Need help with a deal analysis

[Kathy Yao]

Hi BP family! 

I am analyzing a deal in South End neighborhood at Charlotte NC. 

The house has some "hard" issues: 

1. pretty steep hill in the front with stairs to the front of the house. No driveway in the front. Street parking. 

2. Back access is a one-way alley shared by 6 properties around. There is a big tree there, limiting the width of the alley to about 8ish inches. It's tight for bigger cars. But the neighbors told me when they built their house from ground 6 years ago, there was no issues for any building materials or trucks going through the alley. 

3. the house is in historic district of Charlotte, meaning there are quite some restrictions on the exterior renovation. There is a process to get the committee review and approve before any works starts. It definitely causes time and effort, at the end money to do any maintenance and repairs.

Why am I still considering? Great location, 5-10 mins walk to many restaurants, shops and light rail station. There are continue developments (residential and commercial). 

I expect the house will appreciate by $80-100K immediately after putting $45K in renovation. I think it will continue to appreciate by another 100K in the next 5+ years.  

I plan to keep the property and rent it out. Given the high interest and the purchase price isn't low, the cash flow won't be as nice as my other rentals or other options in a different neighborhood. 

Would you think the 3 issues above would be too big a trouble? I have a little hard time estimating a fair market value given these conditions as I don't know how much to discount the value of the house with these issues presented. I appreciate any inputs!!  

 

[Laura Shinkle]

Hi Kathy!

I'm familiar with the Charlotte market (that's my work playground!). Sounds like this is maybe in the Wilmore area if it's in a historic district near South End. I do like the Wilmore/Southend area. Parking will likely be your biggest hurdle. That said, there's quite a few homes in that area that have that challenge (no driveway/street parking). When you're looking at rental comps, I'd look for homes that also don't have a driveway to get an idea of how long it took to find a tenant and if you notice a big difference with the comps. 

In my experience, something like that might cause the home to sit on the rental market longer to find a tenant that is ok with overlooking that deficit. 

For the historic district, I would just make sure that you fully understand what requires approval and what that process looks like. Some districts are more strict than others. 

For the alley, I'm not sure I'm familiar with that set up, so I don't know that I can really comment on that. Did you mean the alley is 8 ft wide, not inches? 

I think if you're ok with the numbers, go for it. That area is appreciating and is a great spot for those that want the convenience of Southend and walkability. Good luck!