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Value-Add Real Estate in Atlanta Gives Rise to Multifamily Investment Opportunities

Jul 25, 2017

We keep a close watch on local markets throughout the country, and we’ve been impressed lately with promising developments in Atlanta. The multifamily real estate market there has been looking up for a while, after coming back from a slump during the last recession. Now more and more opportunities are being identified and activity is increasing both with new construction and sales of existing complexes.

If you are thinking about making new investments or shifting your investment strategy, we feel that the Atlanta market deserves close consideration as the metropolitan area evolves in promising new directions. The city’s population is on the rise and housing prices in Atlanta’s downtown and midtown are rising too. Consequently, outer areas of the city are growing rapidly and apartment communities are being built and renovated to accommodate the influx of new residents.

The Rising Population and the Multifamily “Surge”

The multifamily housing market is thriving in Atlanta thanks to a strong local economy. The city, home to 15 Fortune 500 companies, saw a population increase of 8,932 in its metro area in May alone according to the Georgia Department of Labor. Thus, while the unemployment rate remains steady at 4.5%, the underlying job growth is brisk.

Prices are rising and supply is limited for single-family homes, causing the number of renters to rise by 10% in Atlanta’s urban core and by 26% in the suburbs between 2011 and 2015. This is spurring a wave of apartment development that is being characterized as “Atlanta’s multifamily surge of 2017,” which is projected to deliver 21,200 new units into the Atlanta market over the next two years. While this rapid growth threatens to put temporary pressure on landlords to entice new residents to their newly constructed units, developers are confident that the market will absorb the new supply relatively quickly.

Two projects feature prominently in this new development. A $90.5 million tower to be located downtown, adjacent to Peachtree Center, has just received approval for a tax subsidy from the city. The tower will be 14 stories high and contain 302 units. Construction will begin in January 2018 and is expected to be completed in late 2019. Along the Beltline, the rail line currently being redeveloped as a recreational area, an $80 million, 350-unit complex is being built that will also feature retail, restaurants, and office space. The groundbreaking ceremony was held in mid-June and it will be ready to receive residents in the spring of 2019.

Adding Value in the Atlanta Suburbs

It is Atlanta’s outskirts and suburbs that are seeing the greatest activity, however. This is particularly true of the secondary market, which has seen a spate of transactions in recent weeks. Communities in the upscale, outer Druid Hills neighborhood and in suburbs to the north and south of the city have recently traded hands. These were identified as “value-add” properties, meaning that they were targeted for capital investment to raise their income-generating potential. This is especially timely, as more and more people are priced out of housing in downtown and midtown Atlanta.

Renovations to value-add communities can include interior features, such as upgraded fixtures and HVAC, or infrastructure, such as improved drainage or siding, but the most recent trend has been the addition of community amenities. These are improvements like fitness centers (or even fitness classes), clubhouses, pools, and playgrounds. Each of these improvements represents a potential future rent increase for the residents benefiting from them. This has been a nationwide phenomenon, but Atlanta is especially attracting attention. “There are a lot of undermanaged assets in the marketplace,” one real estate executive commented.

The Benefits of Having Property Management and Investment Expertise

The activity on the Atlanta market highlights the need for both professional property management and an investment strategy. Investors on the primary market must have a thorough understanding of the market, which may be approaching a glut in parts of the city. They also have to be prepared to wait out a period of less-than-optimal ROI.

The secondary market is no less demanding. Value-add properties require a flow of investment over time, as well as the ability to tolerate a lag in returns. In addition, value-add improvements must be coordinated with the property’s residents, requiring precise planning and careful action.

By all indications, Atlanta should remain a strong market for multifamily housing for the foreseeable future. The market continues to see strong demand with the central parts of the city seeing vigorous growth and the number of suburban communities available for sale decreases.

As an individual investor, you might consider finding an institutional partner to enter this market with, as it requires a range of financial and logistic resources characteristic of a very large organization. CWS Capital Partners has a long history of working with investors on the multifamily real estate market. Contact us today to find out more.

 

The information provided here is for your general informational purposes only. It should not be considered a recommendation or personalized advisory advice. CWS has made this third party information available from authors it believes are knowledgeable and reliable resources. However, its accuracy or completeness cannot be guaranteed and sentiment may change due to legal or economic conditions.

All investments involve risk including the possible loss of principal. You should familiarize yourself with all risks associated with any investment product before investing.

Advisory services are provided by CWS Capital Partners LLC, a registered investment advisor.

Securities offered by CWS Capital Partners LLC are through an affiliated entity, CWS Investments. CWS Investments is a registered Broker Dealer, member FINRA, SIPC.


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