Buying Rental Property in a sellers market??

Question

I'm Charlotte, North Carolina & the inventory is low and competitive especially for homes under $150,000 often times resulting in multiple offers.  Would anyone recommend me still buying & paying market price for the home since prices, interest rates are still going up? If I put down 20% I can still clear about $300-$400 a month after or with no rehab. Especially since the rental amounts are climbing fast here as well.

Ali Boone · Answer

If you can clear $300-400/month, there'd be no reason not to buy. Just be sure you have all expenses included in that calculation.

Curtis Waters · Answer

Always buy based on financials!  As for Gastonia - plenty of value & growth -shoud see most of the region's value growth over the next few years.

Andrew Johnson · Answer

@Dwayne Hunter If you get a solid cap-rate and cash-flow then I'd say "go for it".  The reality is, however, that if you're competing with buyers looking for a primary residence their motivations are different that yours.  They can/will develop an emotional attachment and outbid you.  Just be unemotional about your numbers.  Either they work, or they don't.  Don't chase a bad deal because you "have to get into the market".  I'd start looking at properties 30 miles out from where you are and see if the numbers/cap rates/etc. change.  Even if you don't want to buy there it would be an interesting compare/contrast for you and help you evaluate your Charlotte options better.

Russell Brazil · Answer

I've only ever lived in a sellers market as an adult. Prices went down during the crash, but it was still a sellers market with multiple offers. If I didn't buy during sellers markets I'd never have a property.

Amy Thomas · Answer

Hi @Dwayne Hunter, Great Question! I'm in the Gastonia market and have been wondering the same thing. I've also been considering investing farther from home. It will be interesting to see what feedback you get...

Account Closed · Answer

I am in Charlotte and have 7 rentals.  I have an 8th on hold for rehab and I am working on a 9th.  There are plenty of homes, especially under $150k.  If I have $500K I could get a bunch more homes.  You need to think outside the box and that comes with experience.  I tend to not pay much for my homes, fix them up and then rent them out.

David Kerner · Answer

If the numbers work go for it. I was finding 12% Cap rates in Charlotte 2 years ago but now its more like 6-8% easy...but you will find a 10%+ from time to time. Also look at your cash on cash return ratios

Kenneth Reimer · Answer

@Dwayne Hunter Dwayne, great question. The most important question that comes from this topic is what the opportunity cost of your money is. Many times, investors will choose to buy in a seller's market because of the fantastic tax shelter that comes along with it. The savings on their tax liability will swing the scale in favor of purchasing. As for you, I would find out what else your money can do for you right now. If you have it sitting in a savings account, CD, or something of the like, chances are it's not making much. Going another 2, 3, or 4 years before getting it to work for you chips away at the power of compound interest for you.

I really like what @Andrew Johnson said about becoming emotional. A seller's market doesn't mean there aren't deals out there, it typically means you'll have to run the numbers and make offers on more properties before you close on one. At the end of the day, the numbers in your analysis don't lie, if done correctly. Let them be your guiding light, and do not deviate from them.

Dwayne Hunter · Answer

Hey Curtis Waters, someone else suggested Gaston county. Initially, I was hesitant b/c I was surprise to find out that the property taxes where higher than Charlotte's but due to the over saturation of investors in Charlotte for local & out of state investors I think you may be on to something.  Thanks again for the suggestion.

Dwayne Hunter · Answer

Thanks everyone for taking time to respond.  So Jason Smith it is even harder to find multi-family in Charlotte NC without feeling like you are over paying, or it selling extremely fast.  So the situation I am looking at is buying a small new construction for about $123,500.  After I put 20% down the total mortgage payments will be around $695 a month.  Based on what 3 bedrooms 2 bath homes are renting for, it should rent for about $1100 a month.  So with it being new, I shouldn't have any repair expenses (unless the tenant vandalizes the place which I hope to avoid with good tenant screening). So the profit would be about $400 a month if I manage myself or just $300 if I pay a property management company a 9% management fee. Is there anything else anyone can recommend or suggest? This would only be my 2nd investment home.

Buying Rental Property in a sellers market??

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