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Updated over 3 years ago, 02/28/2021
Durham Neighborhoods
Recently, I have been doing some research on the neighborhoods of Durham. As someone who doesn't (yet) live in Durham, I wanted to share my thoughts on the different neighborhoods and let people:
a) tear apart my thoughts if they are incorrect and
b) share their own thoughts on Durham neighborhoods!
Here's are my notes so far:
- Duke Park & Trinity Park - Seems like these neighborhoods have already "arrived". Really good neighborhoods, but properties might be too pricey and deals might be scarce here.
- Cleveland-Holloway - Currently "arriving" - could be some good deals to be had, but who knows for how long!
- Albright - Might take a little while longer, but given proximity to Cleveland-Holloway, could be the next up and coming neighborhood.
- East Durham - REALLY hit or miss. This could eventually be up and coming, but even more so than the rest of Durham, the landscape drastically changes block-to-block. This is a more risky area for investing
- Forest Hills - Another nice neighborhood on par with Duke Park and Trinity Park, but MAYBE there are still some deals to be found here?
I'd love people's thoughts on these neighborhoods as well as neighborhoods that are a little further away from downtown. Where do people currently invest and what neighborhoods do you focus on?
I am especially interested in a few questions:
- What neighborhoods have good cash flow? A lot of the downtown neighborhoods I assume are good appreciation plays, but there must be neighborhoods further out that are good cash flow opportunities.
- How do people feel about the Warehouse District?
- How do people feel about Watts Hospital-Hillandale?
Thanks for playing!
@Dave Olverson, I'm a small fish and most of those neighborhoods are above my pay grade. But, here's my impression.
Duke Park & Trinity Park - Definitely neighborhoods that have arrived. Great places to live. Definitely Pricey. I assume deals are few in those places, but they're both priced out of my range so I hardly ever research there.
Cleveland-Holloway - You could say "currently" arriving, but I think it has arrived for the most part. There are already houses in this area that cost as much as homes in Duke Park and Trinity Park. OTOH, this is definitely an area in transition, as many residents are not in the income bracket of where the neighborhood is trending. So, theoretically there are deals here, but the holdover property owners (not always the same as holdover residents) know what is happening in the area and prices for houses in need of complete reno houses are going up and up.
Albright - Yes, transition is starting and yes it will take a while to fully take hold. The positive side is there are deals to be had here. The negative side is depending on how far from the downtown core you go, gentrification may take longer than you wish to arrive. I really like the potential of this area. DISCLOSURE: I have a property in Albright and I'm looking to buy more here, so I'm biased.
East Durham - I could see many out-of-town investors and even local investors overlook this area. To be completely honest, I'm not too keen on its near-to-mid-term rise. However, after Albright arrives, this is the next logical move for gentrification. Prices here have risen somewhat over the past few years, but I can't discern if that uptick is because of overall market improvement or speculation. Probably a bit of both. This area is definitely not as "dangerous" as it was in recent years, but I imagine it would appear too sketchy for many investors.
Forest Hills - This has been a "arrived" neighborhood from the day it was conceived. My kids attend a school here, and I know many parents who wish they could afford a house in this area. I don't live there, but if you gave me enough money I'd be there. I have no idea if there are deals here, because it's so far above my budget (investing or living) that I hardly ever "shop" here.
Maybe, other more experienced investors might chime in.
@Randy E. This is awesome - thanks for the insight!
Other than Albright, are there any neighborhoods where you do most of your looking? Maybe neighborhoods that won't necessarily benefit from the appreciation/growth of Durham AS much, but currently have good cash flow opportunity and are more in your price range?
You really can't go wrong close to Duke where there are a stable supply of renters. The older neighborhoods mentioned above have lots of historic homes that could potentially need upgrades or be in less than desirable school districts. Schools districts are incredibly important to property values in Durham. Personally I think prices are over-inflated in the historic home areas and there is higher risk of getting a house needing major work.
I am a fan of the Hope Valley (not Hope Valley Farms) area due to location and the lovely homes in the core part. Appreciation potential would be high on an older home. The area surrounding Forest hills is pretty reasonable though as long as you don't want one of the big mansions on the core streets. Try American Village just west of campus for large 80's-90s era family homes and the area south of campus bordering MLK but before you get to Hope Valley for affordable 2-3 bedroom houses on big lots. There is in-fill building happening all around American village. The lakewood area south-east of campus has gotten expensive but 2 blocks east are some bargains (still sketchy on some blocks but only a matter of time). Woodcroft is always a safe bet but many of the houses are a dark/rustic style that is hard to update. There are also some cool houses going up in the neighborhood just west of the ball-park on the other side of highway 147 around roxboro/mangum, I see that as an up and coming area due to proximity to downtown. Still a little rough on some streets though.
Thanks @Jamie S.
The public school system in Durham is definitely a concern and even though I don't have much of a background in education, something I would love to get involved with in terms of helping to improve once I get down there (we will see how that all works out!)
My understanding is that areas such as Hope Valley are pretty expensive. Are you able to find good deals there and do the cash flow numbers work out? In most markets I am used to, when you get into the much nicer range, higher purchase price starts to drastically outpace the increases in rent.
The schools aren't really bad, it's just a perception issue. Durham has a great gifted and talented program and some of the best high school programs in the state. Your child might actually get more resources going to Durham schools.
So to answer your question... yes, it would be expensive and risky to buy a mansion in hope valley central but you can get something a couple of blocks over in North Hope Valley. Most of the houses are quite large 4+ bedrooms which makes them more expensive on paper but if you look at price/sq/ft in 27707 there are plenty that are < $150. Valley Run just north of Hope Valley on the other side of MLK is where I would look. I've noticed that area is really perking up. Fixing up a tract home is not probably going to pay off but some of these houses have million dollar houses right behind them.
As for cash flow there are a lot of doctors/lawyers/visiting faculty/medical residents associated with duke that are looking for higher end rentals. If I pull up rental listings in the popular areas south and west of Duke there are actually only a handful of homes available for rent. And not very many large ones. Maybe indicates a supply/demand opportunity?
http://www.zillow.com/homes/for_rent/house,mobile_type/3-_beds/zest_sort/35.996098,-78.918529,35.949905,-79.003501_rect/13_zm/
Hope Valley has a lot of million dollar plus homes but the neighborhood also has no HOA and it is 50+ years old, so there is an unusual diversity of home types and some older homes that need some TLC. The neighborhood is gentrifying with a wave of 30 something professionals buying homes. Overall, not a renter/investor paradise in my estimation but some limited niche opportunities may be available.
@Jamie S. Thanks for getting into the nitty gritty/specific locations and prices! This is great info.
@David Miller Very interesting tidbit about Hope Valley - I did not know that it doesn't have an HOA. Thanks!
Dave Olverson I should clarify there is no mandatory HOA...there is a voluntary HOA that has no real authority with voluntary dues of $25/yr. they maintain some of the entrances.
I do not know Durham at all but I would like to learn the city better. I know practically every street in Raleigh but Durham is a mystery.
I have been thinking of taking a day driving most of the streets in the city for a while now. If anyone who is familiar with the city (or even if you are not) and would like to do the same let me know.
I've been studying the neighborhoods close to downtown for a little while now and I know that I'm missing a piece or two from the puzzle. When I look at recent sales of properties in many of the areas named above (Albright, Duke Park, East Durham, Northest Central...) it is quite literally all over the place in ways that appear random but must have a pattern that I haven't identified yet. Houses closed at about the same time that are within a block or two could have a $50k spread when they seem directly comparable with about the same size, condition, bed/bath, etc. Or I see something like a scenario where one that was rehabbed with stone & tile & the works would sell below listing after a month on the market while one across the street that wasn't updated and was otherwise equivalent on paper would sell for significantly more AND would sell in 2 days well ABOVE list. Then there are the ones that were rehabbed with stone & tile etc. and sell for huge numbers when the rest of the block looks like a bomb went off. The patterns so far are eluding me.
Someone mentioned school districts which is important in any area for home values, but much of my research suggests in these areas of Durham there are big swings even within the same school district (on the same block!). Anyone else seeing these oddities in the numbers and have any insight to share? The wild randomness I see in the comps without understanding the mechanisms that cause the randomness make it tough to set a confident ARV when it comes to negotiating the purchase.
Hi @Daniel Murphy - since you are local to the area, I would suggest maybe driving the neighborhoods to see the discrepancies that you are uncovering. Nothing better than seeing it for yourself, if Downtown Durham is an area you are interested in.
If you'd like to drive the neighborhood together sometime, send me a PM.
-Eric
Eric Weireter I'd love to set up a time to drive the area in order to get to know it better. Do you have a realtor with great knowledge of the market that would be willing to tag along?
@Eric Weireter I’d also be interested in a drive through, available from 12/28.
Hi @Tracey Callison, unfortunately, I'll be out of town for the holidays. Raincheck? Perhaps another time?
Sounds good! I live in hope valley and know that area pretty well, but I can’t afford to start here :)
I'm curious @Dave Olverson and @Randy E. and others that contributed, if you were to update your thoughts on Durham 3 years later, what would your thoughts and observations on Durham be now?
The Durham market is hot. I’d say it has drastically changed in the past 3 years. I purchased my first rental about two years back and was able to achieve some decent cash flow. With the current market today, it’s much harder to find something that allows for cash flow.
I’m currently looking for my next investment property in Durham but honestly feel like I’m going to have to explore other markets.
It is certainly a sellers market currently.
@Dana LaBerge - thanks for following up. For what it's worth, I think what people say is true. I HATE repeating this phrase because it feels like such a copout, but it truly is block to block. In fact, I know some streets where I would feel more comfortable buying on one side of the street than the other due to crime associated with a street that has properties with a back yard that meets the back yard of one side vs the other.
It is a very hot market and I think that cash flow based on no improvements is not really possible. Cash flow based on buying a distressed house and rehabbing it are certainly possible if you find the right deal, but you have to be really careful that you know the specific area well to know if it is a good investment.
I even know really "hot" areas that still have high crime (or perhaps have even higher crime than they used to because they are hot and gentrifying, which causes tension).
Durham just passed legislation called Expanding Housing Choices which makes ADUs and duplex conversions legal throughout the city. I think the only way I would invest in single family rental homes here right now is if I could get them for a deal and add an ADU or split it up into two units in a cost-effective way.
Of course, others may have more appetite for risk than I do and I certainly think that Durham as a market is continuing to rise and get even more robust with many more people moving to the area every day.
Yeah, I've experienced that too. I've been able to pick up 7 rentals there this past year and they cash flow, but it's not spectacular.
I was asking more on the flipping side as I am always looking for areas that have been changing for a couple of years, but that still have some opportunities to get something at a reasonable price. I flip quite a few in Durham, but still don't feel like I have a good handle on what is happening in the different areas. I'm still trying to formulate a strategy for targeting areas over there and need to learn more.
Thanks for the follow up. You too @Keith Amado.
@Dana LaBerge For your most recent rentals over the past year in Durham, are you finding it difficult to achieve anything greater than 10% CoC?
They are there, but definitely tough to find. I have a couple of rooming houses that will do well when they are full, and a duplex that is around 15%. Property and rent appreciation are helpful there though too and the ones that aren't over 10% should be in a year or two with rent increases. I had to stop trying to exclusively find properties with the CoC return that I wanted now, and instead find some that would be there fairly soon if managed well. So time will tell if that strategy is successful or not.
Originally posted by @Dave Olverson:
@Dana LaBerge - thanks for following up. For what it's worth, I think what people say is true. I HATE repeating this phrase because it feels like such a copout, but it truly is block to block. In fact, I know some streets where I would feel more comfortable buying on one side of the street than the other due to crime associated with a street that has properties with a back yard that meets the back yard of one side vs the other.
It is a very hot market and I think that cash flow based on no improvements is not really possible. Cash flow based on buying a distressed house and rehabbing it are certainly possible if you find the right deal, but you have to be really careful that you know the specific area well to know if it is a good investment.
I even know really "hot" areas that still have high crime (or perhaps have even higher crime than they used to because they are hot and gentrifying, which causes tension).
Durham just passed legislation called Expanding Housing Choices which makes ADUs and duplex conversions legal throughout the city. I think the only way I would invest in single family rental homes here right now is if I could get them for a deal and add an ADU or split it up into two units in a cost-effective way.
Of course, others may have more appetite for risk than I do and I certainly think that Durham as a market is continuing to rise and get even more robust with many more people moving to the area every day.
Dave, when you mention ADU, does that refer to a owner-occupied property only? or is this a property that can be permanently split and rented out as a true duplex? triplex? quad?
@Michael Jackman Owner occupancy is not a requirement but maximum allowed square footage for ADU is 800 and all the units must be Sprinkled to meet fire safety codes.
Where do read about the sprinklers required in ADU's specifically? I couldn't find it in the legislation. Nor would that make sense for residential buildings with less than 3 stories. Are you referring to apartment buildings?
@Michael Jackman - there is no requirement for the property to be owner occupied. Within the city limits (I think both suburban and urban tiers) you can now have, by right, up to 3 units (2 in the form of a duplex and 1 in the form of a detached accessory dwelling unit).
Of course, the problem is that construction costs are so high, ADUs are difficult, but if you have a garage that could be converted easily, that could be a good way to go!
I have not heard anything about sprinklers and don't think those would be required in the main house, so I can't imagine they'd be required in the ADU.