Rental Investment in Raleigh

[Sarah Lyon]

Hello,

I inherited half of my mom's estate about a year ago and decided that the best decision I could make for myself would be to buy a house. I am living in Raleigh and intend on making this my home base for another year or so and want to have a place to live in for that time while I work at converting my van so I can travel and live off the income I receive from my moms house I now own which has it's mortgage paid off. 

I am looking to stay under 350k, however I have found what I feel will be a very profitable place east downtown in a more seedy part but one that is changing quite quickly and it is 370k. The cap rate I have measured is about 5% and the cash return would be about 1.25% while I pay my mortgage off (The extra income will be going right towards the mortgage) and I imagine as the area undergoes more updates and new houses that the rental prices will continue to rise. 

I will be living in the house for about a year or 2 and will not be making profit in the beginning, however I will be renting out the other rooms to roommates and will be paying about about the same amount as them yearly if I were to choose said house.

So what I am really looking for here is some advice as to whether this is a good decision. I don't know if I have really included the details necessary, but I am still quite new at this. Renting out my house and working with a property manager has helped me a bit and I have done a lot of research, however I am still trying to fully grasp understanding of investing in rental properties as this is something I would like to endeavor on to partially pay for my retirement. 

Any suggestions as to areas I should look in with my price limit? Is my price limit too large for a rental? 

I want to have a diversified portfolio of houses and I currently have one in Jacksonville NC (military town, typically have tenants 4-8 years) that is a single family in a suburban neighborhood. I also will possibly be living in this house one day as Raleigh is where I want to set my home base as I am a bit nomadic at this point in my life (27). 

Thanks for taking the time to read this and I hope y'all can shed some light on my decision and help direct me in the right direction!

p.s. I do have a realtor who I love, however she is not a specialist in rental properties. 

[Caleb Heimsoth]

@Sarah Lyon. Most anything you find in Raleigh probably won’t work well for a rental. The prices are too high. If you’re able to get them discounted and rehab them or put large down payment down it may work.

Realtor recommendations would be @Dawn Brenengen and/or @Tiffany Alexy. They can probably help you with what you’re looking for.