Many investors are reaching out to our team lately to understand what product is delivering the highest return in Columbus, Georgia lately. This comes as a loaded question because there are a variety of factors to consider in this particular ask such as, what is the average time on market (vacancy), average rents, and affordability.
Based off the above questions, the winner in our mind in clearly single-family houses (SFH); specifically houses with 3+ bedrooms and 2+ baths. Why, you ask? Well, of all of the properties that we manage, SFH properties sit on the market the least amount of time and receive the most amount of leads. Additionally, rents have climbed 22% for 3-bedrooms throughout Columbus and a whopping 58% for 4-bedrooms (Zillow.com).
Why is there such a high demand to rent SFHs in Columbus at the moment? While the answer might not be clear there are a few indicators that help us understand the driver behind the need. First of all, two-bedroom apartment rents were nearing the cost of three-bedroom for houses in high-demand areas such as Uptown or Midtown. In 2023, the median rent for a three-bedroom sat around $1022/month while the median rent was $850 throughout Columbus for a two-bedroom (although we saw much higher prices in popular areas). With the close proximity of rents, we believe renters saw an opportunity to rent homes that offered higher square footage along with a yard. The yard also is a key factor for renters with pets, who would have the ability to allow “rover” to play outside without supervision; a perk not offered with apartments. Also, after COVID lock downs, renters appear ready to occupy more space for home offices or simply to have the ability to have personal space throughout the day.
Whatever the actual cause for the demand behind SFH in Columbus, the push increased the median rents of a 3-bedroom to $1,249 while median rents for a 4-bedroom sat at $2,450. These are the median and the Columbus market offers a wide variety of asset classes, but our team has experienced even higher rents in popular locations such as Historic Downtown, East Highlands, Weracoba or the North Columbus/Midland area.
So, what about apartments?
Studio, 1-bedroom, and 2-bedroom rents have not done well in 2024. Below offers a quick snapshot of the year-over-year change between the product types:
Bedrooms | YoY Change |
Studio | -26% |
1-Bedroom | -13% |
2-Bedroom | 0% |
Why? The answer is simple here – supply. The Currents currently added 226-units to the Uptown area, which offers tenants Class A amenities along with retail shops and restaurants. Also, The Prose Apartments located near Green Island Hills on River Rd recently opened and added another 340-units to the market. It will be interesting to watch the absorption rate for the added 566-units throughout 2024 (and perhaps 2025) but these units will definitely offer higher income earners throughout the metro area a premium Class A product. This is in addition to The Rapids apartments in the downtown area, which also delivered 226-units to the Class-A market in Columbus just a few years ago. You might be saying to yourself, “well these are products are Class-A” and you’re right. However, these products will draw tenants from the military, hospitals, and local big businesses and leave older B and C products for everyone else.
This brings us to our last topic, affordability. This has been the number one discussion amongst our team for the past year because we never have a shortage of applicants during the leasing process, however, finding tenants that possess the 30% rent-to-income standard has become increasingly difficult. Which makes sense, because the largest occupation is Office and Administrative Support Operations (DataUsa) and based of the median salary for this line of work, the typical employee in this industry can afford $775/month or the median cost of a one-bedroom apartment.
While SFH’s seem hot at the moment, we wanted to look at how “affordable” each product looks at the moment to measure the ability to grow. What we did is take the median income in Columbus ($50,542) and turn this into a monthly figure of $4,212 and calculate the 30% standard rent-to-income ratio and came up with a fixed price of $1,214 per month. Using this number as our median affordability rent in Columbus we came up with the following matrix:
Bedrooms | Affordability Measurement | Median Rent 2024 | Median Rent 2023 | YoY Change |
Studio | 41% | $515 | $700 | -26% |
1-Bedroom | 53% | $675 | $775 | -13% |
2-Bedroom | 67% | $850 | $850 | 0% |
3-Bedroom | 99% | $1,249 | $1,022 | 22% |
4-Bedroom | 194% | $2,450 | $1,550 | 58% |
Obviously, higher income brackets will look for products with three or more bedrooms, however, it does appear that multifamily units still have room to grow. Which may indicate why large developers continue to add supply into the market. But it will take time for these to grow due to the large supply recently introduced into the market.
Where to invest? It depends. If you’re searching for quick cash-on-cash returns then we would highly recommend to research the residential market, however, if long-term growth is where your goals lie then multifamily shows room to run in the future.
If you like our analysis and our interested in how we can help you increase the value of your assets, then please reach out to the author at kyle@fifthprincipleproperties.com.
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