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Atlanta’s Growth Is Spurring Investment Opportunities in the Rental Market

Atlanta has firmly entrenched itself as a major player in not just the United States but also the world. While the city itself is home to just less than 500,000 people, making it the 39th most-populous city in the country, the Atlanta metropolitan area is home to 5.88 million people, making it the ninth largest metropolis in the country.

Atlanta’s roots as a transportation hub date back to its founding in 1837. The city was built at the intersection of two railroad lines that year, and it is staying true to its history today. Atlanta is major transportation hub today. The Hartsfield-Jackson International Airport is the busiest airport in the world. In 2017, the airport carried almost 104 million passengers, 8.1 million more than the second busiest airport – China’s Beijing Capital International Airport.

The story of Atlanta is one of resilience and renaissance. The city was mostly burned to the ground during the Civil War, but after it was re-built, it quickly rose to prominence and became the unofficial capital of what became known as the New South. It was a major organizing center for the civil rights movement, with Dr. Martin Luther King Jr. being born in the city.

Over the last 50 years, Atlanta has quickly become a major international player in the fields of finance, research, technology, education, media, art and entertainment. It boasts an extremely diverse economy and ranks in the top 20 among world cities with a gross domestic product of $385 billion. Major companies such as Coca Cola, Turner Broadcasting, Home Depot and Delta Airlines all call Atlanta home, fueling the city’s economy and attracting other industry to the region.

The strong industry and diverse economy in Atlanta have made it an extremely attractive place for people to live and move to in recent years, and statistics in the housing market reflect that. The influx of residents to the city and its surrounding suburbs have fueled a strong rental market in both traditional apartments/condos and single-family homes, making Atlanta one of the prime markets for real estate investment.

Atlanta Has Changed

In the 1990s, almost 25 years removed from the civil rights movement, Atlanta began to undergo a transformation that propelled it to where it is today. The city hosted the 1996 Summer Olympic Games, making it front and center on the world stage. To showcase the city to the people across the world who would be visiting the city or seeing it on TV, Atlanta underwent major construction projects that saw the creation of parks, sporting venues and transportation infrastructure.

In the decade that followed, the city’s demographics began to evolve as well. Once known as a predominantly black city, with African-Americans making up 67% of the populous in 1990, the city’s booming economy and the country’s shift to suburbanization saw an influx of more diverse residents. The percentage of African-Americans who called Atlanta home by 2010 dropped all the way down to 54%.

Young, college-educated professionals were the main reason for the shift in the city’s makeup. These people came from all over the world to make Atlanta their new home because of its industry, easy transportation access to other parts of the country and the world and because of the city’s transformation.

Cultural amenities soon followed. Today, Atlanta is one of the few cities in the nation with permanent, professional and resident companies in all the major performing arts disciplines of opera (at the Atlanta Opera), ballet (at the Atlanta Ballet), orchestra (Atlanta Symphony Orchestra) and theater (the Alliance Theater). The city is also home to many major museums and to three major professional sports franchises:

  1. the Atlanta Hawks
  2. the Atlanta Falcons
  3. the Atlanta Braves.

Atlanta’s Industry Is Still Growing

Atlanta is home to 15 companies that were ranked in the 2017 Fortune 500 and is also home to four Global Fortune 500 companies. These major players that are already established have helped contribute to the growth and attraction of the city to other industry. Atlanta continues to be attractive for business investment because it ranks among the lowest costs of transportation for services and manufacturing of the country’s largest metropolitan areas, which makes it a distribution hub for many sectors of industry.

Other major companies that contribute to economic and job growth include UPS, Aflac, HD Supply and SunTrust Banks. As the state’s capital city, Atlanta also has a wide array of public-sector jobs to help support the state’s governmental functions. And as the home to many universities, colleges and graduate institutions as well, Atlanta boasts a significant education employment sector. Some of the major institutions of higher learning include the Georgia Institute of Technology (Georgia Tech), Emory University, Georgia State University, Kennesaw State University, the Morehouse School of Medicine, DeVry University and the Terry College of Business Atlanta Center at the University of Georgia.

While the city has already grown substantially in recent years, that trend isn’t expected to stop any time soon. The city is projected to grow by an astonishing 38.7% by 2030, adding 1.4 million residents in the process. To keep up with the demand, the city has dedicated billions of dollars to transportation infrastructure, including the 22-mile Beltline Transit Loop, and housing projects across the region.

Here are some other eye-opening statistics for the Atlanta market:

  • Atlanta is expected to have 1.5 million job openings by 2040
  • Atlanta is projected to have $10-$20 billion in economic growth from the Beltline Transit Loop
  • Atlanta is ranked the top college city among cities with more than 300,000 people
  • Atlanta has the lowest cost of doing business out of all the primary U.S. metro markets, with an 18% lower corporate tax burden
  • Nerdwallet ranked Atlanta as the sixth best city in the nation for job seekers.

All the current industry and employment health plus the continued projected boom for the region makes the Atlanta real estate market a prime place for investment.

Atlanta’s Rental Market Is in High DemandAtlanta Real Estate Investment

Atlanta’s employment market is driving a healthy demand for rental housing. The increased need for more workers is attracting young workers who either have families or are about to have families to both the city itself and the greater metro region. The increased growth in development has attracted retirees as well. From 2011 to 2016, the 20- to 34-year-old age group grew by almost 10%, while the 55-and-older age group grew by more than 20%.

In 2017, there were 36,900 new employment positions created in Atlanta, and payrolls increased by 3.2% as well. Another 30,000 jobs are expected to be created this year, which would be another 2.5% jump. The top sectors for employment growth are construction (up 5.4%), education and health services (3.2%), information (3.0%), manufacturing (2.4%), and leisure and hospitality (2.3%).

In response, developers have continued to build housing to serve the increase in population. New multifamily developments have been concentrated in the Uptown/South End and Rock Hill/Fort Mill areas, but single-family rental homes are still in demand. Single-family permitting activity has climbed steadily over the last four years, reaching 15,500 homes in 2017, which was an increase of 7% from the year before. Multifamily developers, meanwhile, pulled 15,200 permits in the fourth quarter of 2017, which was more than double the year before.

People in the Atlanta region have turned to the rental market in increasing numbers recently, as higher home prices and rising interest rates have made renting a better option for many. Single-family renters are expected to increase over 12% in 2018, with the single-family vacancy rate reaching 6.8%, up 40 basis points from the previous year. The average rent is also expected to rise 2.8% in 2018, to an average of $1,344 per month.

This has all made Atlanta a prime region for single-family real estate investors looking for returns in the rental market. The continued influx of residents and the growth of the economy with a strong job market combined with the fact that Atlanta is an affordable entry point make it such a highly-sought-after region for investors. The median sales price of an investment property was $140,000 in 2017, which was a 12% increase from the previous year. In 2016, the median sales price grew by 4%.

While this higher sales price of homes has resulted in lower returns for investors, the yields plus appreciation have regularly averaged in the double digits over the past several years. Appreciation at the highest priced homes of the market has slowed while cap rates are below 5%, which just makes the mid- to lower-tier properties more attractive for investors looking for shorter-term gains in the rental market. The spread between average cap rates and the 10-year Treasury was 350 basis points at the end of 2017, and wider spreads between debt and returns have typically indicated strong buy periods.

Where to Invest in Atlanta

With all the factors above, it’s clear that now is a great time to invest in the Atlanta housing market. There are plenty of options to invest inside the city limits and in the suburbs as well. The real estate market in the city could be a little more difficult with all the new development and high-rise construction, though. So many investors are looking more toward the Atlanta suburbs for opportunities.

Here are a few prime investment opportunities in single-family homes in the Atlanta suburbs:

202 Westwood Trail, Dallas, GA

Dallas is a northwest suburb of Atlanta, approximately 30 miles from downtown. The home has three bedrooms and two bathrooms with 1,104 square feet of space. The purchase price of $125,000 and investment of approximately $46,500 could have a 10.08% gross yield and $7,261 in net operating income with its projected monthly rent of $1,050.

3699 Summit Drive Northwest, Acworth, GA

Acworth is also a northwest suburb of Atlanta located about 32 miles from downtown. This particular property is listed at $109,900 with a projected investment of $70,772. The home has three bedrooms and two bathrooms with 1,465 square feet. The projected rent of $1,400 per month could result in a high gross yield of 15.29% and net operating income of $94,38.

1053 Fern Valley Way, Dacula, GA

Dacula is northeast suburb of Atlanta, approximately 37.5 miles from downtown. This single-family home with 2,442 square feet offers four beds and two baths. It’s priced a little higher at $21,000 with a projected investment of $70,300, but the projected rent of $1,699 could result in a 9.71% gross yield and $10,813 in net operating income.

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