Buy and hold Charlotte

[Justin R.]

Hello friends of BP. I am looking into SFDs for long term rentals in Charlotte, NC. Does anyone from that area, or anyone who has invested there have any advice? Areas, investment types, or local knowledge they can share? Would you recommend a particular wholesaler or agent who specializes in investors? Thank you Justin

[Curtis Waters]

@Justin Rick 

Need to go into buy and hold investing with open eyes! You should get 7-10%+ CAP rates or 15-20%+ Cash-on-Cash return (with financing). Ask plenty of questions - you can make decisions based on where you would live and get a lower return, or invest in working class neighborhoods and receive a higher return.

Some startup investors feel that they can buy a very low cost investment home in a so-so area and they will be okay - but consider your risk.  Has the home been inspected?  What are your long-term replacement costs on the home's major systems (Roof, HVAC, electrical, plumbing, foundation)?  If these systems are in good shape your risk is lowered on an older home, as it is effectively newer.  I also advise to take $100/mo minimum to fund your maintenance and updating budget.  If you don't use it - don't take the $, but keep funding your maintenance bucket so if a HVAC dies (or other major event) you have funds to address this event.

If you are using a property manager (not hard to manage your own if you properly screen tenants & handymen), consider that if their efforts result in high maintenance or repair costs, or they rent the home for under market rent, their exposure is low - but these factors greatly impact your return.  For example, a property manager might price your rent $50 below market value.  At a 10% fee to them, this results in a $5/month impact to the manager, but $50/month to you ($600/yr).  The manager claims great occupancy and will still benefit.  You could have the same concerns with turnkey providers.

The Charlotte metro area is growing at a great pace, and there is a shortage of good housing.  The Charlotte metro area's population is projected to grow by 47 percent between 2010 and 2030, according to a recent report by the Urban Institute.   

As for appreciation, Charlotte is seeing good appreciation on buy and hold properties.  I don't like the idea of banking on appreciation after what happened in 2008/9.  However, many investors with properties in Charlotte reported rent increases in 2008/2009 as previous homeowners now needed a place to live.