Charlotte,NC or Atlanta, GA for a 1st time investor of Rentals?

Question

Hi to all BPians out there,please guide me with your expertise in Rentals niche.I'm a newbie to REI space, but sincerely working towards becoming a good one in coming days. Also, joined my local Habitat volunteer program to contribute a bit to the needy as well as myself can become a good handyman to DIY majority of home repairs in my future rentals/house-flips.I live in Charlotte, North Carolina. My current job(IT consultant) allows me to work remotely, so I've this flexibility to live in any of the major Metro areas.Planning to buy a multi-family home (can be a duplex/triplex/Quad depending on how good the deal is). Have already browsed internet (BP, RealtyTrac to name a few) for pointers on places to invest in Rentals. Got to see that Atlanta, GA seems ranks better than Charlotte, NC in overall prospects with some bargains/deals (provided one does proper due diligence).Here's where I need guidance/help: I've been living here in Charlotte for 1.5 years & have a few friends & a cousin, so a bit attached to this city,while my aspirations hint me to leave for Atlanta/other better places to hunt for better deals. However, if it's ATL or anywhere else, I may have a zero/bad social life given my introvert nature :( If it's in Charlotte, I can manage my RE investments/ as well as social life for my psychological well being. So, here's my Q: Is Charlotte a good place for a 1st time buyer eyeing on sub-50k (fine with working out on foreclosures/Ugly/bad looking homes (with no structural issues though))& then some DIY, hiring contractors for necessary but not HiFi makeovers).Essentially, I'm looking to start small, have seen some successful folks here in BP with sub/~30k properties, I feel I should expand to bigger amounts once I get some real-time/1st hand experience, Just to give u an idea:my current job:IT consultant with 6figure annual salary, Frugal(not cheap though) lifestyle, net savings(4-5k/month), Credit score(775) & mortgage eligibility (can borrow anywhere upto 400-500k ) Can you please guide/advise me? should I move to Atlanta/ any other city for deal-hunting OR stay back in Charlotte (my heart currently lies here, feeling a bit attached, although I might be wrong thinking so). You may also please suggest any better places (if not Charlotte/Atlanta) to start with.PS: sorry for such a long post, would like to give as many details as I can so that u can understand my profile better & provide your invaluable inputs.Thank u all in advance!!

Curtis Waters · Answer

Charlotte is in massive growth mode. Many renters face significant rent increases based on this growth. Earlier this month, HomeUnion looked at 44 single-family rental-housing markets nationwide, and ranked Charlotte as the #7 rental market with a projected rental rate growth of 5.3% for 2016. Atlanta wasn't in the top 10. This list can be deceiving however - San Jose was #1 with a projected growth of over 7% in 2016 - but their projected average rent was $3459/mo! Looks good on paper - but financial returns to new investors are very small and require a major investment compared to Charlotte. So some perspective is required.As for sub-50K rentals - yes, you can find them. I would caution you to ensure that the major home systems (Roof, electrical, plumbing, HVAC) are stable. I use a home inspector who is also an investor before I purchase. Structural and foundation issues are a risk in older homes, so an inspection is key (until you have enough time/knowledge and desire to go under houses.....).Gurus (the major traveling ones plus those pushing books & programs) accentuate the positive but fail to stress risks!@Alex Franks has many years of local experience in rentals and can speak to concerns with older homes as well. With lower cost rentals you must know your property well - and you must screen the tenants for criminal & eviction history, plus make sure that they make a minimum of 3 times the rent in monthly income (you don't want to setup a tenant for failure - will become your potential money pit). A good financial reserve should be considered when you are starting out. Are you prepared if a tenant decides to leave before the lease is over - what damage might you encounter - and the time to make the home ready for the next tenant?I caution new investors to get as much knowledge as possible. I don't want to see anyone cut corners in financial projections, underestimating rehab costs, or hoping that quickly prettying up an older home will allow them to get by for more than a few years. Real estate investing is a business, so your risks must be properly calculated and reasonable. Those you see on BP with under 30K houses are usually seasoned, and they have looked at many of these homes to find the few that would work out. You will also find articles on BP about the dangers of 30K & under homes ( such as https://www.biggerpockets.com/renewsblog/2015/08/22/truth-30k-investment-properties/). Few first time investors can see these pitfalls or prepare adequately for contingencies.Turnkey homes could be your answer - but you have to deal with trust and history of these turnkey providers. Are there financial risks based on the property condition and tenants placed? Consider inspections and ask for the tenant screening information.Some new investors will work with a seasoned investor to fund some or all of a project, and then learn on these projects about financial benchmarks, risk, rehab processes & scheduling, material selections, finding and selecting contractors, and marketing. I recommend that you go to local investor groups that focus on buy & hold strategies - learn from the lessons of those who are succeeding locally.

Paul Timmins · Answer

@Gangadhar UppalapatiI have a overview of markets across the country EMAIL me for a copy.The local REIA clubs should be a big help interact via phone till you can visit.Paul

Gangadhar Uppalapati · Answer

thanks @Steven Gesis for ur valuable inputs!

Steven Gesis · Answer

Gangadhar-Everyone has there own flavor and real estate investing comes in many flavors! I think you can begin by reading the following guide A Simple Guide for Buying Out of State Turnkey Investment PropertyThis is a good base for answering many of your questions about where and how to begin, it breaks down some key tangible challenges, you may want to introduce yourself to. It all boils don to value, if you believe you can gain the highest level of efficiency by doing a DIY on a home in the below $50k property marketplace, this is a space I personally would never even entertain. By the time you get done spinning your wheels with tenant replacements, high cost of turnover and continual maintenance, you could have stepped up into a nicer space with a higher rent. Believe it or not there is a scientific correlation between property cost, rent collected and an actual success rate. Im not talking about being successful once, or getting lucky once in a while with an excellent tenant, problem free home, I think this is certainly not the rule but rather the exception. I am talking about continous results, over and over again. Just think about it, just because you know how to assemble a car does not mean you will manufacture them, the pure theory of economies of scale, time value of money are simple theories to consider when you define value for going with a turnkey investment. Ultimatley, you have define a strategy and seek to master it. Much Luck!

Deb Jones · Answer

If your heart is in Charlotte stay here and invest here and other places as well. I live in Charlotte and have a rental in Orlando. Investing outside where you live can happen all the time. Charlotte is growing and will continue to grow. You could even seek out houses in the outer markets of Charlotte. As the city grows outwards you could already be there.

Travis Beal · Answer

No reason not to invest in and around a city you know. Plus the $2B bond that just passed should keep the state's population growing.

Alex Franks · Answer

Harry I don't sell turnkey any more, but have a lot of post on and for out of state investors.Feel free to read PM if you would like more detailed information on our market.Alex

Harry Darmawan · Answer

Hi all, been wanting to invest in Charlotte area for a while.@Paul Timmins mind emailing me the list as well ? Thanks in advance ! My email is hdarmawan at yahoo dot com

Gangadhar Uppalapati · Answer

hi Paul, its gangadhar dot unv gmail dot com

Paul Timmins · Answer

@Gangadhar UppalapatiMy BP PM doesn't work you need to email me directly.Paul