This is not another “Now is a Great Time to Buy” real estate article. It’s just some simple facts of the Atlanta real estate investor grade market. Investor grade is a starter-home property ready and suitable for renting or resale. The analysis was conducted by a third party company, PortReal, LLC. PortReal benchmarks investor grade pricing using the 15th percentile price point in the market. They believe investor grade housing shapes supply/demand for the overall housing market by defining a clearing price for investors.
Many people have believed this is a trickle-up recession that began when the starter-home market became over-inflated and loans were given to those who should not have had one the first place. By correcting this first home market, a recovery could begin to follow. So, let’s see how PortReal validates their 37% Underpriced Investor Grade Market…
A 3 bedroom investor grade property in metro Atlanta is estimated to cost $104,500. The rents produced from 3 bedrooms properties are sufficient to cover operating and financing costs (80% LTV @6.46%) of a $166,811 property. Therefore, $166,811 – $104,500 = $62,311 divided by $166,811= 37.35% below the investor grade benchmark.
Granted there is still a high amount of inventory to burn through, but the good sign is there is enough incentive now for investors to take risks and buy the investor grade properties. Thereby reducing the inventory and forcing a trickle-up rebound as start home sellers become move-up buyers.
Atlanta Real Estate Investment Market Report by PortReal
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