With big Wall Street funded investment companies snapping up hundreds of millions of dollars worth of foreclosures in metro Atlanta, you'd think that tenants were fighting "tooth and nail" get into single family rental properties.
Indeed, the main stream media has been reporting for quite a while now that there is a growing demand for rental properties as a result of the high number of foreclosures. But given that mortgages are still, for the most part, cheaper than rents in Atlanta, does it really follow that everyone who could not afford their mortgage will plan to rent a house instead? I'm not so sure about that. My observations and the general data seem to paint another picture.
In recent months I've been noticing quite a few "for rent" signs in front of houses in various parts of the metro area. Many of them are in nicer neighborhoods where it is unusual to see these properties used as rentals. And I also work with real estate investors who are out on the streets in various parts of the metro area. On the east side of metro Atlanta, I'm getting reports of lots of vacant houses that are not on the market. There is evidence to suggest that there is still a large amount of "shadow inventory" in some areas.
I decided to take a look at some of the "for rent" listings around the metro area, to see if there is any apparent evidence of a shortage of rental properties. And frankly, I just don't see it.
The Atlanta Housing Authority, AHA.org, has always been a good barometer of rental property demand inside the city of Atlanta. Back before the real estate investing boom began here, it was not unusual to have a very short list of rental properties available in the government subsidized, (section 8), housing program. But I've seen this list of available properties grow steadily since the housing boom years.
A few years back, the section 8 program actually began reducing the amount that they paid to landlords. Before the boom years, they paid higher than market rents to attract landlords with good quality properties. During the housing boom, renting to section 8 tenants became a very popular investing strategy. The glut of available rentals resulted in a drastic cut in rent rates paid to landlords.
This week I found 1049 properties available for rent within the city limits of Atlanta on georgiahousingsearch.org which handles the rental property listings for the Atlanta Housing Authority, along with other housing groups in the metro Atlanta counties.
Properties listed on this website include apartment complexes for low income renters as well as single family houses that are owned by real estate investors, investment companies and private owners who have qualified under the AHA guidelines.
There were a total of 4260 properties available in greater metro Atlanta on georgiahousingsearch.org. The highest rent rate listed is $1,100 per month, depending on location and size. The tenants pay a share of that rent, and the housing authority pays the remainder. The total rent paid to the landlord is based on a rate classification that is given to your property by the AHA inspectors.
Here is where most of the demand seems to be: Instead of vacancies, there is a waiting list for apartments on the low end of the rent rate scale. Government subsidized apartments rent from zero cost, (rent paid by the government for tenants who qualify), to around $500 per month, depending on income.
From Griffin, GA, over an hour south of downtown Atlanta, to Woodstock, about 30 minutes north of downtown Atlanta, there is a waiting list for dozens of apartment complexes, that offer subsidized rent for tenants who qualify based on income. It is clear that most of the tenant demand is on the very low end of the scale.
To get an idea of the general rental market activity, that would not be included in the subsidized rent listings, I did a search of the FMLS rental listings that included only Cobb, Fulton, Dekalb, Clayton and Gwinnett counties - five of the primary counties, out of 20 or so counties that make up the greater Atlanta metropolitan area. I found 3227 matches, and got an error that said "too many matches to display map". To narrow it down a bit, I searched exclusively for 3 bedroom, 2 bath rentals in those same 5 counties, and turned up 1026 active listings along with another error saying "too many matches to display map".
And though the foreclosures are primarily single family homes being converted into rental properties, there are also plenty of new apartments being built as well. It was just a few years ago that we had a glut of upscale apartments that went begging for tenants. It was not unusual to see an apartment complex offering free rent or other perks to attract new tenants. I'm not seeing as much of those signs at this point. It seems that apartments are doing better, while single family houses may be reaching a point where there are more houses than tenants who can afford them.
Until the job market picks up significantly in metro Atlanta, my gut feeling is that we may be reaching a tipping point with single family rentals in those areas that have seen lots of foreclosure buying from big investment companies. Only time will tell, but rental rates in metro Atlanta are lower now than they were 10 years ago in many areas. During a recent speaking engagement at a local Atlanta investor association, I asked the group how many landlords had reduced their rent rate to keep a tenant or to fill a property that was not renting fast enough. Fully 80% of the group raised their hand. In my area, north of Atlanta, a 3 bedroom, 2 bath single family property is renting on average for about $850 per month. Back in the late 90's those same properties rented for around $1200 a month.
I can remember back in the 1980's, when the manufacturing base was still thriving here; before GM and Ford began closing their auto plants; before the mills closed, and interest rates were so high that no one could afford a mortgage. That was a golden era for landlords. You had to get to a property the same day the ad came out in the paper if you wanted to have a chance at renting it. Today the fundamentals have flipped-flopped. Interest rates are at all time lows, the unemployment rate is high, and the stock of available rental properties continues to grow.
Donna S. Robinson is a real estate investor and residential investment consultant located in Atlanta, GA. Follow her on twitter at donnaconsults, Facebook.com/RealtyBizConsulting and watch her videos on youtube. Her latest book, Basics of Real Estate Investing, is now available for Kindle on Amazon.com
Is atlanta finnished as a city for a small invester like me
who wanted too buy two foreclosur low end homes
No Brian, Atlanta is not "finished" as a city for the small investor. I do believe that the big investment companies are going to have more problems with management and cash flow issues than they realize, and I would be very cautious about turn key investing in Atlanta, through third party companies, because the details of the deal can be murky, plus they all have a very short track record as far as net return on investment is concerned. But that being said, as long as you stay out of the areas that have the highest inventory of vacant foreclosures, areas that are over built, and focus on affordable housing you should be OK. The key point is that you have to know the market here. Atlanta metro is the largest metro area in the world in terms of square miles of territory. some areas are very good for rentals, but those areas with too much inventory, heavily worked by investors should be avoided in my opinion. I have rentals too, and yes, Atlanta is a great area to live and work, but that being said, the fundamentals simply do not support the idea that anyone can buy any foreclosed property and rent it at a profit, as is being implied in the media.