Durham multifamily - How much cash flow?

8 Replies

I'm currently active in Bay Area, CA real estate investing, but prices have risen to a point where there's not any money to be made anymore following my usual MO.

My family has the opportunity to relocate to Durham, NC and I'd like to get going again there. In California, investing is usually focused on price appreciation, and cash flow is a secondary concern (and usually not possible). I think I need to change my approach in NC to align with the different market, but not sure what to expect.

What does a typical property cash flow? What percentage should I be expecting? For example, mortgage, taxes, and insurance are in the $1,000 range, how much should I cash flow for it to be a good investment?

Obviously this is a very generic question and property specific so I'm just looking for general thoughts from folks involved in the area.

Hey Chris, as the real estate guys always say "live where you want to live and invest where the numbers make sense." So you don't necessarily need to relocate here, or anywhere, to invest in a market. That being said the good news is having lived in a few different states myself I consider NC safe, family oriented and great weather. Unfortunately our market has been challenged over the past few years like many other MSA's around the country. Too many newbies buying without considering vacancy and CapEx in their cashflow calculations. And too many people buying on emotion and not logic. So we now have low inventory, compressed CAP rates, etc. if you find a specific property and would like a second opinion in calculations PM me and I'll give ya mine. Best of luck!

@Chris May . If you are going to look at the Durham market, I would strongly recommend that you look at the whole Triangle and Triad markets. All these markets are within about 1 hour drive of Durham and are well positioned for growth in the next decade, mostly because of population growth, a very well educated population (major universities).  For taxes, you can quickly take a look here for wake county (Raleigh). RE Prices have risen a lot in this area and deals are hard to come by. For multi family, the corridor between Durham and Greensboro might be a better place to look. I recently saw a few things in Graham, Elon, Greensboro, ... etc. Durham has been growing at a very rapid pace and there are tons of "luxurious apartments" being built all over the city. Same for Raleigh. 

(919) 434-3132
Originally posted by @Henri Meli :

@Chris May . If you are going to look at the Durham market, I would strongly recommend that you look at the whole Triangle and Triad markets. All these markets are within about 1 hour drive of Durham and are well positioned for growth in the next decade, mostly because of population growth, a very well educated population (major universities).  For taxes, you can quickly take a look here for wake county (Raleigh). RE Prices have risen a lot in this area and deals are hard to come by. For multi family, the corridor between Durham and Greensboro might be a better place to look. I recently saw a few things in Graham, Elon, Greensboro, ... etc. Durham has been growing at a very rapid pace and there are tons of "luxurious apartments" being built all over the city. Same for Raleigh. 

 Thanks for the advice. How about the cash flow piece of my question? 

@Chris May - to echo previous comments and put it in the context of your original question. Cash flow in Durham itself is probably possible, but getting less and less so with the booming market. If you are interested in cash flow, those other areas just outside of Durham might work better.

That said, the potential for appreciation in Durham is pretty high! Overall, I would guess that:

- Appreciation is good, but probably not as much crazy upside as Berkeley

- Cash flow is more possible than in Berkeley, but probably not as good as you were hoping (unless you look outside of the immediate Durham area).

Originally posted by @Dave Olverson :

@Chris May - to echo previous comments and put it in the context of your original question. Cash flow in Durham itself is probably possible, but getting less and less so with the booming market. If you are interested in cash flow, those other areas just outside of Durham might work better.

That said, the potential for appreciation in Durham is pretty high! Overall, I would guess that:

- Appreciation is good, but probably not as much crazy upside as Berkeley

- Cash flow is more possible than in Berkeley, but probably not as good as you were hoping (unless you look outside of the immediate Durham area).

 Good to know. Maybe I won't have to completely adjust my strategy then if appreciation is still part off the equation.

What kind of cap rates are you seeing?

Hey @Chris May ! My husband and I moved from the East Bay (Walnut Creek) to Raleigh-Durham last year. There are certainly opportunities in Durham (at a much more reasonable price point!) especially for long term appreciation, but you may want to consider other markets nearby for better cash flow. Have you and your wife visited before or are you familiar with the triangle? I'd be happy to answer any questions or connect you with some folks here that may be useful. Best of luck!

Heather Hopkins, Real Estate Agent in California (#01963382) and NC (#300983)
925-326-0773

My sense is that cap rates in Durham and Chapel Hill are around 4 to 5 percent. Raleigh is a bit higher, and the Triad is around 10-12 percent. 

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