Single Family Home Investment in Raleigh, NC

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Single Family Home Investment in Raleigh, NC

Shaum K.
Gaithersburg, MD · Member since 2020 · 7 posts · 5 votes

My wife and I invested in a multifamily syndication 270 unit in Raleigh last year, which was our first experience in REI. From an active investment perspective, we're thinking that buying a home in Raleigh could be a better cashflowing investment due to the lower prices compared to the DC area where we live. My wife grew up in NC and we have friends who have lived there and liked it or family/friends who live there now, her parents live in NC too so could help us with the home if necessary. From my read of the forums it does seem Raleigh/Cary/Durham it will be hard to find properties that cashflow since it'a sellers market. What advice would you give to us? It's either this or more passive investments in syndications with decent COC returns at least for the short term.

Thank you for taking the time to respond in advance!

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Ryan Daigle
Investor · Apex, NC · Member since 2018 · 253 posts · 215 votes
6y

Hi @Shaum K.. I believe we've invested in the same syndication! I live in the area and was happy to get a piece of something in my area I could drive to.

If your priority is cash flow then it's going to be very hard to find anything that compares to what you're getting in the syndication (around 8%). This area has just had too much appreciation recently to get that kind of cash flow unless you're looking to do a heavy lift like a wholesale purchase and rehab.

Something else you might consider is being a hard money source for flippers in the Raleigh area. You provide the loan at 12%+ to the folks on the ground doing the heavy lifting. Less risk and time involvement for you, though I'm not sure how much capital you have access to.

Hope that helps!

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  • Ryan Daigle
    Investor · Apex, NC · Member since 2018 · 253 posts · 215 votes
    6y

    Hi @Shaum K.. I believe we've invested in the same syndication! I live in the area and was happy to get a piece of something in my area I could drive to.

    If your priority is cash flow then it's going to be very hard to find anything that compares to what you're getting in the syndication (around 8%). This area has just had too much appreciation recently to get that kind of cash flow unless you're looking to do a heavy lift like a wholesale purchase and rehab.

    Something else you might consider is being a hard money source for flippers in the Raleigh area. You provide the loan at 12%+ to the folks on the ground doing the heavy lifting. Less risk and time involvement for you, though I'm not sure how much capital you have access to.

    Hope that helps!

    6Reply
  • Sean H.
    Developer · NC · Member since 2019 · 211 posts · 112 votes
    6y

    You're going be hard to find houses that give you the magical 1% return, but you should figure out what number is acceptable to you.

    2Reply
  • Shaum K.
    OP
    Gaithersburg, MD · Member since 2020 · 7 posts · 5 votes
    6y

    Thanks Sean. I remember hearing something similar from @Dawn Brenengen on a Biggerpockets podcast , granted that was in 2014. I think she mentioned 0.8% is more reasonable to expect. 

    1Reply
  • Roni E.Pro Member
    Specialist · Earth 2.0 · Member since 2019 · 598 posts · 271 votes
    6y
    Originally posted by @Shaum K.:

    My wife and I invested in a multifamily syndication 270 unit in Raleigh last year, which was our first experience in REI. From an active investment perspective, we're thinking that buying a home in Raleigh could be a better cashflowing investment due to the lower prices compared to the DC area where we live. My wife grew up in NC and we have friends who have lived there and liked it or family/friends who live there now, her parents live in NC too so could help us with the home if necessary. From my read of the forums it does seem Raleigh/Cary/Durham it will be hard to find properties that cashflow since it'a sellers market. What advice would you give to us? It's either this or more passive investments in syndications with decent COC returns at least for the short term.

    Thank you for taking the time to respond in advance!

    Congrats on your investment and jumping onto the BiggerPockets family. Also, good to see a fellow DMV area person on the site. I would real Joe Fairless book Apartment Syndication if you think you want to invest in apartments more down the line. Next I would get the Michael Blank SDA course. One you have these items it will help get the lingo down for deals, understand the underwriting and so forth. I would see what your current investment is creating COC wise. Then BiggerPockets has a calculator run the numbers and triple check. Now you need to keep in mind you are shifting from passive to active investing so you will have more duties and need to keep a more keen eye to your active investments. I would look to see if it make sense and are you going to self manage or get a property manager. You will see likely that PM charge 8 to 10% of the monthly rent. If you can find an inexpensive townhome and rent it to some graduate students is not a bad idea as they could be with you for 3 years or more. If I can help answer any other questions shoot me a message. I would also check out some of the podcasts and video podcasts on youtube so you can avoid some common issues.

    1Reply
  • Shaum K.
    OP
    Gaithersburg, MD · Member since 2020 · 7 posts · 5 votes
    6y

    Thanks Roni! Great advice. 

    0Reply
  • Anthony Dadlani
    Investor · New York City, NY · Member since 2013 · 1k+ posts · 269 votes
    6y

    @Shaum Kabadi

    Agree with Ryan. Have to be very active to get a much higher return and even then it’s sometimes better to co invest with people in the business as have less chance of failure and loss.

    Best of luck in all your endeavors.

    0Reply
  • Aaron ZimmermanBusiness Member
    Accountant · Chicago, IL · Member since 2018 · 2k+ posts · 1k+ votes
    6y

    @Shaum Kabadi if you’re looking to move there, perhaps doing a house hack would be beneficial, if the numbers work of course. Best of luck- I love the Raleigh area. Nice town!

    [email protected]
    Brick House CPAs53 Reviews
    WebsiteView Page
    0Reply
  • Emily C.
    Realtor · Raleigh, NC · Member since 2015 · 65 posts · 48 votes
    6y

    With the amount of growth our area is seeing take into consideration appreciation (about 6% in Wake County). You likely will not find 1% here and I agree with the above statement that .8% may be more reasonable. The amount of cash flow required to make it a deal is different for every investor so we can't answer whether it would be a better cash flowing investment. I've found that buy and hold is ideal; especially if you can wait for the next buyer's market or market scare. Cash is King and we have a fair amt. of cash buyers that have been gobbling up rental inventory and holding.

    3Reply
  • Desmond Dunn
    Rental Property Investor · Raleigh, NC · Member since 2016 · 48 posts · 33 votes
    6y

    If you are looking to find single family rentals int Raleigh market I would suggest that you get in contact with some local quality wholesalers in the area.  There are going to have a consistent feed of discounted properties.  I would also look into Durham as well.  If you need any contacts for some wholesalers in the area shoot me DM.

    4Reply
  • Shaum K.
    OP
    Gaithersburg, MD · Member since 2020 · 7 posts · 5 votes
    6y

    Thanks @Desmond Dunn

    0Reply
  • Chris Carrigan
    Real Estate Agent · Wake Forest, NC · Member since 2015 · 67 posts · 54 votes
    6y

    Due to the high demand and low inventory in Raleigh it’s very hard to get a deal on single family homes here, however some of the surrounding towns a little further out are still affordable and growing quickly, so if you can buy and hold for a while you can make good money when u sell.  

    1Reply
  • Sean H.
    Developer · NC · Member since 2019 · 211 posts · 112 votes
    6y
    Originally posted by @Desmond Dunn:

    If you are looking to find single family rentals int Raleigh market I would suggest that you get in contact with some local quality wholesalers in the area.  There are going to have a consistent feed of discounted properties.  I would also look into Durham as well.  If you need any contacts for some wholesalers in the area shoot me DM.

    Im on the list of quite a few wholesalers, and ive never seen a deal worth buying. They overcharge when they actually get something in a reasonable area. I find much better deals on MLS.

    2Reply
  • Desmond Dunn
    Rental Property Investor · Raleigh, NC · Member since 2016 · 48 posts · 33 votes
    6y

    @Sean H. Into totally understand the wholesale game has been over saturated with people who aren’t actually finding deals. But there are some solid wholesalers in the Raleigh Durham area that a lot of investors I know use to source all their deals. Just gotta make sure you know a couple good ones.

    0Reply
  • Sean H.
    Developer · NC · Member since 2019 · 211 posts · 112 votes
    6y

    You tell me a good one then. 

    On top of that, most wholesalers don't disclose anything (since they aren't lawfully required to), and require hefty earnest money deposits. In my nascent stages of investing, the few land deals that were somewhat decent upon my own investigation i realized had undisclosed sewer easements or liens. A newbie couldn't easily lose a lot of money playing the game. 

    1Reply
  • Curtis Mears
    Property Manager · Raleigh, NC · Member since 2014 · 729 posts · 596 votes
    6y

    @Shaum Kabadi

    I would agree with the statement from Dawn. My properties are in that area, but that was from purchases in 2018 and before. I think you will find that number hard to come by without some major rehab. Most minor rehabs seem to sell for about retail, but I could be wrong as I stopped.looking in 2019 because if the high prices.

    1Reply
  • Shaum K.
    OP
    Gaithersburg, MD · Member since 2020 · 7 posts · 5 votes
    6y

    Hi All,

    Thanks for these helpful responses. After talking with my wife and reading @Brandon Turners  article I realized I don’t know the market as well as I need to.

    Where do people like to live? Where are property prices higher? Lower? What about rents? What about crime? Any recommendations of local real estate agents, lenders, property managers, and other local investors to speak to. Thank you for considering responding to these questions! 

    Best regards,

    Shaum

    1Reply
  • Will Kaufmann
    Flipper/Rehabber · Raleigh, NC · Member since 2018 · 76 posts · 67 votes
    6y

    @Shaum K. I can offer some anecdotal experience. We recently purchased a 3/2 SFR in 27601 for $325,000 and it is rented at market rate for $2,200/month. That is very high rent for Raleigh as I believe the strongest market is in the $1,200 - $1,500 range. We purchased off-market at a discount and it is a turn key that was renovated in 2015. 27601, which is downtown / east Raleigh, is truly a block-by-block neighborhood. This is more of an appreciation play than cash flow, but having a conventional 30-year 3.25% loan helps. We live in the zip code so we are comfortable knowing which blocks are safe and which should be avoided. If you are looking for cash flow, I think you may want to look into student rentals around NC State. Obviously those come with a different set of expectations from a cost and management perspective.

    2Reply
  • Shaum K.
    OP
    Gaithersburg, MD · Member since 2020 · 7 posts · 5 votes
    6y

    Thanks @Will Kaufman!

    0Reply
  • Brandon Ross
    Member since 2016 · 9 posts · 0 votes
    6y
    Originally posted by @Chris Carrigan:

    Due to the high demand and low inventory in Raleigh it’s very hard to get a deal on single family homes here, however some of the surrounding towns a little further out are still affordable and growing quickly, so if you can buy and hold for a while you can make good money when u sell.  

    Chris, which neighboring towns would you recommend looking in to for buy and hold cash flowing investment strategy.

    0Reply
  • Chris Carrigan
    Real Estate Agent · Wake Forest, NC · Member since 2015 · 67 posts · 54 votes
    6y

    Clayton to the South, and Franklinton and Youngsville to the North would be my first choices. 

    0Reply
  • Brandon Ross
    Member since 2016 · 9 posts · 0 votes
    6y
    Originally posted by @Chris Carrigan:

    Clayton to the South, and Franklinton and Youngsville to the North would be my first choices. 

     Thank you sir, I will flag those and look in to them. Do you have any thoughts on Garner and Knightdale?

    0Reply
  • Chris Carrigan
    Real Estate Agent · Wake Forest, NC · Member since 2015 · 67 posts · 54 votes
    6y

    Knightdale would be ok also, probably one of the cheaper Wake County towns. Probably a little late for Garner.  It’s a very popular south side town but values are already up there. 

    0Reply
  • Chris Hall
    Rental Property Investor · Knightdale, NC · Member since 2016 · 30 posts · 23 votes
    6y

    I'm in Knightdale and have two rentals here. It's growing solidly. Been getting about 5% appreciation here, but it can fluctuate neighborhood to neighborhood around here. Rents are lower though as the schools aren't in the highest demand. We live here though (and have kids) and haven't minded it one bit.

    0Reply
  • Will Kaufmann
    Flipper/Rehabber · Raleigh, NC · Member since 2018 · 76 posts · 67 votes
    6y

    I recently heard of a new strategy - investing in the "dells" which I think primarily includes Knightdale and Wendell, and you may be able to lump Zebulon into that group.

    0Reply
  • Arthur Schwartz
    Investor · Baltimore, MD · Member since 2019 · 168 posts · 47 votes
    6y

    I live in Raleigh.  The two strongest markets in the state are the Triangle (Raleigh Durham Chapel Hill) and Charlotte.  As a real estate investor I do not see hardly any deals in either market.  There are some deals in the Greensboro and Winston Salem areas.  Personally I would avoid anything south or east of Raleigh due to the flood risk or the hurricane or tornado risk. 

    0Reply
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