College Park, MD · Member since 2016 · 49 posts · 9 votes
Hello everyone,
I am a not-so-new real estate investor currently living in the DMV area. The real estate market here is very tough, hard to find deals, and very competitive especially for new investors with little money primarily using hard money. I consider myself a go-getter and have actively been searching for deals since the last 1 year (I had one under contract last November but the deal fell through in February this year). I have been considering the North Carolina market lately and from a friend, it seems to be a better market, and maybe not as competitive as the DMV (DC, Maryland, Virginia) area. I am primarily interested in rehabbing and also wholesaling.
Active real estate investors in the area, what is the NC market currently like now? What areas in NC are good to invest in? What are my chances of succeeding?
The phrase "NC market" doesn't mean much. It's like saying 'how's the weather in the US?' My view: "flips" and long terms rentals are really two different markets. As are BIG vs small markets.
So for generalities, the "Big Four" price-wise cities/areas in NC: Raleigh, Charlotte, Wilmington, Ashville (!) are generally overpriced. Can you make money? Absolutely. Game plan different? Absolutely.
The bottom tier counties and cities have, again generally, not participated in the NC "big rally" in real estate. Where have I put my company's last $1.2M? Second tier markets. The questions to ask yourself: Do you want cash flow? Appreciation? Quicker (e.g . short term) income or (long term) capital gains? That will determine where (what cities) you should put your capital.
The general consensus is that the NC market is very strong. There is definitely a gentrification trend happening, at least in the Charlotte area. There are a lot of older supply of homes, yet new money and population coming in, which is a nice dynamic for house flipping. I also hear great things with Raleigh and even Wilmington, but am not as familiar. Ultimately, the market has been appreciating very well, and in certain areas real estate is still cheap, but it is definitely a seller's market right now. You're going to encounter similar issues as anywhere else in the country. The supply of housing is very low right now and people flipping homes is at an all time high. On one hand that is great if you have a property, meaning you can sell it quick, but obtaining the right properties is always going to be a challenge.
Thank you for your response David. Ya I do agree that it is going to be a challenge in NC too as it is elsewhere.
I have tried bidding on auction properties in MD but have always been outbid by investors with more money to offer than new investors can.
Please, are you familiar with auction homes in NC? I did a quick search on auction.com and xome.com and as of today there are at least 2,400 properties listed for NC alone on each website, compared to only 800+ for the entire Maryland. Any idea what this means?
I would be taking a guess at what it means, but likely one of two things . 1) There are more properties/bigger market in NC than Maryland, so the % of defaults may be same, but the market is bigger 2) Auction.com may have a bigger presence in NC than it does in Maryland. Auction.com is just a marketplace, think Craigslist for auction properties. It isn't a comprehensive list of everything for sale, just whichever properties the foreclosing law firms decide to post there. What if a property is in foreclosure and going to auction, but it doesn't get posted on auction.com? Basically, not every auction property gets posted on auction.com is what I am saying. Potentially, more law firms in NC use Auction.com than Maryland.
The unfortunate reality is going to be that if there is money to be made on an auction.com property, very likely you are not the only one bidding on it. For that reason, margins are drastically shrunk going through this process and even if you had the money, it may not be that profitable of a deal. Obviously, everything is on a case by case basis and there are probably tons of good deals on there, but that's just my two cents.
The Triangle area (Raleigh, Durham, chapel hill) is a hot sellers market right now. Anything decent on the retail market under $350k is going under contract in days, typically above asking prices.
Anything that is flip worthy is getting scooped by cash buyers.
The best deals are getting done by those that are finding off market properties.
The phrase "NC market" doesn't mean much. It's like saying 'how's the weather in the US?' My view: "flips" and long terms rentals are really two different markets. As are BIG vs small markets.
So for generalities, the "Big Four" price-wise cities/areas in NC: Raleigh, Charlotte, Wilmington, Ashville (!) are generally overpriced. Can you make money? Absolutely. Game plan different? Absolutely.
The bottom tier counties and cities have, again generally, not participated in the NC "big rally" in real estate. Where have I put my company's last $1.2M? Second tier markets. The questions to ask yourself: Do you want cash flow? Appreciation? Quicker (e.g . short term) income or (long term) capital gains? That will determine where (what cities) you should put your capital.
I agree with @Chris Martin my team has at least 4 buyers for every seller. Properties suitable for flipping are going for way more than my husband and I have felt comfortable with. Not enough margin. The big players in town are willing to take more risk. Finding off market properties are the way to find the best deals. If you are interested in buy and holds then you are in a better position.
Thank you @Chris Martin for the quick and detailed response. My game plan/goal is to generate cash/quicker income (short term) by way of rehabbing and wholesaling houses in the next 2 to 3 years and take part of the generated income to invest in long term ventures/rentals (capital gains). Based on my short-term goals, which NC-type of market would work, the "Big Four" or second tier markets?
Thank you for your timely response and suggestion. I do agree that off-market deals are the best to go after.
Up till now, I had never thought that a new investor with little money could venture directly into rentals/buy and holds. I am open to this option as well. Please if you don't mind, how can I do this as far as financing goes? What are my options?
You are probably correct about the auction inventory for both states. I was hoping to 'tap' into the more larger house auction inventory in NC, given that the one for MD is much smaller and very competitive, and my HML is more than ready to fund a deal I come up with, including auction deals.
Any suggestions on things to look out for in house auction bidding?
@Francis I. I can connect you with a couple of mortgage brokers but a buy and hold would most likely require a cash purchase or standard financing. If your credit is tied up in a mortgage that won't give you much freedom to take advantage of a buy if something good comes up. Hard money won't work for a buy and hold. I'm definitely not a financing expert. There are a lot of people on BP that are.
Thank you @Chris Martin for the quick and detailed response. My game plan/goal is to generate cash/quicker income (short term) by way of rehabbing and wholesaling houses in the next 2 to 3 years and take part of the generated income to invest in long term ventures/rentals (capital gains). Based on my short-term goals, which NC-type of market would work, the "Big Four" or second tier markets?
As Cindy points out, new flippers infiltrated the Big markets causing the historic 'rehab' and 'value' players out. Buyers are NOT the hedge funds anymore. AH4R (American Homes For Rent) is no longer acquiring in Wake county (Raleigh) and hasn't since 2016Q2. They bought 15 in 2016, 120 in 2015. Substantially all were under American Homes 4 Rent Properties Nine LLC. A big chunk (large majority) of those purchases were trustee sales.
Regarding auction.com... NC is a trustee state, and the simple fact is that that site is promoting trustee sales now and they didn't (at least not as many trustee firms) several years ago. So yes. Lots more properties being promoted. In the Big markets, the "motivated buyers" have killed the market for the historic 'rehab' and 'value' players. And it has been this way for quite a while.
So to answer the $10 question... "Based on my short-term goals, which NC-type of market would work..." I would say there is substantially less competition in second tier markets... HOWEVER there are also substantially fewer players (e.g. rehab buyers). Either market can work. Different challenges in each market.
Charlotte, Raleigh, and Wilmington are good markets with promising economic bases. In Wilmington, the typical property in a blue collar neighborhood will get around an %6-7 cap-rate with an average price around $90-120K.
The only city I've heard terrible things about is Winston-Salem. Apparently, the rental economy has never recovered after big tobacco left.
@Chris Martin Great posts. How are you identifying second tier markets? What are your criteria? Do you like second tier more for buy/hold? Thanks in advance.
As far as flipping goes, whether wholesaling or rehabbing, in and around the greater Raleigh/Durham/Triangle area - it's a very competitive/saturated market. Even the competition for off-market deals is quite high.
You'd probably find lots of brokers around here that'd tell you flipping simply can't be done in this sellers market. And for most people, they're probably right.
There is money to be made .. but you'd better be really good, smart, savvy, lucky - or all of the above to pickup flip deals with decent margins in them around these parts. Especially on any sort of regular basis.
@Chris Martin Great posts. How are you identifying second tier markets? What are your criteria? Do you like second tier more for buy/hold? Thanks in advance.
In simplest terms, the second tier starts with what isn't the Big 4;) I have high level criteria that everyone else uses: , , available management, target TAM, 'access' (roads/commute(s) to job centers), crime, poverty levels, etc. And yes, the second tier cities can offer better B&H performance numbers than The Big cities/MSAs. Hope that helps some. There are multiple sources for some data, and if I can I pull micro-data (per property) as part of my analysis as well.
@Francis I. yes the DMV market is competitive. That is not necessarily a bad thing. While it is hard to find good deals it is easy to sell them. I would think PG county or Baltimore would have good opportunities for you and they are an easy drive.
The best deals generally go to the investors that know the market the best. It is easier to learn the market nearby than to go two states away.
Any investors in Indian Head or in Charles County MD general? What's your take on the market? I was looking at the water and sewage map of the town and noticed that most houses use public water but share a common sewer line and I was wondering if this would be a problem, especially for investors?