Starting in Raleigh Submarkets - Garner/Clayton Area
Member since 2021 · 3 posts · 0 votes
Hi all, my wife and I want to purchase our first rental property in the Raleigh submarkets. I want to see who (here) owns rental properties in Garner/Clayton and their success with those properties. I'd like to learn about your experience.
Background on our strategy: Currently looking into a couple of different new townhouse communities off of hwy70 - near restaurants, shopping, and gyms. New construction floor plans are 1400 to 1600 sqft with 3b/2.5ba and 1 car garage. Initial cash investment $60K. Estimated monthly expenses $1250 to 1300. That is mortgage, HOA, tax, and insurance without factoring vacancy and repairs. Projected monthly rent $1500 to 1600 starting out. Not looking for fixer upper or multi-family homes as first investment property. Hoping to see home value appreciation over time.
@Jason Williams -- Here's my two cents on the topic of a new investor determining what property to buy. The first thing to do is to determine your goals and strategies. An investor's goals are usually in one or more of the following buckets--Increased Equity (think forced equity lift by adding a bedroom or fixing up a house), appreciation, cash flow, or tax related strategies. The different buckets will take you down different paths of an ideal property. Often, the best cash flow property and the best potential appreciation property are different. If you are looking for cash flow, HOA dues often create very heavy winds coming at you. The new build may not work for cash flow, but will minimize the aggravation and risk that investors "enjoy" with maintenance and CapEx issues. So, as a new investor, it may make sense to take a low-risk, low cash flow reward strategy and bank on appreciation. So, choose your strategy first, and then go down the path of the property that aligns.
I would double check your numbers. They seem to be too good, too optimistic. Assuming you are doing 200k loan, 50k down, 5k closing etc.. That would be around 1,000/mo loan + interest. HOA, i doubt it would be less then 100/mo more like 150-200. Taxes another maybe 150-200/mo. Insurance about 100/mo.
So that's around $1,500/mo and as you said no vacancies. Repairs will be likely very small since its new construction. But also another 150/mo management fee unless you are looking doing it yourself.
Rent at $1600/mo seems quit high for townhome in Garner / Clayton.
Any time you purchase new construction, your margins go down. I would guess you will be loosing money most likely with this every month.
You can probably get 3bed town home in that location for 100k+ cheaper and only loose about 150/mo on rent because it would be older property.. So just based on that, new constructions are hard on cashflow..
And appreciation will be horrible on this type of purchase. So I would say, check on other options..
Hi Jason,
Glad to see you are looking to invest in the Garner area, so welcome! My wife and I started investing in the area about 3 years ago and it has been very strong for us. That being said, I would also echo what Jiri B. has mentioned in his post. The numbers you mention here sound pretty tight and you may experience negative cashflow in the beginning. Appreciation is typically low for townhomes and HOAs are not ideal for trying to maximize your cash flow.
My wife and I typically stay away from new construction/townhomes and look for single family properties that need just a little “TLC”. Although it can seem overwhelming at first, you realize quickly that you make your money when you buy, so finding something below market value is key. Plus it helps that we have met some fantastic contractors who assist us with any and all of the renovations we do. Typically, we find contractors via word of mouth. Of course, all of that is easier said than done but if you constantly keep an eye out, opportunities always seem to come up.
To give you an example, about 6 months ago we closed on and renovated a 3Bd/2Ba ranch single family property with ~$70K cash into the deal. We now have strong cash flow and because we forced appreciation onto the property, we are going to be able to cash out refinance it this month and have almost enough for another deal. There are great opportunities in Garner, you just have to really check the numbers and be conservative.
Best of luck! Feel free to reach out if you have any questions about Garner or REI.
Hayden B.
I would double check your numbers. They seem to be too good, too optimistic. Assuming you are doing 200k loan, 50k down, 5k closing etc.. That would be around 1,000/mo loan + interest. HOA, i doubt it would be less then 100/mo more like 150-200. Taxes another maybe 150-200/mo. Insurance about 100/mo.
So that's around $1,500/mo and as you said no vacancies. Repairs will be likely very small since its new construction. But also another 150/mo management fee unless you are looking doing it yourself.
Rent at $1600/mo seems quit high for townhome in Garner / Clayton.
Any time you purchase new construction, your margins go down. I would guess you will be loosing money most likely with this every month.
You can probably get 3bed town home in that location for 100k+ cheaper and only loose about 150/mo on rent because it would be older property.. So just based on that, new constructions are hard on cashflow..
And appreciation will be horrible on this type of purchase. So I would say, check on other options..
Thank you for your candid feedback Jiri! Here is a breakdown on the monthly expenses after contacting the builder, lender, and insurance provider:
P&I: $855 ....30-year 190K loan at 3.5%. My lender provided me with 3 to 3.625% rates.
HOA: $99 including roof and exterior coverage.
Landlord insurance: $55. This is low because of HOA roof coverage.
Tax is the only thing still up in the air but let's assume the upper end.. $200.
Altogether that is just over $1200. Bring it up to $1350 if I have a company manage it.
I initially thought $1500 to $1600 in rent sounded too high for Clayton/Garner too, but I see comps going for $1395 - $1600. I spoke with another investor and she just secured a 2-yr agreement at $1550. The particular unit I'm looking at purchasing is an end unit with a garage. Most of the comps are interior units with no garage. I would agree that new construction includes lower margin.
I tried searching for cheaper homes in the area but nothing near 100K less as you suggested. The cheaper homes I've found are either in high crime areas or sitting on a backroad — no where near shopping, restaurants, gyms, etc.. If you have tips or suggested places to find listings that, I'd be happy to take a look.
Any reason why you suggest the appreciation would be bad? Is it cause of the location or because it's a townhouse? Johnston County homes (especially west Clayton) have shown solid, consistent growth over the last 10 years.
Hi Jason,
Glad to see you are looking to invest in the Garner area, so welcome! My wife and I started investing in the area about 3 years ago and it has been very strong for us. That being said, I would also echo what Jiri B. has mentioned in his post. The numbers you mention here sound pretty tight and you may experience negative cashflow in the beginning. Appreciation is typically low for townhomes and HOAs are not ideal for trying to maximize your cash flow.
My wife and I typically stay away from new construction/townhomes and look for single family properties that need just a little “TLC”. Although it can seem overwhelming at first, you realize quickly that you make your money when you buy, so finding something below market value is key. Plus it helps that we have met some fantastic contractors who assist us with any and all of the renovations we do. Typically, we find contractors via word of mouth. Of course, all of that is easier said than done but if you constantly keep an eye out, opportunities always seem to come up.
To give you an example, about 6 months ago we closed on and renovated a 3Bd/2Ba ranch single family property with ~$70K cash into the deal. We now have strong cash flow and because we forced appreciation onto the property, we are going to be able to cash out refinance it this month and have almost enough for another deal. There are great opportunities in Garner, you just have to really check the numbers and be conservative.
Best of luck! Feel free to reach out if you have any questions about Garner or REI.
Hayden B.
Great info Hayden! Thanks for sharing. I will PM you with some questions about your experience in Garner.
@Jason Williams -- Here's my two cents on the topic of a new investor determining what property to buy. The first thing to do is to determine your goals and strategies. An investor's goals are usually in one or more of the following buckets--Increased Equity (think forced equity lift by adding a bedroom or fixing up a house), appreciation, cash flow, or tax related strategies. The different buckets will take you down different paths of an ideal property. Often, the best cash flow property and the best potential appreciation property are different. If you are looking for cash flow, HOA dues often create very heavy winds coming at you. The new build may not work for cash flow, but will minimize the aggravation and risk that investors "enjoy" with maintenance and CapEx issues. So, as a new investor, it may make sense to take a low-risk, low cash flow reward strategy and bank on appreciation. So, choose your strategy first, and then go down the path of the property that aligns.
Hey Jason,
I agree with Adam. You have to choose the strategy that works for you, and I am seeing some investors considering new construction because the low maintenance works for them. I have a client buying in one of the communities you mentioned with the plan to live in it for a few years and then rent. A couple of townhomes in the community recently rented for $1700. I own a couple of townhome rentals (not new construction) in Raleigh, and they've appreciated, just not as much as my SFH.
Hi Jason,
My wife and I just bought our third property off of 70 in between Garner and Clayton. Different then your townhome but, it was recently renovated as well. However, we had to make about $10k in repairs 60% of which were electric due to the aluminum wiring issues. Its a 3bd/1bth that we purchased for $147,500 and it rents at $1,275. Our fixed expenses are $647. After estimated repairs, vacancy, etc... we are looking to cashflow $428 per month.
I think Clayton is a tremendous area and has a bright future. From what I understand your first deal is normally not your best. I feel it is important to pull the trigger and buy. There will ALWAYS be a better deal. The question is can you afford this and does it cash flow? If the answer to both is yes why not get started?
Hi Jason!
Clayton is a great area to start! I've managed rental properties in Clayton since 1998 and am happy to advise. PM me if you'd like to discuss further. Good Luck!