Navigating the North Atlanta Real Estate Market: A Comprehensive Guide for First-Time Investors
In recent years, one term has dominated economic discussions: INFLATION. A recent survey revealed that 82% of respondents feel the impact of inflation on their household budgets. I want you to consider how investing in the North Atlanta real estate market can be a strategic response to inflationary pressures, especially for first-time investors.
The North Atlanta Real Estate Market in Numbers
Let’s start by looking at the average sales price increases over the past year in key North Atlanta cities:
Milton: From $1,001,114 in 2022 to $1,071,125 in 2023 (an increase of $70,011)
Alpharetta: From $590,609 to $643,293 (an increase of $52,684)
Roswell: From $554,821 to $598,375 (an increase of $43,554)
Woodstock: From $420,110 to $441,110 (an increase of $20,924)
This translates to an average annual increase of 7.3%.
Real Estate as a Hedge Against Inflation
So, how does real estate investment counter inflation? Here are three key ways:
• Rising Rents, Fixed Mortgages: As inflation rises, so do rental prices, while your mortgage rate stays the same. This means your return on investment increases with every rent hike.
• Paying Less Over Time: Inflation devalues future dollars. Since your mortgage payments are fixed, you effectively pay back less over time in real terms.
• Property Value Growth: Inflation typically drives up property values, enhancing the worth of your investment without increasing your mortgage debt.
Beyond Inflation: The Four Pillars of Real Estate Investment
Besides being one of the best hedges against inflation, real estate offers 4 other key benefits. Leverage, passive income, appreciation and tax write-offs.
• Leverage: Use loans from banks or mortgage companies to amplify your investment power.
• Passive Income: Rental income helps pay off your mortgage, building equity in your property.
• Appreciation: Property values tend to increase over time, boosting the worth of your investment.
• Tax Advantages: Benefits like depreciation deductions can reduce your taxable income.
Understanding Return on Investment (ROI)
Consider you buy a property for $100,000 with a 20% down payment ($20,000). If the property appreciates by 5%:
Gain: 5% of $100,000 = $5,000
ROI: $5,000 is 25% of your $20,000 investment
In comparison, to match this in a mutual fund at 10% yield, you’d need a $250,000 investment.
Getting Started in Real Estate Investment
Hopefully I’ve convinced you to at least consider the idea of investing in real estate now. So where do you start? The first step is to define, with as much detail as you can, the criteria of the investment property. Consulting with a Realtor who has experience with investment property can help you gain clarity around what makes a good investment.
• Define Your Criteria: Detail the characteristics of your desired investment property – location, size, age, HOA presence, condition, and price range.
• Local Focus: Most investors focus within 20 miles of their residence. Narrow down your search to one or two areas.
• Market Research: Use online tools to track property prices and potential rental incomes. Visit neighborhoods at different times to get a feel for the area.
• Create Your Property ‘Avatar’: Develop a clear vision of your ideal investment property to streamline your search.
• Due Diligence: Once you have a property in mind, thoroughly check financial aspects like mortgage, insurance, and HOA rules. Consider getting contractor quotes for any potential upgrades or repairs.
Take the Leap
Armed with knowledge and the right strategy, 2024 can be your year to start investing in real estate. As Warren Buffett advises, be bold when others are cautious. Consulting with a knowledgeable Realtor and lender is an excellent first step.
