in favor of sellers. This still looks like one of the strongest price/area segment in Gwinnett County, GA. At a 2.96 month A/R, this is pretty strong for sellers.

Between $200k and $400k, there were 41 listings for sale, and about 3.8 months of supply. This segment had been weakening for the last few months. But, the 15 sales were up from last year’s 11 sales, and last month’s 9 sales. Even though it isn’t as gangbusters as some of the other areas, it is certainly better than the 28 months of inventory we had in December, 2010. I think this is starting to look like a pretty settled market here…

From $400k to $600k, there were 20 homes on the market. The Absorption Rate is around 8.6 months. The AR had been fairly steady all summer, then shot WAY up in September/October. March’s 4 sales were up from the 3 last month and from last year’s 3 sales. This had actually been a pretty good area for homes in this price range to sell… The good news is that it only takes a few sales to put it back in a balanced range long term. In June we were at just 5.1 months of inventory and five months ago it was 42 months…

In the $600k to $800k arena, there were 2 listings on the market. The Absorption Rate is at 12.0 months of inventory… but with only 4 sales in 2010 and 4 sales in 2011, obviously it is easy to bump one way or the other. One reason for the strong looking Absorption Rate last month was that there were so few listings. The were 0 sales for Mar13, 0 for Feb13 and for Mar12.

The range from $800k to $1m, there were 0 homes listed on the market and 0 sales in February. There were no sales last year. Unfortunately there isn’t enough data for a good A/R number.

Above $1m, there was 1 property listed. But because of the smaller numbers of sales, the absorption rate could be significantly impacted by just a couple of sales. There is simply not enough activity for an A/R figure. The last sale was January 2011.

Norcross, GA is a suburb of Atlanta in Gwinnett County. The population is 2000 was 8,410 but that only included the area inside the city limits, and it has seen tremendous growth since that census. The City of Norcross revamped their old town a long time ago, and it has served as a model for other towns in the area. It is also home to Meadow Creek and Norcross High Schools. One of the things that Norcross is known for locally is the beautiful older homes in the downtown area. They have maintained their historic flair quite successfully.

I have a page dedicated to Norcross Market Data.

Atlanta Metro Zillow Home Value Index

Atlanta Metro Home Values – Interactive chart

Duluth, GA, Market Report, March 2013

Friday, 03 May 2013 10:55

Written by Lane Bailey

1 Comment

This map shows the incorporated and unincorpor...

Image via Wikipedia

Market stats for Duluth, March, 2013 indicated that there were 286 properties on the market, down 1 from last month. Overall, there was about a 5.3 month supply of properties. Sales in March were 76, up from 75 a year earlier. Sales were WAY UP compared to the prior month (40). Duluth had been slightly leading Gwinnett County as a whole, but not so much over the last few months. It is slightly in the Seller’s Market zone.

In the Under $200k arena, there were 82 listings in Duluth, GA, with about a 3.3 month supply. The Absorption Rate for last March, was 5.1. Sales were WAY down this year v last year (35 v 44), but up compared to last month (20). The Absorption Rate (A/R) is a bit better than most of the county…

Between $200k and $400k, there are 83 listings for sale, and about 4.4 months of supply. Absorption rates have similarly risen, dropped and then risen again. Sales were up compared to March, 2012 (26 v 19) and compared to last month (15). Duluth is a market that favors luxury, but this segment is not doing as well as I would have expected… but it might be constrained somewhat due to low inventories. It is still a Seller’s Market.

From $400k to $600k, there were 37 homes on the market. The Absorption Rate was around 12.3 months. March brought in 3 sales. There were 6 last year and 2 last month. Unlike many of the market areas, Duluth is a luxury centric market, and it is doing better than the rest of Gwinnett County, GA, especially at this price level. This moth saw a HUGE jump in the A/R. We are now well to the Buyer’s Market side.

In the $600k to $800k arena, there were 22 listings, with about 5.1 months of supply. Sales were 9 for March… 3 for last year. And month to month sales were up drastically (9 v 1). I would like to see three consecutive months with strong sales, and haven’t seen that for a while. Since Duluth does favor luxury sales, it has been looking better than the much of the rest of the County at this price level. That A/R is great, but not stable.

In Duluth, GA, from $800k to $1m, there were 22 homes listed and approximately 22 months of inventory on the market. The 1 sale for March was not better than the 2 last year or the 1 last month. Sales haven’t been moving much for the last couple of months, but 3 sales for the last 3 months was the better than the same 3 months from last year (2 sales).

Above $1m, there were 40 properties listed. The current absorption rate indicated about 30 months of inventory. A couple of sales at this level could have a large impact on the Absorption Rates. There were 4 sales in the Jan-Mar period this year, and 2 for the same time last year. We should be posting four sales a month here regularly… and we fell short last month but barely had a start with it this month with 2 sales. There was 1 sale last year and there was 1 for last month.

Duluth, GA is a suburb of Atlanta, in the heart of Gwinnett County. It actually straddles the county line and has unincorporated portions in South Forsyth County. The population of Duluth is estimated as about 26,000 people as of 2008, but this doesn’t include unincorporated areas outside the city limits, but with a Duluth mailing address. It is also home to Sugarloaf Country Club, a PGA stop until recently. Forbes Magazine rated Duluth 26th in their nationwide survey of the best places to move, and it is one of the wealthiest parts of Georgia. It is also home to the Arena at Gwinnett Center (Home of the ECHL Gwinnett Gladiators) and the former Atlanta Thrashers practice facility (the Duluth Ice Forum). There is a LONG list of celebrities and athletes that call Duluth home, largely because of the country clubs and proximity to Atlanta.