All Forum Posts by: Danny Kaminsky

Hi Benjamin,

The triangle is a great place to house hack! 

If you don't need to be near Raleigh or Durham, there are lots of small multifamily properties in Burlington, which has great long-term prospects for employment as it sits in the middle of Raleigh and Charlotte (both growing very quickly) on I-40, and things haven't gotten too expensive there yet.

If you do need to be in the Triangle, given the state of interest rates and Triangle home prices, short- and medium-term rentals are your best bet for cash flow as Katherine mentioned. To be able to sustain demand for this through the coming recession, I would recommend buying near enough 
to one of the major universities or hospitals for a commute. There are plenty of students and medical professionals here who will continue to need a room to live in (and have the money to pay for it regardless of the broader economy).

Best of luck!

Hey BPers!

My girlfriend has recently hopped on the real estate bandwagon and is in the middle of buying her first house, we are going to live there for a few years together and then she’ll probably rent it out. Is there a way we can avoid her paying income tax if I pay some of the payment, or reimburse her?

Thanks so much!

@Sean H.

I definitely recognize this was a gross oversimplification, and certainly some of north Durham is Class A. I would challenge you on the fact that the Braggtown area of north Durham is significantly nicer than east Durham. That certainly used to be the case, but not anymore. North Durham has plenty of poorly taken care of properties, and I was driving through an area of East Durham that used to be what you called “ghetto”. 600k apiece new construction everywhere, glass garages with porches inside. If you haven’t been there in a while, it might be worth taking a drive through. A developer like yourself could make a small fortune there over the next few years.

Hey Candace! Check out this thread: https://www.biggerpockets.com/...

@Gopichand N.

You are right in your assessment of those areas as Class A. They will appreciate solidly, but it is much, much worse than the 1% rule. If you can find a deal that cash flows then I'm sure you would do well, but the SFH market in Class A neighborhoods is just not designed for investors. It is a very safe place if you want to buy in all cash, but 99% of people on BP are not looking to do that, so I suppose I generalized a bit too much. Class A housing also tends to be the hardest hit by a recession, and the market is quite hot at the moment. I am not saying there will be a crash tomorrow, but it is not a safe strategy if you are just breaking even on cash flow in a Class A neighborhood.

I know very little about those Raleigh suburbs, but the whole area is likely to see strong appreciation. I will differ to more knowledgeable people on those markets. 

@Joe Nguyen

You can certainly find good SFH deals in East Durham. There are basically 2 types of houses there: "Built 30+ years ago" and "Rehabbed or built in the last 5 years". If you can take type 1 and turn it into type 2, you will find a great investment.

I am by no means the biggest expert on this area on BP, but I have been seeing a lot of questions, especially from out of state investors, about this area. I thought I would take some time to put together this short guide, please correct me if you disagree on any of this...

The Overall Market

Raleigh-Durham has been named on nearly all of the recent “Hottest housing market”-type lists, and for good reasons. Home prices in Raleigh have increased by 20.5% in the last 12 months, and Durham has seen a 21% increase in the same time, compared with 16.7% nationwide. High-wage jobs from incoming companies like Apple, Google, and Eli Lilly, as well as an influx of migration from NYC, SF, and similar high-price metros, will continue to drive up the amount homeowners here are able to pay. Another factor pushing up prices is iBuyer market share, which is among the highest in the country here at 2.7 - 2.9% (Source: Yahoo News). To dive deeper though, let’s walk through the specific markets. I’m going to put similar markets together to simplify things a bit...

Downtown Raleigh/Downtown Durham

At this point, these are established downtown areas. Like most of the rest of the country, buying a single-family home, condo, or townhome here is extremely unlikely to cash flow. The best strategies here are largely commercial development, or perhaps a value-add older commercial building. Residential investing will be quite difficult for the foreseeable future, but a STR strategy might work.

The rest of Raleigh

Home values have shot up throughout Raleigh, and homebuyer demand continues to be extremely strong. Many high-income families are attracted to buying in this area, which depresses rent-to-price ratios. Flipping and new development may work well here, but traditional buy-and-hold is unlikely to cashflow.

UNC/Duke/NC State

Within core Chapel Hill, Durham, and Raleigh, this is one of the only strategies where cashflow will be likely. If you can find a deal with enough bedrooms, you can get up to 1.5-2.5x what a family would pay by renting out the individual bedrooms to students. Demand will always be strong, and near-zero vacancy if managed well, make these relatively attractive areas to invest.

Cary/Chapel Hill

Excellent schools define these two markets. With some of the best public schools in the US and many education-focused families in the area working at the universities and RTP companies, rent-to-price ratios are quite low here due to buyer demand. They are, in my opinion, excellent places to live and grow up, but terrible places to buy-and hold. Flipping and new development may work well here.

South Durham/West Durham/Morrisville

Many of the residents here work in the Research Triangle Park, the Triangle’s legacy business hub, which is why I lumped them all together. These areas tend to have slightly lower price points with a lot of first-time homebuyers, but still certainly plenty of expensive neighborhoods. Cashflow on a long-term investment may be possible if you find a good deal, and I expect these areas to continue to see strong appreciation. There are still some bad streets in South/West Durham, so make sure to talk with a local realtor who is an expert on the area before making a buying decision.

Apex/Holly Springs/Wake Forest

Appreciation and demand from core Raleigh have descended on these areas hard. Quiet suburbs only 10 years ago, these are some of the fastest growing areas in the Triangle, and prices have begun to make it difficult to find cashflowing traditional rentals. These areas are quickly adopting similar market dynamics to Chapel Hill and Cary, so I expect flipping and new development would have a good chance to work here.

North Durham/East Durham

I love this area from long-term rentals, as it has the highest rent-to-price ratios in the core Triangle, but this comes at a cost. This part of Durham was wildly dangerous 20 years ago, but a wave of revitalization/gentrification has overwhelmed this area. Some streets are full of million-dollar new construction, while others are still C/D/F areas. I expect this area will see high appreciation in the next few years, and will end up with quite similar dynamics to the rest of the Triangle at some point in the future. Flipping/BRRR/buy-and-hold/new development all have a chance to work, but you need good boots-on-the-ground if you don't want to get burned here.

Like I mentioned above, I am not BP’s Raleigh-Durham expert (hopefully those people can add their opinions below), but I think this gives prospective investors a reasonable idea of what the market here looks like. Just make sure to leave some deals for me, and good luck :)

@Joe Nguyen

Hi Joe,

I am by no means the expert on the area, but happy to give you my opinions:

Raleigh - iBuyers like OpenDoor and Zillow are eating up 6% of the inventory (highest in the nation). It is extremely hard to find a deal that works on the market, perhaps even impossible without a creative strategy. My personal opinion is to stay away.

Downtown/West Durham - Largely established areas at this point. Plenty of high-wage jobs to support the huge spike in home prices here, but much like Raleigh, it will be quite hard to find a deal without negative cashflow on the market.

East Durham - East Durham is where I am currently looking to invest. Once a gang-riddled warzone, East Durham is one of the fastest-gentrifying neighborhoods in the entire US. New high-wage jobs from Google, Apple, and Eli Lily will continue to expand the wave of appreciation in Durham, which will hit all of East Durham at some point. To steal Paul Morris's example from the podcast episode 274, there are people walking around with cellos now.

Chapel Hill - Student rentals will likely work in Chapel Hill, I've seen some stuff on the market that would cashflow. Great public schools and constant student demand make Chapel hill more recession-resistant than many markets, but this also comes with huge demand from homebuyers. A traditional rental is unlikely to cashflow. Path of progress here is west out highway 54 towards Pittsboro, and that area is less established, so perhaps something could work there.

Cary - Huge new development going on downtown, but otherwise the market dynamics are extremely similar to most of Chapel Hill, but without the university.

I'm not an expert on the Raleigh suburbs like Holly Springs or Wake Forest, so I will let other people chime in there. Hope this helps.

@Rajeev Prasad

Jeremy hit the nail on the head here for STRs. For LTRs, it is going to be hard to find anything in Raleigh (iBuyers like Zillow and OpenDoor are up to buying 6% of inventory there, highest in the nation). If you can find something off-market, maybe you can find a good deal. The suburbs or East Durham (be extremely careful with the street in East Durham) might be a better bet. I personally like Mebane among the suburbs, but that is pretty far from Raleigh.

Hey BPers,

Curious the community's take on where the market is going, since the market has been "toppy" since 2015 according to the podcast. My opinion is that there are still tailwinds for the housing market as a whole, but we will obviously see some slowdown from the craziness of this past year. I think rents will rise nationwide, probably much faster than prices, and that now is still a great time for investors to buy. Here's why:

1. Lower-bracket wages on the rise - The same minimum-wage jobs from 2019 are now demanding 12-15 dollars per hour. This will be a strong tailwind for the Class C rental market, as low-wage tenants can afford rising rental rates.

2. Inflation - I am not a macroeconomic expert, but this one seems clear at this point. There are plenty of great threads on the forum about this, but continuing to dump money into the economy will bleed over into RE prices and rental rates.

3. Interest rates likely to remain low - Interest rates will go up over the next 3-5 years, but I see no reason to believe they will go up by more than a a point or two. This will be a headwind, but perhaps not as strong as some fear.

4. Building costs to remain high - The 2008 financial crisis knocked a lot of great builders and contractors out of the business, and the supply of construction labor has not recovered nearly enough for demand. This means even if commodities go down in price as supply chains recover, building costs are unlikely to fall back to pre-pandemic levels.

5. Low used housing supply - Along the same lines of the last one, 2008 had a huge impact here. There were 4-5 years where all real estate development stopped, leaving a massive hole in terms of supply. Demand for housing at that time was still increasing, and we still haven't caught up.

I'm sure I will be corrected by those much smarter and more experienced than me, but excited to hear what you all think.