Hi! I am a total newbie so please take it easy on me. =) But I'm wondering if it's worth it to consider buy and hold investing in the Triangle Area, NC (Raleigh-Durham). I just learned about the 2% rule and it doesn't seem to apply for this area. For example, look at this 3 bedroom, 3 bath property in Morrisville NC (MLS 1963147):Sale Price: $210,000Size: 1,856 sqftBuilt: 2000HOA: $40Zillow Estimated Mortgage: $1,070 per monthZillow Rent Zestimate: $1,340If I am to apply the 2% rule, then I should try to rent this house at around $4,000 !!!But the Rent Zestimate is about right for this place, around $1,200 to $1,400 per month. I'm thinking I'll be getting a negative cash flow for this property, and for most properties in the area.Are some ares just not ideal for buy and hold investing? Should I instead look at another city? I am considering the Triangle area because I live her.Thank you in advance for your answers.

That's the great thing about real estate. There is no exact "right" answer because everyone sets their own personal and financial goals (see my August 2 post on prior page.) "Should I look at the ugliest/neglected house in a nice neighborhood and rehab it?" Only if that fits for you. Regarding "The most important factor to me is the hassle factor. You can find 1%+ deals, but I'd rather take the .8-.9% and have an "easier" experience." There is nothing wrong with you doing that. Personally, I can't. I'm also guessing that you are financing with government subsidized loans (GSE loans from Fannie Mae, FHA, Freddie Mac) and that changes the equation. My LLC members and I could get GSE loans a decade ago, but you will find that your expenses are a lot higher when you can't access the artificially low government money. Your rent-PITIA equation might be positive, but mine would not be since commercial lenders are driven by free market, non-subsidized, pricing. Finding the right price is key: "I personally wouldn't buy things in Raleigh that fall in the 1.5% or better range unless there was some sort of lucky pricing anomaly." But in my world it has nothing to do with luck. Regarding "...go outside of the MLS..." I generally don't buy from the Maximum Listing Service, I sell there.

@Dawn Brenengen I agree with @Chris Martin Those numbers are extraordinarily thin - congrats if that was really your expense, but rest assured it is NOT going to be your long-term average. If you count your own capital, the mortgage, as well as the costs Chris mentioned above (incl PM), I'm actually struggling to see ANY cash flow at 165K cost and 1300 rent. I have properties near NCSU too, and it is true, they are generally easy to fill. However, sooner or later, you will have larger repair/maintenance items that will necessitate a longer transition than 2 days. That cuts into the income as well as bumps the expense side. I think those numbers are basically an appreciation play (nothing wrong with that either, if that's the longterm plan).

Regarding, "My point was that a foreclosure rarely requires only <5K to make it rent-ready. It may be REO now, but it's still in the same shape it was when it was a foreclosure - I doubt the bank improved anything in the meantime." Not the case for this property. I pointed this out in my posts. My comments: "From the pictures, the owners (JP Morgan per property card) put a few $$ into it so they could make it GSE financeable." The tMLS says they put in a new HVAC system with duct work (last 2 pictures)... which per the permit (#2140416, pulled 6/5/14) included electric and HVAC install. They also upgraded the service to 200A. Like I said... they are trying to make it conform to FNMA underwriting.

Christopher,Whether an area is ideal for buy and hold investing is, in part, dependent on your objectives, tolerance for risk, and property criteria. Are you comfortable with low/no cash flow in exchange for potential appreciation. Alternatively, are you more comfortable investing in declining areas with substantial cash flow and low prospects for appreciation. (This is not a binary question, only two points along a spectrum.)Achieving the 1% rule—or even the 2% rule— in the Triangle is possible, but you need to consider such factors as the age of the property, number of bedrooms, school districts, bus lines, thoroughfares…the usual suspects, alongside your objectives and tolerance for risk. Generally speaking, a lower ranking in these criteria will correspond to a higher rent/purchase ratio. Consider Morrisville and the surrounding areas (Cary, Holly Springs, Apex and Holly Springs) as examples.There are many in the BP community realizing substantial returns on their investments. While reading about their successes is inspiring, try to remember that investing is not a competition. Develop criteria based on your personal circumstances and finances. Lastly, based on what you’ve provided, I suggest that you focus your search on the Durham, Garner and 27616, 27610 and 27604 zip codes in Raleigh. I wish you success in reaching your investment goals. Welcome to BP! John

@Chris Martin I was just showing that with a minute of searching outside of Cary you can find homes that are selling much lower than $210,000 I did not put a lot of time into searching for the property that he should buy. I was looking at the Garner area for an appraisal I had done and noticed how low property was selling for. Per MLS similar homes are renting for 900-1000, with a little bit of work on a home in the area I don't see why he could not get that.

@Christopher Rayala @Chuck Hollowell 1- 2% can be had if you find a good deal in SE Raleigh. However, the reason you get 2% is because they are way more hassle than the $210k one you are looking at. Personally, I would rather have nicer properties and deal with a different tenant population than what you end up with when you get 2%. That extra ROI can get eaten up by vacancies, evictions, etc. My favorite area is near NC State. You can buy a SFH for $165-175k and get $1300-1400/month in rent if you rent it during the right time. This in no way meets BP standards, but there are no vacancies and rent is always paid on time. I think the lower rents are made up for by the potential appreciation. I know you're not supposed to factor that into a buy and hold investment, but you and I both know that Cary and Morrisville have a lot of potential to appreciate nicely.

@Christopher Rayala There's several things going on here.1. Generally speaking, I think it's advisable to invest in the area where you live. But at the same time, there are a lot of people who are successfully investing in out-of-state properties.2. Generally speaking, you are likely to get better ratios in lower-priced properties. But, if you go too low, you run into other problems (higher turn-over, higher maintenance, more crime, etc). I like the price-range for first-time blue-collar workers.3. Finally, and probably the most important - it ain't as easy as just go find a property on the MLS and, bang it's going to be a great deal. There are good deals on the MLS, but you often have to really hunt for them, and you sometimes have to wait a while to find one.Also, don't trust anything that you find on Zillow.

Other than REOs... I will buy via MLS if 25% below list. Happened once. But to answer the question, historically, Trustee sales and UI HUD/REO.

@Chris Martin You strike me as being very successful at what you do. As you said, you don't buy from the Maximum Listing Service. If you don't, what are the top two ways that you get your deals?

@Andrew S. @Chris Martin From my few weeks of studying the Raleigh-Cary-Apex market, the best I'm seeing from properties listed at the MLS is 0.8%.I'm starting to feel that to get a 1+ percent deal in a good neighborhood, I have to go outside of the MLS. Is this true?Should I look at the ugliest/neglected house in a nice neighborhood and rehab it? Is this a good way? How about yellow letters? Pre-forclosures? Buy from wholesalers?

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Updated over 10 years ago, 08/24/2014

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Posts: 10
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Christopher R.Poster

Rental Property Investor
Cary, NC

Buying & Selling Real Estate

Does it Make Sense to Buy and Hold in the Triangle Area, NC

Christopher R.Poster

Rental Property Investor
Cary, NC

Posted August 02, 2014 08:12

Hi! I am a total newbie so please take it easy on me. =) But I'm wondering if it's worth it to consider buy and hold investing in the Triangle Area, NC (Raleigh-Durham).

I just learned about the 2% rule and it doesn't seem to apply for this area. For example, look at this 3 bedroom, 3 bath property in Morrisville NC (MLS 1963147):

Sale Price: $210,000
Size: 1,856 sqft
Built: 2000
HOA: $40
Zillow Estimated Mortgage: $1,070 per month
Zillow Rent Zestimate: $1,340

If I am to apply the 2% rule, then I should try to rent this house at around $4,000 !!!

But the Rent Zestimate is about right for this place, around $1,200 to $1,400 per month. I'm thinking I'll be getting a negative cash flow for this property, and for most properties in the area.

Are some ares just not ideal for buy and hold investing? Should I instead look at another city? I am considering the Triangle area because I live her.

Thank you in advance for your answers.

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