Making our first investment in North Carolina

[Christopher Schultz]

Hi everyone.  We are (finally) ready to make a splash in the North Carolina real estate market.  I guess I'm posting here looking for pointers on opportunities or things to watch out for in some of the markets below. Here are some details on our goals:

• Financial goals: invest in an area where there is consistent renters,ideally $1200 or greater per month, that give us $300+ in monthly cash flow ( before income taxes but after paying property management fee, principal, property taxes, etc.).  
• Price range: we are hoping to stay in the low to mid $100k range, but would consider into upper 100k and even low $200k in areas that are commanding higher rents.  We would be financing with 20% down and have great credit and sufficient financial assets.  
• Location: Our first investment would ideally happen in the Triangle area but we are open to other markets within a couple hours of us (notably Wilmington & Fayetteville).  I have already looked at properties in Carrboro, Durham, Raleigh, and Knightdale. 
• Target renters would be graduate students, young professionals or young families looking for relatively affordable housing close to the growing employment centers, urban areas like Durham or Raleigh.  

As much as I'd love to have our first investment down the road from us, I've found it difficult to make the numbers work in Chapel Hill & Carrboro (due to higher taxes and rising property values).  I did look at a nice townhome in Carrboro that met all of our criteria but it went under contract the same day I looked at it, which is typical for this area.  Regarding Durham, despite rising home prices, seems to be better than the CH area but some of the areas where there are opportunity seem questionable in terms of safety and tenants.  From a numbers perspective (i'm a massive spreadsheet and data nerd) Raleigh, specially the eastern, western, and northern parts of the city, seems to have both attractive markets and opportunities.  There seems to be an abundance of townhomes on the market in those parts of Raleigh and with us having experience living in townhomes and dealing with HOAs we feel that property type is the safest first investment for us.

Some specific questions: 

What parts of Raleigh and Durham are seen as up and coming and realistic given our goals?  We will likely avoid the downtown areas due to prices that are well outside our range so any tips on up and coming areas for young families or young professionals (perhaps northeast Raleigh or east of Raleigh?) would be welcome and appreciated.  My wife is also interested in exploring investment potential of the Fayetteville market and we'd be happy to hear from someone who has had some success there.

We have a good idea of where the undergraduates at the local colleges are renting but what are the neighborhoods or pockets where the graduate students, who seem to be willing to pay more for the nicer, safer, and quieter neighborhoods, are consistently renting from?  

There seems to be an abundance of townhomes available in Raleigh...yet the prices don't seem low enough given their rental potential.  I know that quite a few people are still moving into Raleigh daily but timing wise is it best to wait another 30 to 60 days to see which of those townhomes are still on the market?  

Related to the question above - is there an ideal time to list a rental here?  I know for students the late spring & early summer seems like the time to list but does anyone have data they can share on other times of the year when it would make sense to list something for rent?  I guess I'm asking because we prefer to not pull the trigger on something too soon, where we would have it sit for too long before we could get it rented. 

Last but not least - I'm sure a lot of investors out there are looking for the similar types of renters, properties, and cash flow, especially when all the newbies are getting their information from the same sources.  It seems difficult to find opportunities in these markets that meet the goals I listed above.  Should we adjust our expectations?   Perhaps we need to look into areas I haven't mentioned that are up and coming and have yet to be picked over by investors and home flippers?  

Thank you all so very much for posting and sharing so much useful information to this site.

Chris

[Dawn Brenengen]

@Caleb Heimsoth Thanks for tagging me!

@Christopher Schultz  So much to unpack in your post  :)

Chapel Hill probably is too expensive to invest in unless you are looking for appreciation only.  You might be able to find numbers that work in student housing, but yes, higher taxes and this not being a student rental season would deter me a bit.

I love Durham - South Durham, closer to Brier Creek and some areas closer to downtown Durham are nice.  DT will probably be too expensive, though, unless you are willing to take some chances on the neighborhoods.  Sounds like you already know that about DT, but that IS where the young professionals are going.

In Raleigh, you can definitely find more affordable student housing closer to NC State, but the housing stock is on the older side.  You can find newer homes that attract older students and young professionals south of downtown/NC State.  Those would fall in the lower to mid 200k range or maybe high 100s for a townhome.

The only time of year I try to stay away from having a vacancy is between Thanksgiving and New Years, but even if you end up with one then, it's not the end of the world.  I'd rather have an extra month of vacancy and find a good house than wait for another one to come along. If it's a student rental, you've missed the season for that, but they can still usually be rented to families at off peak times, but won't usually rent for as much as they will in the summer.

In the mid to high 100s price point, I actually like single family homes in SE Raleigh, Knightdale and Wake Forest. If you can go to low 200s, then small SFH in Holly Springs and Apex. Town homes can work too, and of course, are cheaper, but you just have to make sure the HOA dues make sense, the HOA allows rentals and that there are not already too many rentals to compete with in the neighborhood.

To go in a totally different direction, I'm also very familiar with Fayetteville.  It's a better cash flowing market, but not an appreciating one.  If you're interested in that, I'm happy to give my thoughts on that as well.  I have a buyer agent who works with me who specifically covers Fayetteville.