Real estate is often considered a great investment. It can provide a steady stream of passive income, long-term appreciation, and tax benefits. But is real estate in Atlanta really a great investment? In this blog, we’ll explore the factors that make Atlanta a good investment market and our favorite equations to help ensure you find a great deal.

Why Atlanta Real Estate is a Good Investment Market

Before diving into the equations, let’s explore why Atlanta real estate is a good investment market in the first place. Here are some of the factors that make Atlanta a desirable real estate market:

1. Strong Job Market

One of the most important factors in a strong real estate market is a strong job market. Atlanta is home to numerous large corporations and startups, providing employment opportunities in various fields. This means that there is a consistent demand for housing, which can drive up prices and rental rates. Atlanta has become the economic hub of the southern united states in the last 10 years. Many new companies as well as older and more established companies call Atlanta their home. This is a huge factor as to why the housing market has exploded in Atlanta in the last 10 years. Many people are leaving places like California and going to a place that they can raise a family and buy more of a house for a cheaper price.

2. Growing Population

Another important factor is population growth. Atlanta has experienced steady population growth in recent years, driven by both natural increase and migration. This means that there is an increasing demand for housing, which can drive up prices and rental rates. The rental rates in Atlanta have gone up steadily, as more and more people move into the city and the surrounding metro. The cool thing about Atlanta is the large size of the metro cities and counties. The best real estate investment opportunities lie outside of the city and inside the metro. Most of the people that work in the city of Atlanta commute from one of the surrounding metro cities. This is a stark contrast from places like New York and Chicago. For investors, this means that there is potentially more real estate available, especially rental real estate, that can be bought in the metro cities and rented out to people who commute to work in the city of Atlanta.

3. Limited Housing Supply

Limited housing supply is another factor that can make a real estate market desirable. In Atlanta, there is a limited amount of available land for development, which means that new housing supply is limited. This can drive up prices and rental rates, especially in desirable neighborhoods. Atlanta used to have plenty of housing for everyone, but the recent growth has caused a housing shortage. First time home buyers are finding it increasingly difficult to find affordable housing.

4. High Quality of Life

Finally, Atlanta offers a high quality of life, with excellent schools, cultural institutions, and outdoor recreation opportunities. This makes it a desirable place to live, which can drive up demand for housing and increase property values. Atlanta is a very culturally diverse place and a great place to live and raise a family. This makes the housing market in Atlanta very strong and very stable, since many people are looking to relocate to this beautiful city.

Our Favorite Equations for Finding a Great Real Estate Deal in Atlanta

Now that we’ve explored why Atlanta is a good investment market, let’s dive into some equations that can help you find a great real estate deal in Atlanta.

1. Gross Rent Multiplier (GRM)

The Gross Rent Multiplier (GRM) is a simple equation that can help you quickly evaluate the potential profitability of a rental property. To calculate the GRM, divide the property’s purchase price by its annual rental income. For example, if a property costs $500,000 and generates $50,000 in annual rental income, the GRM would be 10.

A lower GRM is generally better, as it indicates that the property is generating more rental income relative to its purchase price. In Atlanta, a GRM of 10 or below is generally considered a good investment.

2. Cap Rate

The Capitalization Rate (Cap Rate) is another useful equation for evaluating the potential profitability of a rental property. To calculate the Cap Rate, divide the property’s net operating income (NOI) by its purchase price. The NOI is the property’s annual rental income minus its operating expenses, such as property taxes, insurance, and maintenance costs.

For example, if a property generates $50,000 in annual rental income and has $10,000 in operating expenses, the NOI would be $40,000. If the property costs $500,000, the Cap Rate would be 8%.

A higher Cap Rate is generally better, as it indicates that the property is generating more net income relative to its purchase price. In Atlanta, a Cap Rate of 8% or higher is generally considered a good investment.

3. Cash-on-Cash Return (CoC)

The Cash-on-Cash Return (CoC) is another equation that can help you evaluate the potential profitability of a rental property. To calculate the CoC, divide the property’s annual cash flow (rental income minus expenses) by the amount of cash you invested in the property.

For example, if you invested $100,000 in a property that generates $10,000 in annual cash flow, the CoC would be 10%.

A higher CoC is generally better, as it indicates that you are generating a higher return on your investment. In Atlanta, a CoC of 10% or higher is generally considered a good investment.

4. Price-to-Rent Ratio (P/R)

The Price-to-Rent Ratio (P/R) is another equation that can help you quickly evaluate the potential profitability of a rental property. To calculate the P/R, divide the property’s purchase price by its annual rental income.

For example, if a property costs $500,000 and generates $50,000 in annual rental income, the P/R would be 10.

A lower P/R is generally better, as it indicates that the property is generating more rental income relative to its purchase price. In Atlanta, a P/R of 10 or below is generally considered a good investment.

Atlanta is a strong real estate market with numerous factors that make it a good investment. By using equations such as the GRM, Cap Rate, CoC, and P/R, you can quickly evaluate the potential profitability of a rental property and find a great deal in Atlanta.

However, it’s important to remember that these equations are just tools, and they should be used in conjunction with other factors such as location, neighborhood, and property condition. If you’re considering investing in Atlanta real estate, be sure to do your research and work with an experienced real estate professional, such as the team at Nance Home Buyer, who can help you find the best opportunities. Give us a call today to learn more!