| Investors often ask: Why Jackson? Simply put, it is because the numbers work. The rents relative to the value of the homes are very high relative to other areas of the country, and the Jackson metro area continues to experience excellent appreciation (see link below). http://money.cnn.com/2009/02/12/real_estate/Median_home_prices_in_record_plunge/index.htm The housing appreciation rates in Jackson have been excellent. According to data from the National Association of Realtors, Jackson saw single-family home appreciation of a stellar 8.9% year-over- year at the end of Q3 2006 (compared to -1.2% for the rest of the US), placing it in the top 15th percentile of metro areas in the U.S. Jackson is ranked as the 9th most undervalued metro region in the U.S., placing it in the top 3% out of 317 metro areas, according to the March 2007 Housing Valuation Report by National City Corporation. In 2006, Jackson was named of America’s Top 30 Livable Communities by Partners for Livable Communities. Despite the low housing prices, rents, relatively speaking, are much higher. According to HUD statistics, the 50th percentile rent for a 3-bedroom dwelling in 2008 was $899 per month. Therefore it is not surprising that many houses can provide positive cash flow, even with servicing a 90% mortgage. The economics in Jackson are clearly favorable for investment. The key to investing in Jackson lies in careful selection of homes in the right locations and neighborhoods, and carefully selecting tenants and property managers. Inner city neighborhoods have high crime rates. Some areas are prone to flooding. So there is some important due diligence that must be performed. Hurricane Katrina. Katrina devastated the coastal areas of Mississippi, causing widespread wind and water damage related to the storm surge. Most of the southern half of the state was affected by Katrina, with the damage lessening farther north. Jackson, owing to its central location 140 miles inland, suffered relatively minor damage compared to the coastal areas. Jackson had some wind and water damage with some local flooding, with many homes and cars being damaged by tree limbs and other flying debris, but the overall damage was much lighter than the coastal areas. Many people displaced by Katrina moved to Jackson, further driving up home prices and rents. Despite only light to moderate damage, Hinds and Rankin counties (the Jackson metro area) were declared Gulf Opportunity Zone (“GO Zone”) counties, meaning that the federal government has offered a variety of special tax incentives, the most noteworthy of which is “50% bonus depreciation”, to businesses and investors who are helping to rebuild the areas affected by Katrina. This additional depreciation is a significant benefit for increasing after-tax ROI and is available on property that is placed in service through 12/31/10. Interested investors should contact their accountants and/or the Mississippi Development Authority for more information. Because Jackson was less affected by Katrina, there has been a surge of displaced victims from New Orleans and the coastal Mississippi areas who moved to Jackson to find housing and work. This influx has had the effect of increasing rents, raising housing prices, and lowering vacancy rates. These factors, in combination with the GO Zone tax incentives, are the principal reasons why Jackson is an excellent location for real estate acquisitions. HUD Section 8. The demand for good quality, yet affordable housing is high in Jackson. Many renters, including Katrina victims, are eligible to obtain rent subsidies from the U.S. Dept. of Housing and Urban Development (HUD) under Section 8 or from FEMA. HUD’s Section 8 housing voucher program encourages the disadvantaged to seek safe, decent, affordable housing in the general community where they are from. The advantage to landlords with Section 8 tenants is that the rent subsidies are paid directly to the landlord, not to the tenant, so there is virtually no risk of non-payment of rent. There are certain unique HUD standards that properties must meet to qualify under Section 8. According to the 2000 census, the population of the Jackson metro area was over 500,000 people, of which about 184,000 live in Jackson proper, and the balance in its suburbs. Approximately 71% of metro Jackson is African American, 27% are Caucasian, and about 2% are Hispanic and other minorities. The 2000 census indicated that the city of Jackson median single-family home price was $64,400, less than the state average of $71,400, making it one of the least expensive metropolitan housing areas in the nation. The median home prices in the suburbs of Jackson are much higher than the city. Property taxes are also relatively low, because the low tax rates and the low housing prices combine to hold down annual taxes. Most of the homes in Jackson are older than average, with many built before 1960, and a striking 42% of the homes are rented. |
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posiive cash flow properties
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