Townhomes near RTP - Advice?

Question

Hi All,

I have a couple general question about SFR / Townhomes near RTP area. So I want to buy something within 15-30 minutes of RTP e.g. Apple campus, for something new/close to new/turn-key as a buy/hold long-term investment property as an out-of-state investor. I hear it's really hard for investors to get in because a lot of communities are not allowing investors to purchase, can anyone verify that?

I am looking at new build townhomes in Cary particularly near the Route 55/Morrisville/Carpenter area that is about 10 minutes from RTP, 20 minutes from Raleigh downtown, and 15 minutes from Duke. For a 3 bed/3 bath, does a rental comp of $2.2k sound too much to expect or it's reasonable? Buying just over $400k, would I be paying way too much or it's about right for the current market? I know with these numbers I would be cash flow negative, but I am seriously considering making a bet on appreciation. I have a stable and well paid W2 so I can afford to eat the costs in the meantime.

Appreciate any insight anyone can offer or tips in general. I've started looking recently in the RTP area. I am also new to this, but eager to pull the trigger for a reasonable deal in the coming months, sooner than later.

Thanks!

Chris London · Answer

@Chow Ahmed as far as investor restrictions, some new construction has this to help maintain the community property value and often is in force for the 1st year.  I know of very few existing (not new construction) communities that have these restrictions.

The area you are referencing, while a great one, is far too limiting IMO. While I realize you are targeting the radius right around RTP, I can tell you 1st hand that employees from the major corporations (IBM, Lenovo, Apple, Cisco, Pfizer, Biogen, etc) expand and are heavily concentrated in South Durham, all of Morrisville, all of Cary, Apex, Holly Springs, Fuquay Varina (yes, even the 'Quay") & North & West Raleigh. Chapel Hill also, but as an investor, I'm not a fan of their higher property tax. At the very least, as far as an upscale townhouse, I'd suggest adding S. Durham, Morrisville, and West Cary to your list. You will get as many UNC & Duke Residents & Fellows to apply in Durham for a July 1st occupancy as you will tech & pharma employees.

Price Compression: 2020 the rental sweet spot in the Triangle was between $1200-$1600. Since Jan of this year the number of out of state, sight unseen applications has been tremendous. I've had properties priced 20% over LY prices and received multiple out-of-state (NY, NJ, MA, CA) applications. So, while the sweet spot this year seems to be more of a moving target most of the $2.2K range properties that people are asking for a larger sqft properties w/ 4 bedrooms. Not having seen the specific new construction you're looking at I can't comment on if you can ask $2.2K but I will say your funnel of potentially qualified applicants would not be as big as I'd like to see.

Feel free to DM me w. any questions

Artem Lopatchenko · Answer

Chow, take a look at the beltline expansion (highway 540) plans as well.  Once the road construction is complete, areas such as Garner and Johnston County will become very reasonable commutes for RTP employees.  Also, keep property taxes in mind as some of the areas are being built up at a crazy pace, but don't have to pay the city and county property taxes, making the cash flows a bit more attractive.

Scott Ashworth · Answer

@Chris London you nailed a lot of this on the head. For one, folks that work in RTP are not concentrated in one specific city/town. Another, CH's high property taxes do not make it easy for investors. I have had success in Cary, but I have some friends who have done better in Apex. I do not believe it is coincidental that my buddy lives in and loves Apex, and I live in and love Cary. It helps to know where folks want to be in each respective city/town.

With regards to rents: I too am seeing folks from out of state who are looking to rent my properties. The 4 most recent states: TX, CA, WA & NY. I had a 4 bed/3bath property listed for $2,600/month, they told me they were paying $3,500 for a smaller property that was not a nice. My point is: if folks are moving from out of state, those folks are accustomed to paying more rent.

The trick of course is to give the Renter a great value. We try to do this by paying for Quarterly Pest Control, Yard Maintenance (weed & feed and grass cutting) and high-end finishes. Our rentals range $2,200-2,750/month and we have no problem keeping them rented.

@Chow Ahmed feel free to DM me if you have any questions

Peter K. · Answer

I hear it's really hard for investors to get in because a lot of communities are not allowing investors to purchase, can anyone verify that? - it depends on HOA and/or restricted covenants.

Your rental comps will depend on the neighborhood. What is "too much" or "right" in your definition - this depends on the individual.

If you have any questions, feel free to reach out. I'm an agent operating in RTP.

Gopichand N. · Answer

@Chris London - Very valuable suggestions in your post,would it be okay to DM to you for any questions?

Jaymin Jasoliya · Answer

@Chow Ahmed. In similar boat. Going to be in RTP area between September 1st to 10th. Want to really find a real estate agent and see some properties.

Any recommendations on real estate agent ?

Have you reached any conclusions ?

I have narrowed down on apex, holy spring and FV.

Peter K. · Answer

Hey @Chow Ahmed - I live in Morrisville/RTP area and would be happy to answer any questions. Very familiar with this area. Feel free to reach out.

Peter Kim, Realtor

Choice Residential Real Estate

Leo Croes · Answer

The parameters you’ve set are good but this area is very large and spread out so RTP employees live throughout Wake, Durham, Orange, Johnston and Orange counties. 400k for a townhome is reasonable and rents tend to be in the $1600 to $2200 or so for those properties. Think the appreciation makes the investment worth it but I agree that you will more than likely be cash flow negative.

Ava Miller · Answer

Hey Chow,

I can't verify the builders restricting investors. But speaking from my perspective with Alcove (co-living platform), we have lots of investors buying new builds and leasing them through us.

These builds are all over - RTP, south Durham, west Cary, and Morrisville - and have been able to generate those sort of rental comps you're seeking for their properties.

I'll DM you with more info and would be happy to send you rental estimates before you purchase a new build in the area!

Sophia Griffies · Answer

Hey Chow,

Some communities do have rental restrictions.  It varies by community/builder.  Given the intense seller's market here and increasing construction costs, $400,000's for a new, larger, well located 3 bedroom townhome is not out of line.  $2.2 million rent is on the higher side, but not unreasonable. Feel free to DM me.

Sophia

Townhomes near RTP - Advice?

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