Rental Portfolio Question

6 Replies

I recently closed on my second single family home in Winston Salem, NC.  My strategy is to buy and hold single family homes in areas that produce good rental income and have significant potential for appreciation.  I currently saving for my third house, but I am unsure  if I should buy a third property in Winston Salem or branch out to surrounding towns like Charlotte, High Point, or Greensboro.  Maybe I have too much exposure to a small market?  Any advice is appreciated!

@Chris Jones If you have 5-10 in one market then I would consider diversifying. Two homes in a market doesn’t make for too much. If you buy 1-2 homes in a bunch of different markets you’ll be spread to thin

I grew up in South Carolina and knew that the south east had some great deals on houses.  I don't want to buy in CA right  now because the house prices are very high compared to rental income and the laws are biased against landlords.  Also, I'm expecting a pretty large correction in Socal pretty soon due to our market being propped up largely on foreign money.

My experience:  If you are talking about 10 or less houses and trying to build on that number, there are many more advantages to being in the same market than being spread out among many.  In the same City/area, you can save time and money by using same prop manager, same realtor, same bank etc.  

Real estate isn't stocks, so I don't buy in to the idea that having all your houses in one area increases your risk.  Instead, one area allows you to get better returns and put less time into the management of your properties, therefore allowing you to build quicker!  You being on the other side of the Country makes that an even bigger deal.

Good luck!

@Chris Jones I agree with @Caleb Heimsoth and @Daniel Roberts - if you only have two in one market there's no need to spread out just yet. When you start getting up to 6 or more, then it's time to explore a new area (maybe 10+ if you were in a larger market). Daniel made a very good point - investing in one market keeps your time/energy costs low since you'll have done most of the legwork on the first prop. If you're self-managing then it definitely will be beneficial to have multiple props in the same area. If you're hiring a PM, one market means one team to vet, rather than finding, vetting, and managing multiple PMs in different markets. 

No need to put the cart before the horse. You're just starting out so keep things as simple for yourself as possible and work on scaling when you have the portfolio, knowledge, and experience to do so.

Congrats on your second closing and good luck!