300K..Invest in San Antonio (TX) or Raleigh (NC)?

Question

Hello Everyone,

I am a newbie in RE and need your expert opinion.  I live in the San Francisco Bay Area, have a solid W2 job and a high credit score, and want to invest in SFH or a duplex in San Antonio or Raleigh (ok with neighboring cities). I have done a lot of research and narrowed it down to these two cities (I know someone from Michigan, Ohio, or Indiana would comment on investing in those states., but please don't..I am only interested in TX or NC). I like Texas, but the only thing that holds me back is the higher property taxes compared to North Carolina.

1- Money: ok to spend 200-300K (prefer to put only 20-30% down) and invest in a couple of properties than buying one in cash

2- Prefer cash flow (of course, appreciation would also be great)

3-Prefer SFH over duplex just because with SFH (in a good neighborhood), I probably would have less headache and drama

Here are my questions:

1- Which city do you invest in and why?

2- Would you consider any other city in NC or TX? Why?

2-Am I correct in thinking SFH has less headache over multi? if not, why not?

3- How would you spend the 300k for investment?

Thanks,

MJ

Tiffany Alexy · Answer

I'm not familiar with the San Antonio market, can only speak to the Raleigh/Triangle area market but here's my take:

1) I'm currently invested in Raleigh, Cary, Smithfield, Selma, and Lake Lure NC
2) I would consider other cities in NC, but not in TX just due to proximity.
2) SFH vs multi... there are a lot of factors, so depends on how you define "less headache". Speaking in generalizations as it really depends on the deal, but SFHs won't have as much cash flow as a multi typically. You may have more options on the back end as far as resale, though, because you can sell it to an owner occupant OR investor. As far as a multi, personally if all things were equal I'd go for the multi for a few reasons. 1) Added diversification.. if one tenant doesn't pay, you can still cover property expenses with the other tenants 2) Shared capex... typically, one roof and one property to maintain but multiple streams of income 3) Less vacancy.. usually multi's rent for lower, for example one of mine is the sweet spot of 3 bedrooms for $1300. These are usually easier to fill because it's perceived as "better value" versus a 3 bed SFH that is renting for $1800-$2000. There are going to be more people who can afford $1300 so vacancy is less of an issue.
3) This is a broad question, and it really depends on so many factors. As a newbie, I would probably start with one property, and see how that goes.

Larry Zucker · Answer

I think @Ananth NA is right on point.  A SFH can generate cash flow but is really more of an appreciation play compared to a MF property.  The value of the MF will be determined mostly by the cash flow it brings in. If cash flow appreciates so will the property value. The SFH, however, will appreciate with or without cash flow.

I also agree with the observation about the 1% rule. In the Raleigh-Durham area 0.5% is the prevailing measure. Mostly, this is because of the growth in the area. While some deals may be negative cash in the early years, the area growth will push up both rents and home prices tuning the deal positive within a couple of years.

In your stated price range (200K - 300K) you are likely to find some SFH and some TH but mostly condos (which are totally a cashflow play as they appreciate last). For my first-time investors, I recommend going the townhouse route because they are very rentable, less per door than SFH, appreciate well and much of the exterior maintenance is handled by the HOA.

Happy to chat and answer any questions you have about the area. Just reach out through BP.

Ananth NA · Answer

I recently bought my first rental property in Durham,  NC ( which is a suburb of Raleigh North Carolina) . Here, it is difficult to meet the one percent rule Suggested in bigger pockets. Most of the properties go for about half a percentage. So you would probably end up having negative cash flow in most of the deals. The deal that I invested in was a $330k townhome 3 bedroom 3 bath. That is renting for 2k dollars. I put in 25% down. After taxes, hoa, mortgage, insurance, I end up with slightly negative cashflow. I am using a property manager and that costs 8% and I use 5% of rent as reapir reserve - this takes me deep in the red. My hope is appreciation in durham (rent and home prices).

Peter K. · Answer

• Here's my take as an investor/broker that's been in Raleigh, NC for a long time:Why Raleigh? Raleigh stands out due to its position in the Research Triangle, a hotbed for technology, education, and healthcare sectors. This unique positioning drives consistent job growth and attracts a steady influx of residents, bolstering demand for rental properties. The city's diverse neighborhoods cater to various budgets and lifestyles, enhancing its appeal to a broad tenant base. Moreover, North Carolina's property taxes are generally more favorable than those in Texas, offering a better return on investment over time.
• Exploring Other NC Cities: While Raleigh is my top pick, Charlotte and Durham also offer compelling investment opportunities. Charlotte's burgeoning financial and tech industries create a dynamic rental market, while Durham benefits from its proximity to top universities and research facilities, part of the Research Triangle. Both cities exhibit strong economic foundations and growth potentials, similar to Raleigh but with their unique draws.
• SFH vs. Multi-family Units: The preference for SFHs in good neighborhoods is well-founded. Single-family homes tend to attract longer-term tenants seeking stability, which can reduce turnover and management challenges. This preference is especially relevant in Raleigh, where many neighborhoods are family-oriented, enhancing the appeal of SFHs. While multi-family units can offer higher cash flow, they often come with increased management complexity and tenant turnover, aligning with your goal to minimize hassle.
• Investment Allocation: With a budget of $300k, diversifying across several SFHs in Raleigh could maximize both cash flow and appreciation potential. This strategy takes advantage of Raleigh's growing market, where strategic investments in select neighborhoods can yield significant returns. Your budget allows for a balanced approach, spreading risk while tapping into different segments of the local real estate market.

Raleigh's real estate market is characterized by its resilience, growth potential, and appeal to a wide range of tenants. These factors make it an attractive option for your investment criteria, balancing cash flow and appreciation prospects in a stable economic environment.

Alyson Gordon · Answer

I live in Raleigh and have a close friend who is an active investor in San Antonio, TX. The purchase price of SFH seem to be a lot lower in San Antonion than they are in the Triangle area. I think it would be worth exploring that market as your money likely can go further. The Triangle is a great area bu tin high demand with a lot of people relocating here so you'll have a lot of competition with home owners and investors alike. Just another perspective :)

Anthony Rivera · Answer

Hello, I am local in the Raleigh market so I would be biased to say to invest in Raleigh. I am a license GC and Realtor and can help you located some properties to analyze. I will send you a DM.

Biswajit Dash · Answer

@MJ Jav i m exactly in the same boat as you are. I started looking at Raleigh and surrounding Clayton, zebulon area. Right now its very difficult to even breakeven with 100k down on a 330-350k decent size sfh. I feel someone has to put more down to become cash flow positive. Not sure if this growth of Raleigh triangle area will stay as it is or we will see a slow down and 5-10% correction this year.

Benjamin Carver · Answer

I've lived in both texas and north carolina. Agent in both states too. More than happy to discuss differences, shoot a PM

MJ Jav · Answer

Thanks for sharing..I agree seems like there is more competition in Raleigh than in San Antonio

MJ Jav · Answer

I will definitely look into TH..Thanks!

300K..Invest in San Antonio (TX) or Raleigh (NC)?

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