I'm new to BP and am down-the-rabbit hole of their real estate investing podcast series. Thanks to everyone for the helpful posts I've read so far!
My wife and I will hopefully be first time rental property owners later this year and are doing our research now. We're prepared from a financing perspective but I'm hoping to learn more about the process of actually finding and closing on the right investment property in the Charlotte market, specifically:
1) Recommendations for Charlotte REI networking groups - I've seen a few mentioned in different threads here but they appear event-specific from this past month
2) Ideas on approaching the property search - Are there local RE agents / firms that specialize in REI properties around town? I have a bunch of pre-filtered saved searches on MLS but it feels like they disappear before I can price them into my model.
3) What to watch out for in property #1 - BP podcasts have a ton of great examples that I've learned a lot from, but would love to hear more about local stories and lessons learned. We are planning on using a property manager FWIW
4) Thoughts on purchasing a rental outside of Charlotte - My first thought was to look only in the 485 belt, but supply continues to seem limited and demand remains high. We've been exploring fringe neighborhoods and other neighboring cities and towns that I think will continue to grow as the city expands (Matthews, Indian Trail, Belmont, East Charlotte, Gastonia). We've been in Charlotte just over 2 years and are still learning the neighborhoods.
5) General thoughts on this local market - I'm not trying to arbitrage the market by any means, but price appreciation seems like it's unsustainable. This will be a long-term hold-and-rent property for us, so I'm less worried about a market crash / correction and more concerned about overpaying for our first property.
Thank you and look forward to connecting!
Hi Kyle! Sounds like you're moving and grooving, which is great to hear. As far as your 3rd question, wanted to share that BiggerPockets is launching a 12 week Rookie Bootcamp in late August, with Ashley Kehr leading the way. She's the host of the Real Estate Rookie podcast. It'll be a mix of on demand videos, live Q&A sessions, and a step-by-step curriculum to help you get your next deal. Sharing in case it would be helpful to better understand what to look for in property #1.
@Lindsey Buxton - thank you for reaching out! The bootcamp looks like it would be helpful to address #3, I'll certainly look into it.
Hi @Kyle Belles , welcome to BP. Metrolina REIA is the primary REIA in town. They have monthly events as well as sub-group events that are more specific. Best advice is to jump in and attend as many as you can so you learn and meet other investors.
Regarding your other questions, you can see in my post history, I'm a strong proponent of investing outside of the 485 loop. Strong cash flow, appreciation, and delta between purchase and replacement cost.
@Kyle Belles . I recently bought in Charlotte.
Make sure you have a clear investment thesis. Meaning what returns you are looking for. The asset type... single family or small multi family. The age of the property. The quality of the sub-market....crime, schools, access to public transit, etc. And lastly how much of any value add you want to do. Put that all down on paper and you will narrow your search and help you with your discussions with agents, etc.
On the appreciation in CLT, there are a number of strong long-term macroeconomic trends. So I think as long-term buy and hold I think that's very important. Regarding the short-term appreciation, this was driven by both supply and demand issues. I wouldn't consider appreciation like that in the future in your models. But many are not predicting a correction because of the imbalance in the demand for housing in CLT vs. the practical limits in supply.
I think the biggest risk would be you see the rental rates come down causing you short term cash flows issues. So consider running your returns and cash flows with a few scenarios including a shock of your rental rates for a few years.
@Jim Kittridge - thanks for the info, I'll check out Metrolina. And lots of great intel and examples in your post history I'll check out as well.
Thanks @Christian Stoecklein .
Our ideal property is single family home, ideally less than 20 years old (willing to budge if major upgrades we're made w/in 5 years, such as HVAC, roof, etc) within a 30 minute commute from uptown Charlotte. For schools, I look for middle-of-the-road rankings on Zillow (4-5 and above as a benchmark). Access to public transportation isn't a priority, my target renter has a vehicle.
My time horizon is buy, rent, hold for 5+ years (and likely refi early if the market performs well). On the investment thesis, below is my initial thinking. Since this is a first property, I'd like to play it a bit more conservatively, which (I think) is why the cap rate of 4.79% is lower than ideal. Would love to hear if anyone thinks these numbers / assumptions are wildly off or too conservative.
- Purchase Price = $200,000
- Closing Costs (at 2%) = $4,000
- Due Diligence (at 1%) = $1,500
- Up-front Renovation Reserve = $5,000
- Total Acquisition Cost = $210,500
- 20% down payment = $40,000
- 80% loan (likely a major lender, traditional 30 year loan) = $160,000
- 30 year term @ 3.2% (educated guess with very solid credit)
- Mortgage Payment = $691.95
- Property Taxes = $120
- Insurance = $55
- Property Manager (soup-to-nuts) = $159
- Other Variable Monthly Expenses = $40
- Capital reserve monthly deduction = $37/month (5% of net income withheld for capex)
- 3 months to renovate / update post acquisition
- Property rents for $1,400 / month (and assuming a 3% annual increase)
- 20 day vacancy assumption = 5.48% vacancy rate
- Tenant takes occupancy month 3
- Annual expense growth rate of 3%
Expected / Target Returns:
- Monthly IRR (w/ financing) = 15.48%
- Monthly cash-on-cash return (average over 5 years) = 2.79%
- Monthly Net Operating Income (year 1) = $798
- Capitalization Rate = 4.79%
@Kyle Belles this a really good plan. This should be easy and low risk. Low downside and high upside.
Financing - your rate may be a little low or maybe the rate is good but the fees will be higher or they will want 25% down. Make some calls and validate since you will need a pre-approval anyway.
The rent at $1,400 might be low but I don't have enough facts to say. I can send you my realtor if interested.
Hey @Kyle Belles looks like you have done your research pretty well, good for you. I can help you out with #2. Sent you a PM to connect.
Kyle, what you're looking for is right on target. Having said that, you should be aware that all of the institutional buyers and hundreds of out of state buyers are all competing for the same asset. I had lunch with a friend last week that is going after the same criteria with all cash, $50k DD after walkthrough and still only winning 10% of offers.
I'd consider going after something slightly different than the institutional guys. For example, larger homes, no garages, older homes, etc..
@Jim Kittridge - great points, and right on target with what I'm seeing. I've been using my criteria to scrape MLS listings on Zillow (which are scarce to begin with). It's wild, I'll favorite 4-5 new listings at night and the following morning they're already pending. Investment properties with these criteria are moving very fast - probably obvious to everyone here but faster than I originally expected.
I'm not afraid of expanding my search and started casting a wider net outside of 485 to areas less developed but that have demonstrated solid appreciation and have good school districts (Weddington, Waxhaw, Indian Trail, Rock Hill, Fort Mill). I'm almost beginning to think these may be more opportune for my scenario since I can't compete with other investors making all cash offers above asking closer to the Charlotte metro.
I will likely purchase in the fall with the hopes of things cooling down a bit. In the meantime I've been calling on realtors to learn about markets and connect, lenders for financing quotes, and beginning to meet / network with others who've done this before. All helpful feedback here, thanks again!
You’re on the right track, just be aware they are buying there as well. Just so you know, taxes are much higher for landlords in SC.
@Jim Kittridge - great point, I was unaware. A quick search here on BP showed a number of NC versus SC investment property tax comparisons and SC is much higher for REI
@Kyle Belles you've done a great job developing your plan and specific goals. Unfortunately right now houses that should be selling for 200k and are worth 200k are selling for 20-30% more at least. And then buyers are submitting offers over asking. Finding something like what you have described is going to be really tough using MLS. I would suggest developing a solid relationship with an investor friendly realtor who can send pocket deals your way. And join one of the local REIA groups so you can meet some wholesalers. Check out your rent as well. Right now they are very high. But be careful if the market slips a little they may drop. Best of luck.