Living and Investing in Raleigh, NC.

4 Replies

Interested in both living and investing in Raleigh, NC. Just looking for a brief overview. Which areas are being built up? Where to stay away from? What's the market like for flips? Also interested in both commercial multifamily and residential. Any information on the market I can get would be helpful. Thanks in advance!

Dillon McGough

1) ALL areas are being built up 2) the worst area is Southeast Raleigh (crime) but even lots of normal people with great jobs have started moving there because everywhere else is getting expensive 3) I’m not sure about flipping. The market is tough, but there are lots of flippers in raleigh here on BP that do really well

Raleigh is just like the great Yogi Berra said, "Nobody goes there anymore. It's too crowded."

I continue to be amazed at the volume of new construction in northern Harnett and northern Johnston counties. These areas are like Fuquay or Holly Springs of several (like 10) years ago. See also this post about areas of Raleigh that, a few years ago, were promising. @Dawn Brenengen posted about Biltmore Hills, Rochester Hills, Worthdale Park which were good investor spots a few years ago, and maybe she has some insight as to current market dynamics in those places. Personally, I sold out of Kingwood Forest for Buy/Hold, but that area wasn't bad for flips (my observation only since I don't flip) a few years ago. 

@Dillon McGough There aren't many areas to stay away from.  Even the worst parts of town are selling quickly, but we are fortunate to not have much in the way of obvious ghettos.  Are you more interested in flipping or buy and hold?  I typically tell my clients to not get too hung up on where in the Triangle they want to buy, but let the available deals guide that decision. If a good deal presents itself, then you can decide if the area is one you are comfortable with.  I still carefully watch the three neighborhoods Chris mentioned above, but the prices have gone way up in the last few years.  You used to be able to buy a home for well under 100k there and maybe value add, but now they are more like 125k+ and still need some work at that price.

I concur with everyone else that's posted so far in this thread.

There aren't very many 'bad' areas these days in and around the immediate Raleigh area and those that are should be pretty darn obvious by either/both: a) a quick market/comp/DOM analysis of the immediate neighborhood/block/street ; b) driving out to the property in question .. I find that if you have any sort of reservations about the property and immediate area, that you do drive-by's at different times of the day/night on varying days of the week and weekend.

This would be the least I would consider in terms of initial due diligence on your part if you're not already very familiar with the location or neighborhood in question. The double edged sword or rub with this is that if it's really a deal, it will almost certainly be long gone by the time you do the proper amount of diligence (assuming you're not already familiar with the location and can't make an immediate move on it).

So if you're not familiar with the area, find someone you can trust to run potential deals by (@Dawn Brenengen is a good example) or try and partner up with someone who's got more experience in the area you're trying to work. Just make sure you can bring something to the table or else JV'ing isn't going to make sense to anyone that truly knows what they're doing.

I'm approached regularly about partnering or JVing but all too often the person asking isn't bringing anything of real value to the table. Or else they have vastly over-estimated the value of whatever they are bringing to the table (a potential deal, money, construction expertise, offers in the way of 'sweat equity') in my opinion. In other words, if I can already accomplish whatever you're offering to do or provide for $_X_ amount of dollars (normally in the form of a line item expense within the deal) and you are offering the same thing but want some substantial cut of the profit, that is an equation that won't ever make sense for me, naturally.

This is only my opinion but the harsh reality is that competition is fierce and the market around here is both very saturated and currently remains a hyper-sellers market. My experience is that the local guys that have been operating in these 'A markets' for several years and do this full time have a TREMENDOUS home turf advantage and scoop up a large majority of the real deals. That's not to say that it's impossible to find a deal by any means. Especially if you're willing to do one or two deals every once in a while as they come up. But unless you find a competitive advantage and/or you have a lot of time to invest into acquisitions, you'll be searching for needles in haystacks.

All of that said, I've found that my criteria for what I consider to be a real deal is much stricter than many others. I don't invest notable chunks of my time, money, risk, or energy into projects that are going to net me $5k, $10k, $20k or typically anywhere even remotely close to that. Whereas I see other people, especially newer investors, that are so anxious to find a deal that they are willing to cut their margins razor thin like this. However, this is a recipe for either not making much money (BEST case) .. or more realistically, breaking even or losing money after everything is all said and done. There's just too many variables involved and when you have to move at a cobra's pace whenever an opportunity presents itself to even stand a chance of picking it up, there's only so much diligence you can do. So there's going to inherently be a greater degree of risk. So again if you're not versed in the market, neighborhood, area, etc. - it's probably much better that you don't take that risk. Take whatever amount of time it takes to do the proper amount of diligence you need to make a prudent decision. Just do it with the understanding that you're going to miss a lot of deals until you learn more and get more confidence and competence. It's just part of operating in a new (to you) area. Unless you just really like gambling or have money to burn, in which case, by all means - roll the dice if that's your thing.

Further - contractors and suppliers are SO damn busy these days with all of the construction going on around here that getting a renovation of any real scale completed correctly or a new construction job done is a very serious challenge in and of itself and takes a great degree of skill, care, TIME, connections, and probably some luck. I say all of that to say that budget overruns and time/schedule delays are almost inevitable. These alone can add up or stack up quickly to evaporate those thin margins I was speaking of a few moments ago.

Probably the biggest mistake I see newer investors (and even not so newer investors) make over and over again in this market is trying to jam a square shaped object into a circular hole. Instead of waiting patiently for a real deal to come along or altering their current or past approach so that they can ideally better locate a real deal, they start putting on their rose tinted glasses with ARVs, neighborhoods, and repair costs and compromising their math or analysis formulas because, darn it, doing any deal has to be better than not doing a deal at all, RIGHT?? Not in my opinion. The temptation for this is quite high and if you're not real careful and objective, almost anyone can boil themselves in water slowly over time with these sorts of poor judgement errors.

Do your research and attend networking events and talk to and MEET PEOPLE in the area.

Regardless of the state of the investing market, this really is a great place to live. For many reasons. Just ask Forbes magazine ;D

Best of luck!

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