Tips on Analyzing Rental Properties in the Raleigh Area
Hi everyone!
I am currently a new investor in the Raleigh area looking to buy my first property in the spring. Currently I'm enrolled at NC State and am trying to get into the student rental market before the next school year rolls around.
I've been following the market and BP for a few months now but I'm having trouble analyzing deals. I usually analyze about 2-3 deals per week using the four square method (although I'm trying to get that to one everyday) but I'm not sure how accurate my analysis is.
Does anyone in the Raleigh area have any tips or thoughts on getting accurate analysis on properties? Specifically when it comes to estimating vacancy, repairs, and capex costs?
Thanks in advance!
Hi, it's good to analyze, but it sounds like the particular areas you are asking help with are determined by the specific property(condition, age, etc) and the area/neighborhood. Tough to know all of this from just a listing. You won't be able to know all the ages of the systems in a home and even if you do, new systems can also fail. My advice is don't get so hung up on trying to know every number, you never will and you don't need to. I would focus on making sure the deal is gonna cash flow or at least not be negative cash flow with a 15%(of gross rent) margin for CapEx but you do need to have some $ stashed in case that big expense happens on Day 5 of owning it. Put the 15% aside each month and build up a reserve and you don't have to let possible future issues deter you from pulling the trigger. Even if you lost $10K on your first deal the experience would be well worth it, that said I doubt you would if you are paying attention even a little bit. Now go buy something ;-).
Good luck.
I went State, I wish I had the foresight at the time to house hack. In the student housing arena find a place you want to live and house hack like a champ. That way you can be more discerning in tenants, work on your management skills, and build equity while someone else foots the bill. This will allow you to mitigate vacancy costs, and if you are hand greatly save on repair costs. Pick an area you want to live and analyze the deals in that area. Obviously, the more north you go the more expensive but something in the Jones franklin, Avent Ferry area could be of interest.
House hacking those 4/4 down Avant Ferry Rd has always been attractive to me. These is a bottleneck getting financing as an outside investor because banks won't give you conforming loans for an investment property in complexes with high (50%) investor owned units. HOWEVER, as an owner occupier you can still get that good financing. If you are willing to move once a year, you can build a nice portfolio.
I'm in Raleigh, PM me if you want to get coffee.
Also a new investor in Raleigh, I graduated from UNC-Chapel Hill in May 2019. Currently in my first house hack and looking for ways to find another deal. PM me if you'd like, would love to connect!
@Matthew Coffey I use 10% for vacancy, 10% for capex and 10% for PM. Figure in PM even if you plan on managing yourself. You may change your mind. If it cash flows still, you’re probably coming out ahead. I’ve never had more than a few days of vacancy in Raleigh, but capex is guaranteed.
Hey @Matthew Coffey, you've gotten some good guidance. Generally 10% vacancy, 10% capex and 10% property management are good estimates and if anything a little on the conservative side (capex maybe not so much, depending on age of property/systems).
I started my investing career the same way. House hacked a 4/4 during grad school at NCSU and then just rinse repeat a few times. You're on the right track! But I will admit I have no idea what the four square method is LOL. As @Christian Hansen mentioned, don't spend too much time analyzing to find the "perfect" deal... find something that is good enough, and you can learn from. Analysis paralysis is real!
Happy to schedule a call or run through specific numbers if you're ever stuck!
10% for PM/CAPEX/Vacancy is a moderately conservative depending on the property. You can find a PM for 8% but, they might charge leasing fees. Always have the cash on hand. I have SFHs and a townhome. I keep $5k on hand per property. Might be a little much but, I know one will need a new septic in 5 years and one will need the floors replaced.
But, if you are cash flowing after the 10% mentioned above...buy it (assuming it is in your price point or in a bad part of town).
Here is my view point when it comes to deals. There will ALWAYS be a better deal out there. The only question is where does your deal fall? I is it the top 25% of deals or bottom 25%? If you can cash flow a property and stay in the top 25% of deals out there, you will do great.
Go out and buy!
Hey @Matthew Coffey,
My team built this awesome underwriting spreadsheet you can analyze your deal with and determine the cash flow of your deal. Message me and I can send it over to you. Might be helpful!
Ry