Neighborhood Analysis: Live Oak/Baldwin Park
This will be the first in a recurring series of posts where we analyze a specific area of Savannah. We will discuss relevant metrics for flippers, turnkey or BRRRR landlords, and touch on commercial development opportunities as applicable. For the uninitiated, BRRRR means buy, rehab, rent, refinance, repeat. It's a powerful way to build wealth and avoid taxes.
First up - Live Oak and Baldwin Park! If you're not super familiar with Savannah, Live Oak is in the bottom right of the map below, north of Daffin Park. If you're familiar with Savannah you'll probably notice that I expanded the customary definition of Live Oak a bit, and that the shaded area below includes Baldwin Park and the area between Bee Road and the Truman that most people don't think of as Live Oak. I just decided to expand the definition of Live Oak here so I can keep this series down to about ten posts in total.
And here's the zoomed in.
The Live Oak neighborhood is an area of active revitalization located between Daffin Park/Ardsley Park and the Henry/Anderson St corridor. Almost all of the Live Oak neighborhood is economically disadvantaged and underdeveloped, which is why almost all of it falls within a federal opportunity zone. The neighborhood is historically working class and was an area where people of color were permitted to purchase homes during segregation. The Live Oak neighborhood of Savannah experiences higher levels of poverty still to this day due to the legacy of segregation, and is now experiencing the early stages of gentrification - and not without some controversy. I actually have a lengthy draft blog post about that dark history that I will link here when I finish it - you really can't talk about Savannah real estate with out discussing segregation and red lining, but that's a heavy topic that deserves its own post.
If you want to learn about how I did my research, check out this section, otherwise skip.
So, I actually live north of Live Oak in the Benjamin Van Clark neighborhood - I could probably write this whole post based only on anecdotal evidence and personal experience. I will pull in some data though because here at Trophy Point Realty Group we're big on numbers. The data that I will include is from the U.S. Census, and specifically I will pull data from census tract 27. Unfortunately the Live Oak neighborhood includes parts of four different tracts, but I feel that this tract is the most representative of the neighborhood. You will see some maps, these are built using my personal experience in the neighborhood and MLS data, where applicable.
All census data is from 2018 or earlier. Census data is thrown off because of the student population - a high student population skews the poverty level to seem higher than it actually is. https://www.census.gov/library/stories/2018/10/off-campus-college-students-poverty.html
Economic Data and Trends
Poverty: Poverty is close to 20%, remember though that the college student population skews this number to seem higher than it actually is (since college kids don't make any money.) This isn't to say that there's not poverty in Live Oak, because it certainly is. I would estimate that the poverty rate in live oak, excluding college kids, is between 10-15%.
Housing units vs Population: Population in census tract 27 is up about 300 people since 2012, but housing units are actually down just a bit. This puts upward pressure on rents, of course.
Household income: I'm not sure what is causing this increase in poverty that we've been seeing around 2015 that shows up in the chart below and the poverty level chart above. It could be an anomoly in the data, because it's been my experience that Savannah has been on a pretty steady up and up progression since the bottom of the recession here in 2010 (with the real estate price bottom hitting in about 2012). Let's not get too caught up on the year to year movements though and focus on the overall trends, and the trends look pretty good, but still leave much room for improvement.
Key takeaways are that most people living in Live Oak make less than $25k a year. A portion of these folks are students who show little to no income but are not living in poverty, but most are legitimately living in poverty.
We see that the percentage of households making more than $125k has more than tripled - I would estimate that most of this population is living right on Victory Drive or 42nd Street. Many of these households are also actually living in the Baldwin park neighborhood, which is a more affluent neighborhood just north of Ardsley Park/Victory drive that is centered on Atlantic Ave.
Demographics - Age: A couple of interesting trends here. First, the over 75 and the under 5 bracket of ages are trending down on a per capita basis. To me this indicates that families and legacy homeowners are making up a smaller percentage of the population in this area.
The population of 65-75 year olds is increasing though, which indicates to me that retirees are moving into Live Oak. This matches up with my personal experience, I have a few neighbors who are retirees who wanted to move to Savannah and chose the Eastisde because it's cheap, but still close to downtown attractions.
We also see that the population of 18-35 year olds is growing fast. Again, this lines up with my personal experience as I have seen the number of college kids and young professionals that are moving to this side of town for much of the same reasons as the cost-conscious retirees. Hell - I'm one of these people!
Housing Data - Rents and Sale Prices
The chart below pretty much speaks for itself - the price per SqFt ratio in this part of town has close to doubled in the last five years, and has outpaced appreciation in Savannah at large. On average, a 1500 SqFt house in this part of town sells for about $175k - though there is some huge variability block to block. I'll dive into that a bit in the "neighborhood classes" section below. Months of inventory are also the lowest they've been since just before the last recession. Ask any agent around town and they'll tell you the same thing: there is not enough starter home inventory in this town. A nice home listed in the high 100s/low200s in this part of town will typically sell quickly, even if it's not on a great block (it still better be on a decent block though, pay special attention to my "neighborhood classes" section below for more information on this).
Rents have also been increasing briskly here, below is a chart I built from MLS rental data. MLS rental data isn't as accurate as sale data because many rentals never get entered into the MLS, but given the sample size of 180 rented units over the 8 year study period I feel that this should be a pretty close approximation to the actual market. Right now, the average rent price per square foot is about $1, which is up from about 70 cents eight years ago. Meaning a 3 bed, 1500 SqFt unit rented for about $1,050 back in 2012, and rents for $1500 today. This is almost 4% growth in rents per year!
Now, please note that you really shouldn't use this metric to evaluate an individual deal. The market rent per sqft is higher for single family units, and also higher for smaller units. The amount of bedrooms and quality of unit obviously play a huge role as well. I'm just trying to illustrate general trends over time here.
Neighborhoods in Savannah are incredibly diverse, and Live Oak/East Side is no different. This map below is one that I built based on my own experience working deals and living in this area. Here's how my color coding works:
Blue: areas that are already well-developed; there is not much opportunity to find fix and flip/BRRRR deals here. These are established neighborhoods. Rental properties routinely sell at or near 150x gross monthly rent (as in, you're not going to cash flow on a rental unless you get in below market rent.)
Green: transitional areas. These are areas where the young professionals and college kids are starting to move into. They are >40% flipped - meaning early investors have already driven up prices a bit, but there is still opportunity to find deals. These are a pretty good bet, but you're not likely to find killer deals unless you get lucky (because everyone else knows about these areas and wants to invest there.). You can push close to $200/ft in these areas. Turnkey rental properties routinely sell around 115-120x gross monthly rent - still able to cash flow here, especially with rates as low as they are.
No Color: "C+" areas. Not too great, but not bad. There has been some flipping/renovating going on, but not to the extent of the green areas. ARV for flips will often be in the low $100s per foot, or if you're buying a rental look to be all-in at about $100x rents.
Orange: "C-" areas. You're not going to be able to sell a top notch flip here for much more than $100/ft. Look to be all-in at 90x gross monthly rents or below. These are areas where about 10% of properties on any given block are blighted or in visible need of serious repair.
Red: "D" areas. These are pretty much good for rentals only, or flips that you can profit at an ARV around $100k. You should be all-in at 80x gross monthly rents at a max. Over 15% of properties are blighted. For experienced landlords only.
Now, here's the disclaimers: Savannah is SO block to block, really it's impossible to really make a map like this. This is intended for general guidance only. Same thing goes for my ARV comp data and market rent to sale price ratios - this is block to block, and really property to property as well. Please use this information in your initial deal screening, but be sure to do more due diligence before you actually decide to purchase - or give me a call!
There really has not been too much commercial development in the Live Oak area over the last ten years. There is a newer whole foods nearby, and a new 50-75 unit apartment building near Anderson and Waters, but the overall lack of development has been a bit disappointing. The city and federal government is pushing hard to bring in new development, and I think that as more young people with money move into the area developers will become more incentivized to build some retail and restaurant space for them to enjoy - and once those spaces are built they will attract more younger folks as a result. Check out this post to read more about the incredible tax advantages available to developers who develop real estate in this part of town!
Live Oak is on the up and up, and a lot of investors here in Savannah are pretty bullish on the area. The areas between Daffin Park and 40th St and south of Henry/Anderson to about 33rd st are actively being flipped, but the areas surrounding 37th st haven't really caught on yet, estpecially east of Waters. Overall, the Live Oak neighborhood and the Eastside of Savannah in general is likely to continue to develop quickly as SCAD students, young professionals, and retirees chasing a lower cost of living move into the area.
I believe that as working from home catches on and becomes more permanent in the wake of COVID, Savannah will see more net immigration of young tech enabled workers looking to move out of the big and expensive north eastern cities into a town like Savannah with it's low cost of living, gorgeous streets, history, and diversity in dining, shopping, and nightlife. Live Oak will continue to be a draw for the cost-conscious among that crowd.
Developers will begin to take advantage of Savannah's tax advantaged zones in Live Oak as more money moves into the area, and that development in itself will draw in more money once complete. This will continue the upward pressure on rents and home prices. There was recently some demolition of a decrepit commercial building on Waters and 31st, there's the new apartments in the old school on Waters and Anderson. I think the next big movement to really kick off growth will be when the first coffee shop/bodega space opens up along Waters, most likely between Park and 31st - at least that's what I'd be doing if I had the money. This might also happen near Paulson and Anderson, or both. I anticipate this to happen within the next 1-2 years.
It is for these reasons that I like BRRRR deals in the Live Oak neighborhood. Why fix and sell real estate here when we believe there will be so much growth? I know that I personally would prefer to hold onto real estate here, and that is in fact what I'm doing with my own money. Of course, when it comes to single family homes it often makes more sense to flip, it all depends on the numbers!
Want to talk specifics with me about real estate investing in this part of Savannah? Shoot me an email at firstname.lastname@example.org and I'll get you on my calendar as soon as possible!