Relocating to Raleigh, NC this July!

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Just bought my first investment property... new construction believe it or not. That’s how crazy this market is here. Hard to find anything in the triangle right now not selling 25-40k over asking, while waiving due dilligence addendums, waiving inspections, waiving appraisals. Definitely a sellers market. But it’s a hot market. High demand. People are moving here and for good reason.  Getting pricey though. 

Small multi-family is hard to come by as-is in Raleigh but then couple that with the fact that it is a strong sellers market and it you get yourself a high barrier to entry in that space. Not saying deals don't exist out there but you will need to get crafty if that's what you're looking for.

Originally posted by @Greg Pawluk :

Just bought my first investment property... new construction believe it or not. That’s how crazy this market is here. Hard to find anything in the triangle right now not selling 25-40k over asking, while waiving due dilligence addendums, waiving inspections, waiving appraisals. Definitely a sellers market. But it’s a hot market. High demand. People are moving here and for good reason.  Getting pricey though. 

 Hi Greg, @Greg Pawluk can you share what the new construction deal look like in terms of numbers. I am very interested, i might follow your lead.

@Alfred Uda. Sure.  I am not expert, and I am sure there are plenty that would have something to say about this... but essentially I decided to take a long term stance for my first investment, that's more on the safe side.  Ultimately, they all say for the first one, just get one under your belt and learn from it.  As I said above, I was getting out-bid quite a bit, even during pre-listing phases, in the Raleigh market.  After what homes were going for, capital improvement costs, expenses were getting high anyway, as rent rates seem to be lagging behind a bit in this market.  I knew a guy who was basically flipping new construction...(days prior to production price increase with lumber prices).  Basically he was buying new during opening phases (best pricing), building bare bones, doing his own upgrades after closing and selling.  So I took a page from his book and started looking, just out of curiosity.  I found a new townhome community in an up-coming area-Garner.  The waive hasn't quite hit it yet like some others, as everything seems to be following Interstate 540 (south and east).  For example, my realtor just sold practically the same townhome in Apex, NC for $372,000.00.  I got in on the last home of the first phase, spec home.  They have already raised second phase pricing 6-10k (basically covers my closing costs).  I did a cash out refi on primary residence (we've done well in past, buying, living, appreciating, selling) to come up with 25% down.  Raises my mortgage about $200.00 a month.  Aside from closing costs, this $2,400.00 a year is my true out of pocket costs, to purchase a brand new, maintenance free-ish home, that actually cash flows.  

Investment: 3 bed 2.5 bath/garage. HOA ($145/ month) covers all exterior maintenance (roof/siding/lawncare)-that was an important factor for me. Everything is builder warranty for 1 year, big ticket items have 5 year warranty. So, essentially maintenance free for a while.

Price $291,900.00

25% down: $72,975.99

P&I: $938 (180 day lock at 3.124%- had to hardcore shop around for this)

total expenses including HOA: $1,422.50

Projected Gross monthly income $1795-$1895 (still being built- not a ton of true comps-realtors think might be more with big pharma and Amazon moving in, along with all the development/proximity to RDU/Downtown)

NOI (cash on cash): 6.13% - 7.8 %

5 year ROI: 14% - 17.7%

*Already has gained equity and isn't finished being built.  I don't see this market slowing down for a while.  Demand is too strong.  Even if it only appreciates 3% a year, in 5 years it will appreciate 40k... principal will be paid down 25k....cash flow will bring in 25k.  (+80-90k).

I know I shouldn't look at it this way... but again, my true out of pocket cost is $2,400.00 a year from pulling equity from primary residence. I paid closing, down payment, all expenses to include washer/dryer/refrigerator with the cash-out as well.  To get my foot in door for first one without totally knowing what I'm doing, in this market, made sense.  I'll re-assess in 5 years.  

Hope it helps.  Again, they all say for the first one just don't lose money.  Get in and learn.