By Charles Sells
Real estate investors learn early: Pretty numbers make pretty houses. The right strategy can make any investment property pretty during the “fix” stage of a fix-and-flip deal, but almost no strategy can beautify a bottomless money pit. For real estate investors in Savannah, Georgia, even with today’s tough economic environment, pretty numbers are still accessible, and that is great news for everyone looking for opportunities in today’s unprecedented markets.
The key to Savannah’s resilience during the current time of economic hardship lies in something analysts refer to as an “economic push.” Essentially, an economic push occurs when something about a market is attractive to an economic support factor. Sometimes, the economic push comes in the form of a strong government initiative to partner with private investors, but usually a push comes when a big employer is planning a move into an area or the local jobs market has a lot of healthcare-based, biosciences-based, or tech-based employers. For example, when Amazon appeared to be seriously considering installing its HQ2 in Raleigh, North Carolina, that market went (briefly) wild. Even though the online retailer did not ultimately end up putting its HQ2 there, it was an economic push for Raleigh because it showed that the e-commerce sector took the market seriously.
In Savannah, Georgia, the economic push is a brick-and-mortar establishment that has been in the city for more than 40 years. This is good news for investors because it shows that boost is certainly not going anywhere! The Savannah College of Art and Design (SCAD) is been an economic driver in the city for decades, but in the last 10 years in particular it has emerged as a force to be reckoned with. SCAD is a private school funded by private money and is the largest art-and-design school in the world. The college boasts campuses in Atlanta, Savannah, Hong Kong, and Lacoste, France.
As the college has expanded its reach and influence in the design world, it has done the same in the world of local, physical property. That is where the economic push for Savannah investors comes in. At present, even with COVID-19 an ever-present issue, real estate investors in Savannah are snapping up properties, fixing them up, and flipping them to retail buyers who want to live in relatively close proximity to SCAD and the historic downtown area of the city. What makes these properties particularly appealing for investors is that at the moment, the total investments on these single-family residential homes is about $120,000. These properties rent for around $1,200 a month or sell for substantial payoffs. This trend is unlikely to stall both because of SCAD, which will continue to operate in the unique semi-bubble reserved for most academic campuses, and because of the Port of Savannah, which is thriving in the middle of this economic downturn because now, more than ever, the country is relying very heavily on shipping and cargo carriers.
The Port of Savannah is Poised for Liftoff
The Port of Savannah is the single largest and fastest-growing container terminal in America. With its prime location within a two-day drive of most key cities throughout the U.S. Southeast and Midwest, the port is always a top destination for products going in and out of the country. The port’s associated “dry ports” found farther inland, where large shipments may be stored, broken up, and dispersed as needed, create a massive shipping network with unparalleled flexibility for consumers. Improvements on the port result in nothing but good for local residents. In fact, according to the Corps of Engineers, a current project to deepen the harbor and bring in larger container vessels will ultimately save U.S. producers and retailers $282 million in annual transportation expenses while every dollar spent on construction in the port will yield $7.30 in benefits.
Not surprisingly, with numbers like those Savannah and the Port of Savannah receive a great deal of federal “support” for the local economy as well. In fact, in 2020, the federal government allocated just under $250 million toward the Savannah Harbor Expansion Project (SHEP) and Savannah River dredging and maintenance. Real estate investors see these types of public-private partnerships and federal programs as signs that an economic push is in place for the long haul.
Supporting Southern Homeowners and Homebuyers
With projected port growth of 37 percent over the next decade, Savannah needs more residents. That has led to a number of homeowner- and homebuyer-advocate programs designed to make it easier to move to the Savannah area. Some types of programs help property owners get variances on codes; others provide down-payment assistance. In some areas of the city where public and private entities are working together to revitalize the neighborhood, homebuyers may qualify for as much as $60,000 toward their new property. For a real estate investor doing fix-and-flips, knowing a retail buyer will have that type of assistance on hand for their purchase is incredibly meaningful.
Savannah offers a number of profession-specific homeowner-advocacy programs as well, including Teacher Next Door, HUD Good Neighbor Next Door, and a variety of HUD, FHA, VA, and USDA financing programs. These programs create multiple layers of insulation against economic loss when employed by a real estate investor across a full panel of assets.
Savannah also boasts one of the best government-assisted growth initiatives in the country, the Developmental and Renewal Authority. Because of the city’s long history, the population has an ingrained resistance to tearing things down and building new. They tend to want to keep as many of the city’s historic properties as possible. As a result, investors have access to hundreds of grant programs that will help protect real estate investments and ultimately make them more profitable.
What’s Ahead in 2020
The remainder of 2020 is a big, scary unknown for a lot of people these days, but real estate investors do not have to be part of that frightened population. Real estate investments have always been the infrastructure beneath most of the wealth accumulation and wealth growth in the United States. In fact, most people agree real estate has been the single most-effective path to wealth for Americans since the advent of private property rights.
Of course, investors must pick their investments carefully. There are certain tiers of the market that will likely suffer in the coming months. For example, the top tier of the market, luxury homes, is certainly softening in most areas (although pockets of Savannah are an exception). By contrast, the bottom tier of the market, starter homes and basic single-family residential properties, is still heating up as more and more investors and retail buyers compete for an increasingly limited inventory of these assets.
Successful real estate investors will either tap into a proven source of leads for these types of properties so they can obtain these deals off-market or will look for niches in the middle, where relatively affordable mid-tier properties will continue to hold strong as luxury owners downsize and starter-homeowners upgrade as their homes increase in value.
Savannah, Georgia, is a great location for this type of investing, especially if an investor is already working with an investment firm or project manager with ties to the area. Whether you opt to acquire properties at auction, through probate, or via some other means, you will find that Savannah, Georgia, is well-positioned to maintain a strong housing market regardless of what the national economy may throw in its direction.
Charles Sells is founder and owner of The PIP Group, a push-button, turnkey service provider helping clients invest passively in everything from tax liens to fix-and-flips. Charles and his team at The PIP Group have taken the stress out of investing in distressed real estate, by enabling investors to have their individual investments remain in their name and their control, retaining 100% ownership, with Charles and The PIP Group team at the helm to make certain those investments remain profitable. For more information, visit PIPGroup.com.