Thoughts about investing in Rocky Mount

[Tom Keller]

Hello, I'm fairly new to Raleigh. Can anyone give me some background info on Rocky Mount? Any thoughts about investing in the area?

[Tim Sherrod]

Rocky Mount is a unique market for investors.

• The economy has been struggling for the past 10+ years. One of the highest unemployment rates in the state. Will this turn around? There are positive signs but it’s too early to tell.
• The population has been decreasing every year for the past 10 years. Will this trend turn around soon? Conventional wisdom says to invest in growing markets. Investing in RM now means that you’re betting that a turn-around is coming soon.
• Half of Rocky Mount is in Nash County. The other half is in Edgecombe county. The dynamics are different in each market so be conscious of that.
• Rocky Mount is much more of a renters market than larger NC cities. (% renters is higher on Edgecombe side than Nash County side)
• A significant portion of the housing stock is very old.
• Rent to price ratios and cash on cash returns for the market tend to be very high relative to larger markets in NC. This is a blessing but can also be a curse if you’re not careful. An investor coming in from another market can look at their first deal in RM and think they have a steal based on traditional metrics…..only to find out that they overpaid significantly.
• There are lots of deals that offer great cash flow in Rocky Mount. Most of these are very old or in underperforming parts of town that I mentioned above. One thing to keep in mind is that if you invest in the very old properties or in less desirable parts of town, the only buyers that you’ll find when it’s time for you to sell will be investors—no homeowners. Those investors will be expecting the same “steal of a deal” that you were looking for so keep this in mind when you run your numbers and are forecasting future sales price. Be very conservative on appreciation estimates. I’m fairly conservative, so I assume low or no appreciation in RM when I run my numbers.
• I’ve found that you can be much more aggressive on rental rates than on appreciation.
• Some areas have flood risks so do your homework. Use the FEMA website to assess the risk for each property your research. This is usually step # 1 or 2 for me.

These are some of my observations. I tried to focus on my factual points/considerations and allow you to form your own opinion. My overarching opinion is that investing in Rocky Mount has a lot of potential.    Your analysis will result in great metrics on paper. Those theoretical numbers can be achievable if you do sufficient due diligence…….but they can also turn into a nightmare if you’re not careful. So make sure that either you or your agent are very knowledgeable about the dynamics of the market.  Good luck!