New Investor - Greensboro, NC

[Ben Parker]

Hello everyone!

I live in Greensboro, NC and am looking to invest in real estate. My first one! I have a decent amount of cash on hand ($30K) as well as stock investments I can tap into. I've been analyzing properties on the MLS and haven't found anything with great cash-flow or CoC return. It seems rent in this area is $4-500 below the national average. I know Raleigh is a hot-spot and would be interested in opportunities there as well - very open but my friend up north has had great success with college rentals. Doing a little digging however it seems like that area may be a little tough to get into as my first investment. Some other areas around me are Winston-Salem and High-Point (a lot of colleges locally too).

If I've learned anything from podcasts it's more just getting the first one under my belt (whatever the property type), learning, and doing it again. I would appreciate any feedback, help, or insight and would love to network with anyone on the forums that is willing to help out a new guy! Thanks!

[Anna Laud]

@Ben Parker

Hi Ben!

My wheelhouse is Indianapolis, but I’ll try to include some helpful information here that should roll-over into the NC market as well and give you a better idea of what to keep in mind.

Class A areas are most often SFR, owner occupied home, or rentals with lower monthly rental yield percentages (lower because the fair market value of the homes are higher on average, and most of the time anyone able to afford a certain threshold of rent (%based) could easily afford (and qualify to do so) without needing/wanting to rent. These areas usually have higher school ratings, as well as lesser crime and a lesser extent of an overall property damage level from tenants.

So, while fewer renters in these areas, the quality of renters are usually higher. It can be easier in these areas to have a buy and hold investment property and magane it yourself. Lower returns, yet higher margin of physical safety net/reassurance. Rents in these areas -usually less than1% monthly rental yield

Pros to this area would be safer to rent in, with higher quality renters. Cons would be minimal opportunity for fix & flip, monthly rental yield usually less than or equal to 1%

Class B areas are usually mixed between rentals and owner occupied homes, more duplexes can come into play here as well. These areas can offer some more of a mix between professionals and blue collar owners/renters. Rents in these areas are usually higher in % of fair market value than Class A areas, and in a lot of cases still less of a worry than other areas as far as possible property damage goes. Rentals in these areas range, getting closer to and sometimes beyond 1%.

Pros to these areas are still higher quality renters, yet monthly rental yield increases to 1% on average. Cons to these areas are slightly higher risk of property damage, and fewer flipping opportunities.

Class C areas become more of a 50/50 split than Class A and B areas as far as renters and owner occupied houses go. In these locations the schools tend to have lesser quality ratings, but more families (as gentrification transpires) will ultimately (and in time) choose private school settings. Rents in these areas range getting closer to a 2% monthly rental yield (at least in some places in Indiana- obviously not all Class C areas are closer to 2%, but you see a pattern forming :)

Pros to these areas are usually 1%+ monthly rental yield to 2%, and having a steady pool of renters, as well as more frequent opportunities for fix and flips. Cons are slight downgrade in quality of renters, property damage more likely/possible.

Class D areas are for the most part rentals, and in these areas of Indy you will find more abandoned homes. Tenant maintenance here is more required than some areas, and using a PM or PM group in these areas is what most investors choose to do. Rents in these areas are often subsidized, around <$900 a month on average (again, Indiana, but proceed accordingly as a loose rule). It IS worth noting that some of these areas have seen some drastic gentrification in recent years, and that may play into NC as well.

Pros to these areas (especially those mentioned after listed zip code) are ample opportunity for fix & flips and these areas quickly transforming into Class C or Class B areas. Cons for these areas (mainly those not having further mention) higher likelihood of property damage and more issues with tenants (yet still a steady supply/pool of renters)

Sprawl, Holly Springs, Fuquay, Franklin, Youngsville seem to be a few popular areas from others investing in NC, while those holding true to college town rentals prefer Boone and Asheville- but it does seem that Raleigh isn’t going to maybe be your highest cash flowing area maybe.

Having said that, you obviously fall into some tourist, Airbnb opportunities in some areas in NC as well and there are plenty of investors that use this niche as their bread and butter, so maybe worth considering if you find a Class A area that fits this criteria - this would change your % of monthly rental yield accordingly as “nights stay” charges usually are far superior to monthly rental charges (a quick prorated daily charge would show you by what %)

If you’re going towards a college town, I would caution you to move your lease agreements to student ‘friendly’ - co-signer at minimum (make sure you know that parents/guardians can/will foot the bill for damages/rent ultimately) but I’ll include a link that should help with this too.

https://www.rentecdirect.com/blog/the-pros-and-cons-of-renting-to-college-students/

With all of this in mind- it might be best to speak with an agent in your area/desired areas and get someone who’s familiar with working with investors and the best investing areas you’re talking about in NC. If you need help connecting with someone, let me know because I can connect you with an agent that you can at least talk to!

Hope that helps!