CW 735 - Market Profile of Macon, Georgia - An Under The Radar Opportunity

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Welcome to the Creating wealth show. This is Jason Hartman, your host. Thank you so much for joining me. We have so many listeners from around the world and we appreciate all of you so much. I am once again on the move today. Do you know that the United States is the most mobile society in the world? I was talking to a friend about this at dinner last night when I was in Aspen, Colorado. I flew up there and hung out with some friends and kind of relaxed a little bit. Well, actually I, I am not telling the truth there. I did not relax much when I say that because I ended up doing quite a bit of work actually from my hotel room. But I went up to Aspen, Colorado. Beautiful place. Of course, totally, massively overpriced. Because. Why, why would that be? Well, it would be because they, the environmentalists won't let anybody build anything and everything's very highly regulated. So it's super expensive. You know, salad for lunch in Aspen is $26 for a salad. That would be $15 at any other restaurant, maybe even 12 at some. So that's Aspen for you. You know, the NIMBY syndrome is well at work there where everybody who's got theirs, who, who has their expensive real estate there, they don't want to let anybody else in or let else build anything because, well, that would just ruin their neighborhood and it would decrease their values. So this is the NIMBY syndrome. It's that like that riddle I always say. And by the way listeners, just so you know, tangent alert, we're on a tangent here. So it's like that riddle that I share at my seminars. What do you call a developer? Someone who wants to build a house at the beach or in the woods. What do you call an environmentalist someone who already has a house at the beach or in the woods. And that's pretty much the way it works all around the US if not around the world. I coined the phrase when I had Thomas Sowell on my show quite a while ago. We did play him on a Flashback Friday. And by the way, if you are one of these. I know, I know, I understand, it's a very small number of you. Here's a tangent within a tangent, double tangent alert. Who sometimes, maybe you'll admit it, maybe you don't. You skip the Flashback Friday episode. Ah, shame on you. Don't do that. Don't do that, don't do that. You must listen to those. I'm hand picking those episodes for you and they are from many years ago sometimes. So do not miss Flashback Friday. Very important. Anyway, when I interviewed Thomas Sowell on Flashback Friday and on the original episode, we were talking about this issue. I think we may have even mentioned Aspen because it's kind of the poster child for it. But Irvine, California, my old hometown, is like that too. I coined the phrase environmental racism. Yes, environmental racism. Spread that one around. It's a pretty cool term. If you want an explanation of that search, go to jasonartman.com search that episode and check it out. It's interesting idea. Okay, what was I talking about at dinner with a friend last night in Aspen? And we were talking about. I don't know, we talked about a lot of things. But anyway, that size it up. Aspen, beautiful place. I love it. But you know, it is what it is. You just gotta understand the kind of hypocrisy that goes on in these communities. Of course there is a John Denver sanctuary there. I did not know it was there last time it was in Aspen. I wasn't aware of that. He had already died. He died back in 1997. That was a sad day for sure. I love his music. He and the lyrics especially, you know, very meaningful lyrics. I love songs with meaningful lyrics because they tell such a great story in such a great way. Much better than a poem when it's set to music, right? But I went to the John Denver sanctuary and checked that out and you know, that was very moving, very peaceful, very nice. Anyway, I am headed, driving to Santa Fe, New Mexico now. And it's a beautiful drive. You know, they just ought to build some more houses along these beautiful places so more people could participate and live here and enjoy it, enjoy the beauty as well. I mean, there's got to be some balance to it. I don't think you should totally overrun the land, of course, but let's just be reasonable, folks. That's all I'm saying. So that's where I'm off to now. But today our guest is going to have a market profile for us on one of these small. And again, you know, I don't love small markets for a variety of reasons. There aren't as many resources, of course, but they can be good because they're limited in terms of the inventory, which is is good once you own inventory there for sure. And the prices have been pushed up so much in some of the larger markets, some of, well, I should say the desirable larger markets, of course, that you've just got to constantly hunt for these markets that make sense, that properties work, that the rental market is strong and they're under the radar. Hopefully they didn't have the influence of the institutional investors during the beginning of the boom cycle. And so one of those markets is a nice city that I like a lot. It's Macon, Georgia. And it's a little less than an hour outside of, well, it's a little less than an hour, I should say, from Atlanta Airport. So we'll have our local market specialist that we worked with for many, many years in Atlanta who has now been busy in Macon, Georgia, because you just can't make anything work in Atlanta anymore. I mean, you know, when I say anything, that's a figure of speech. Okay. There are some things that work in Atlanta. Okay. Don't take me too literally ever, because, you know, might make a mistake doing that. But inventory is very scarce in Atlanta, put it that way. So he has expanded his scope. He's done business in some other markets, too, over the years. We've been with him a long time. So anyway, you're going to hear about this market for a few minutes. And what else did I want to just talk to you about before we dive into this? Of course, keep on the lookout. We're going to announce our next event here fairly soon. So that'll be coming up on a future episode. And I am just stunned and amazed again with these articles that are coming out that depict the real tragedy in the American savings world, how so many Americans just don't have any money saved up. Oh, hey, by the way, I remembered just now, because you're not here to remind me, like when it's a live audience to keep me on track, I remembered what I was talking about and that was our mobile society comparing it to Europe and other places. I'll be back to that in Just a moment. Anyway, the massive lack of savings, this represents a huge part of the rental market that needs to be served by us, along with the millennial generation, along with all of the other things I've been citing over the last several hundred episodes that make the demographics coming at the rental real estate market over the next 10 years nothing short of phenomenal. Probably the best they've ever been in history. And how far does history go back? Well, I don't exactly know. You can decide for yourself if you're a feminist listening. I know. I hope that word does not offend you. We can call it her story, too. We don't have to call it his story. Yes, you know, his story is why do the men get to dominate with the stories from the past? Women have stories, too. So herstory. Yeah, herstory and history coexisting in harmony. Yeah, that would be good. Oh, Jason, you're getting a little punchy. See, I just had this Americano, and whenever I drink coffee, it's just right away this punchy sort of thing goes on. So what was I talking about? About the mobile society before. Yes, America, one of the most mobile societies, if really the most mobile modern society in the world. So we travel all the time. We. We go around every place. It's. It's amazing. But we move so much, too. I remember taking an international real estate course several years ago. I remember I was in Tennessee taking this course for a designation, something I can't remember. The certified International Real Estate Specialist or something like that. CISP or something like that. First of all, I want to comment. I couldn't believe how elementary it was. A huge part of the course was spent converting square meters to square feet. You know, just roughly. Just divide by 10. Okay. Or I mean, multiply by 10, depending on which way you're going, of course. So, you know, a 150 square meter home is about 1500 square feet. You know, you really don't have to be a brainiac to know this stuff. I couldn't believe the number of hours they spent in that course talking about that. Anyway, there's another tangent. Here's my point. In Europe, there is so little real estate business. I mean, Europe's a great comparison, right? Because I'd say it's the second. Well, Asia, of course, too. And I don't know much about the Asian market, but certainly in Europe there is so little of a. Like, real estate is almost a cottage industry there compared to what it is in the US in terms of people moving the traditional real estate industry, because People just stay in these homes forever. They just do not move. So another reason you have a decline in, what is it called? Velocity of money. Velocity of money is very important to an economy. And that's why deflation is something that the government and the central banks around the world will do whatever they can to prevent. Because deflation not only has all these terrible side effects and direct effects on the economy in terms of R and D stops, production stops, decisions stop because everybody waits. And the velocity of money just massively declines because people postpone buying decisions where in the inflationary world. And this is why the Fed has a target inflation rate, which I think is kind of epically stupid overall. Philosophically I do, but you know, I'm not going to be a slave to my philosophy. And as an investor, you shouldn't be either. You should, you should understand the philosophy of things. But at the same time, be a realist, be a pragmatist, be pragmatic and just align your interest with the powers that be. So they've got a target inflation rate, they're going to make it happen. Income, hell or high water, that is around 2%. That's the old Phillips curve thing, the relationship between inflation and employment. So we need to align our interests and keep them aligned with those powers that be. The most powerful forces the human race has ever known. Central banks and governments, withstanding armies. Anyway, that is probably enough of that. I just got on sort of a rant here. It is my birthday, so please excuse me. And by the way, thank you for all the birthday wishes. I really appreciate it. It's amazing how quickly time passes, isn't it? Yes, it is. I know, we all know that. And that's why again, most people, they're really upset and discouraged and frankly, rather depressed about the passage of time. And that may be true as far as aging and the fact that our body won't do what it used to do and it doesn't have the kind of energy and flexibility. But hey, listen to my longevity and biohacking show. And there are some workarounds and there are some amazing things coming our way in that world. So definitely check out my longevity and biohacking show if you're not listening to it already. I know a lot of you are, but the, the passage of time when you're a real estate investor is just a wonderful thing because you put everything on your side. Bad government policy, Father Time, Mother Nature. I've talked about that in terms of natural disasters as we have this huge hurricane approaching in the southeast, all of this stuff, some of it good, some of it bad, some of it tragic. I get it. I'm not making a commentary on it. I'm just saying it is, it is what it is.

Our interest is served when all of these things that most people are the victim of, they benefit real estate investors if you're doing it right because you've aligned your interest with reality, not the way you wish it could be. So I guess that's it for now. Let's get to our guest today and get a little quick profile on Macon, Georgia. Check out properties at Jason hartman.com, check out educational products@hartmaneducation.com and I'll look forward to talking with you after this brief market profile and on the next episodes.

As you investors know, the market has been very, very hot for the last several years. And that has caused a challenge for investors to go outside of some of the bigger sort of flagship markets, whether they be Phoenix or Atlanta or Dallas or Austin or whatever, where all of these markets have had big hedge fund activity, big private equity group activity. And there have been run ups in prices as investors have just gobbled up every property they can find that makes the least bit of sense. Of course, this problem is even more pronounced and worse in the cyclical markets, whether they be South Florida, the expensive east coast markets and the expensive Western markets. And and you already know that. So we won't even talk about those markets. They are an absolute joke. They are a speculator's dream. They are based on the greater fool theory of no matter how much I pay, some greater fool has to come along after me and pay more and those people will get themselves into trouble. They always do on every cycle. So we're not even talking about those markets. We're just comparing the linear markets who have now become these markets. Many of them have become kind of hybridized and it's a challenge to find properties there. And not only investors have gobbled them up, but just regular home buyers as well. So we're going to talk about a smaller kind of boutique market today as this sort of we'll call this investor sprawl. You know, they call this urban sprawl in sports suburbia, right, where people have to drive further and further away to buy a house and get a decent property for the price. But we also have this in the investment community where you have a little bit of investor sprawl. And so we're going to talk about a very nice place. But it is a boutique market. It's one of our smaller markets And a comparison would be, say, Little Rock, Arkansas, beautiful city, great place, but a smaller size market. And today we are talking about Macon, Georgia. Eric, welcome.

How are you doing? Great. I appreciate you having me on.

Good. A lot of business with you over the years in the Atlanta metro area. And Atlanta has just become really challenging. It's hard to find deals there. Prices have gone up quite a bit. Tell us a little bit about your interest in Macon, Georgia, which is a little less than an hour from the Atlanta airport, is that correct?

That is exactly right, yes. It's just south of Atlanta, actually. So, yeah, I was obviously very active in Atlanta and I was even acquiring properties for some hedge funds here. And the returns that you're getting here do not make sense in my opinion for the average investor. And actually here meaning Atlanta, correct? That's correct, yes. So I started looking around at different markets and studying some areas like Augusta, which people have probably heard of because of the Masters, and some other areas within three or four hours of Atlanta. And I was fortunate because I have actually family in Macon, Georgia. So I think kind of watching that market over the last couple of years, noticed that some of the price points are appealing with regards to the rent to price ratios. And the more I studied it, the more I found it intriguing. And so we ended up buying properties over the last year or so down there, kind of testing the market to make sure that the vacancy period wasn't going to be too long because it is a smaller market. And also make sure that the rent rates that I was being told were accurate by various property managers down there and kind of understanding the whole market.

When you say down there, you're talking about Macon, Georgia, right?

That's correct.

Okay, good. Got it. And when you say here, you're talking about Atlanta because you're in Atlanta, right?

That's right. I should clarify.

Okay. The listeners don't know that, so you got to be clear. Okay, go ahead.

Yeah, so we've done kind of a trial run on the market down in Macon, Georgia, and it's been really successful. Our vacancy periods have not been overly long, which has been very pleasing because I just was a bit unsure in a smaller market how that would work out. But we've had a lot of success. Most properties that we have had once completely renovated. Actually, all of our properties have been rented within 45 days. We do a bit nicer renovation, so that probably helps. But we've been happy with the occupancy thus far down in Macon. And because I have family down there, I've Watched the revitalization of the whole downtown area down there. It's really improved in the last four or five years. Like many places, I've kind of come around on that concept, but it's done a great job. A lot of new and improved restaurants and things of that nature to basically keep the appeal of making around as opposed to people wanting to head to other places and live elsewhere. So we've been really happy with the progress and growth of the making market and it continues to do better the universe there. Mercer University is expanding and they just added a football team, for example. And just to add new. More intrigue in hotels and other things that surround that type of a product is an exciting thing for Macon. So we're aggressively moving in there and looking forward to continuing to find good opportunities there.

Tell us about the economy and what every investor should be concerned about is where does their tenant work. Who are some of the employers for these tenants? What kind of what, what's kind of that profile tenant in. In the areas of that market you're, you're. You're doing business in?

Sure. Well, I can speak. So We've got around 20 properties in the area. Between my group and other groups that I've found properties for a good bit of our tenants are in the 900 to 1250.

So we've got several. Actually got a couple police officers, we've got a couple of teachers. We've got actually some college students at Mercer who occupy a couple of our properties. And I would say distribution and manufacturing centers are definitely a decent size employer there. Mercer employs a good bit and then you've got more small business type of an atmosphere down there. There's not going to be a mass employer that kind of employs the whole town. But there's also.

Well, that's good for diversification for sure. I mean, when you have the one horse town concept, you always need to be concerned that maybe that one horse doesn't do so well. You know, they get into trouble with various economic cycles. So diversification of the employment base is good.

Yeah. And at Warner Robins, which is a little bit south of Macon, is predominantly employed by the Air Force base there. So that market can be a little bit scary, a little bit appealing to whomever bases it around military bases. I guess it depends on your political stance. But Macon itself is a diverse market in that regard. It's just smaller. My family actually commutes to Atlanta, who lives down there. So there's going to be some of that because the price points of Macon are so much More appealing than Atlanta, especially now since we've gone straight up for the last four years. So I feel comfortable with the diversity of Macon. And again, the fact that it's growing so much in the downtown pocket adds a lot of appeal to the area that was not there five to 10 years ago because it was a little bit more run down. And so people are graduating from Mercer, for example. They'd always just come back to Atlanta. Well, now there are more and more college students staying in Mercer for various jobs, which is an appealing aspect of the community.

Okay, good. Tell us about the target property that you've been buying and what you're doing in terms of rehab and. And what that property will cost for any of the investors listening.

Sure. I'd say your typical cost for an investor is going to be right around the 1% mark of rent to purchase price. We're looking in the A and B areas. I could buy C and D areas in Atlanta that would be comparable to a small town like this. So the advantage would not be there for a mason if I'm buying the lower end stuff. So I feel like the advantage is you're buying areas that are better schools, low crime, better tenants overall, but you're still getting much better returns than you would in Atlanta market. So we're looking at typically maybe 850 to 1250 in rent range. And then for those properties, you're going to be looking somewhere between 80 and $125,000 on a purchase price for the investor.

So That's a nice 1% then, right?

Correct. Yeah. And taxes and insurance are going to be a little bit lower in Macon versus in Atlanta. So the returns actually are a little bit better because of that as well. But yeah, our rehab scopes, we try to replace the roofs if they're older than about 13 years. That's kind of my mark for wanting to replace a roof and H vac. It kind of just depends on the condition. I don't necessarily have an age where we'll replace it, but what I've started to do in order to save on turnover costs for investors is I put vinyl plank and all of my living room, kitchen kind of areas that they don't already have. Hardwoods and tile.

I hate to break it to you, but this is almost becoming cliche. Vinyl plank. We've talked about it so much. It's, it's. Well, you know, I'm just giving you a hard time, but. No, you're exactly right. I mean, it really is the answer. So many investors are quite happy with that type of flooring, you know, about two bucks a foot somewhere in that range installed, you know, if you have to replace part of it is real easy to do. So that's great. And, and I want to make sure we get to talking about this Realty Track article, Housing Wire article that says Macon is one of the best markets. So we'll get to that. But continue on the rehab, if you would. I interrupted you there, but yeah, sure.

No, I really try to focus on turnover costs because ultimately management and turnover costs or what can be detrimental to investors after we move forward with our sales process. And I always try to make sure that people want to keep coming back and buying more. So, you know, typical kitchen, typically if I'm going to do an 1100 or $1200 rent, I'll put granite and stainless in for the rents below that, it doesn't necessarily make as much sense. So I'll typically do a laminate countertop.

So stainless steel appliances you're talking about, right?

Yes. I'll do a black appliance package for things that are lower than 1100. And I do that because if I want to sell retail, for example, or if the investor ever wants to retail it on the back end, it's obviously going to help a lot more to have that granite and stainless appliance package to maintain value. So I try to think long term because if we don't sell it to investors, obviously we're going to own it. So I would do. Yes. Carpet in the bedrooms, obviously we assess cosmetics on all the bathrooms and kitchen to make sure they're at least reasonably updated, depending on the rent range. But the house that I recently did, we put 32,000 into it. And that was a 1250 rental property. And that was again, a nicer rehab. But I'd say on average we're looking anywhere from 15 to 20 to about 30 in rehab, depending on the prospects of the home.

15 to 15 to $30,000, right?

Yes, that is correct. 15 to $30,000 in a typical rehab. You're doing a great renovation. That's correct, yeah. So 15 to 30,000 on our renovations. And then there are some older homes in Macon. Like one of the ones I bought was an old, true historic craftsman style property. And so obviously we look at the electrical and plumbing on properties like that to make sure that they're, they're up to par. But yeah, so I think generally speaking that's about our average rehab. And I, my wife is a designer, so I try to stay on top of kind of what's more appealing these days with regards.

What about property management?

Yeah, so there's, that I've seen who are very active and solid. There's, there's six property managers down there in Macon. I interviewed several of them. I found one that I feel really good about. I think what he's best at is saving money on turns. His rehab costs are very low and so I've been very happy with him thus far. There's, there's others that I've heard good things about. But I, once I started with him and the process was seamless and everything he said would happen has happened which is sometimes, you know, up or down in that, a particular arena of property management. So I've been really happy with him. The manager that I use down there, it's been, it's been very good. He charges 10% of the gross rents but he does not charge a renewal like some property managers. So I feel like you're, you're getting.

About what's the lease up fee?

Half, one half month, one half months rent.

Yeah. And see, you know, this is the, this is the reason and folks, I've talked to you about this on many prior episodes. When I talk about this flat fee style of management that's great that for example this manager, and I'm not picking on this manager but you know, it's fine, doesn't charge renewal fees. But some investors will argue that, well then they like it when the tenant moves out so they can charge a lease up fee. But you know, that's really a lot more work and 50% lease up fee really isn't too bad. I've seen a lot higher than that for sure. It's also about the alignment of incentives and this is why folks, I really am pushing this idea. Well, I guess I'm not really pushing it that hard, but I'm still talking about it, I'll put it that way at least of this sort of flat fee management where everybody's interest is aligned for every dollar that comes out of that property, whether it be a lease up fee, monthly rental income, whatever it is, the manager just takes a picture percentage and they'll have to take a higher percentage because they won't have these, what I'll call affectionately garbage fees in there. You know, their fee schedule will just be completely flat. It'll be totally uncomplicated. When a dollar comes in, the manager gets a certain cut of it, you know, whatever you negotiate. Maybe, maybe it'd be 12% or something. But there's no other fees that's just it. I don't know what that number is. I got a few managers finally interested in the this idea. I've certainly got some clients interested in it. I don't know. I just kind of think it's worth a try. But that's just me, so I don't. Unless we go off on one of my famous tangents on this, I will. I will refrain from more discussion about it, but just wanted to throw that in there. So, top 20 markets for residential rental returns number two, Macon, Georgia. Really?

I know. Part of that article honestly made me think, well, maybe I need to take a harder look at this market. And yeah, the price points are so low down there for a really good quality house and area. That just makes the rent to price an absolute bargain compared to other big markets.

Fantastic. Fantastic. Well, what else do you want people to know about the market? The management, the properties, the tenants, Just anything else in closing that I didn't ask you?

Yeah, I would just say initially a smaller market was something that I was apprehensive about. So that's why I wanted to test out the market, which I've done over the last year. I feel good about it. I feel good about the city. My family loves it. They're not going anywhere.

There's a good job base in Macon and it seems to be slowly but steadily growing. One other thing that I like about it is if you look at 2010, the markets and the big cities were obviously hugely down. Well, Macon is kind of just a stable market. It doesn't go up or down. So when you're in a hot market like we are now, well, you can take advantage of a solid, stable market like Macon. And then if Atlanta were to come back down reality at some point here in the future, that would be potentially a good time to look at Atlanta as a market. But I like in a hot environment to try to take advantage of some of these secondary markets. And so we feel good about the areas we're buying in. Again, these are nicer areas than what I've done in the past in Atlanta and some other markets just because you can get the best bang for your buck there. So something we're excited about and hopefully we're putting out a good product that investors will be interested in.

Fantastic. Well, thank you so much for joining us and telling us about Macon, Georgia. Appreciate it.

Thanks, Jason. I appreciate you having me on.

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