Best Charlotte Zipcodes to Invest

[Cindy Bowman]

Just wanted to share this article entitled Top 10 Charlotte Zip Codes To Invest In.

http://www.charlottestories.com/top-10-best-zip-codes-charlotte-invest/

[Alex Franks]

Originally posted by @Curtis Waters:

@Chris T. has it right. In general, the lower the price the better the return. For example, I recently listed a 3br home that is priced at $45K (with under 1K in costs just to make it more presentable). Homes in this area (28208) can rent for at least $900/mo, with a projected net CAP rate of 14% (yes net - after expenses). If you want to get 10% or better CAP rates (annual net operating income divided by property cost), then lower priced homes can provide this type of return. Most $150-200K single family homes in Charlotte won't generate enough rent to provide these types of return (unless you got an amazing deal).

Charlotte is experiencing massive growth, and neighborhoods that might have been shunned 3-5 years ago are seeing heavy rehab and teardown/new activity along with significant rent increases.  This makes Charlotte a great opportunity for buy & hold now!

@Chris T.

Curtis, the problem with the lower end assets, they are such a more hands on investments , just more of a headache. Which I'm about to tell you why. Yes, on paper the entry price point looks great. So folks are only seeing one side of things. Lower end properties tend to be higher maintenance, higher expenses, and much higher turn over rate. Another factor is the rental prices aren't making sense, while still continuing to rise. We owned 37 of these exact type of homes (lower end in RH SC during the timeframe of 2004 -2009). So I'm speaking from experience, these type of assets tend to burn holes through investors pockets. Most folks start here, (1) Because they do not know any better and (2) The price point is much more attractive. These are what I like to call recycled product, which usually has a 5 - 8 year shelf life or in better terms the game of hot potatoes- who or which investor is getting stuck holding the bag. Easy way to look at things are any institutional, or Hedge funds buying in this asset class. Now they are mostly buying A - B asset. Their is a reason Wall Street, and most private money are parking their funds into higher class assets. Most times this is why newer investors, jump in because its all that is left on the table for them ( lower end )

The information above from Cindy is great. I've spoken with Cindy here on BG a few times. I told most folks here on BG and in many seminars that if I sit at computer long enough I can dig a lot of great information up to prove what a great city Charlotte is. We are Atlanta's little teenage brother growing up (fast) We are all lucky to be in a booming city basically still many years of growth left

I have to disagree on this being a good buy and hold market. From 2009-2013 this was one of the best buy and hold markets. Today we are facing an over priced market, rental returns are much less. I have some left over stock still holding from 2009. I was buying from $40k to $50k range. Same house now priced in $100k - $120k pre-rehab price range. I was also buying in 4 states; NC, SC, Georgia, & Florida. With that being said, "one man's junk is another man's treasure." So for out-of-state folks with (ex: California or NY) they tend to have much higher entry points. So buying a house here from $100k $150k with 1% rental rule. Still makes this a very attractive market for out-of-state or international folks. This does not mean we have a great buy and hold. For me personally, it says we are lucky that we still have a lower entry point then most folks markets.

If we jump in and really become bit more analytical. It is cheaper to build than buy today. We will be building new construction rentals for a few years. I am seeing this as  similar to the 2000-2004 market. So the box Vinyl Village type homes is the current build (mixed in with townhomes, duplexes, quads).

Now back to your 10% Cap rate this is why most international folks are going to get burnt and other folks will as well. When investing in these lower end asset classes, alot of these brought in cities like Detroit and Michigan. Promised a 20% return on the properties. I challenged folks to show me that over 5 years period (I am sure those returns are a lot less). Keep in mind this has nothing to do with the homes. It has everything to do with our economy,salaries for the lower income bracket, and a renters mentality. No security in those type of jobs with very little insurance benefits so job changing is common among lower end renters. It is very hard for someone paying 35 to 45% of their income to pay rent. I know here comes that chatter, well property management will handle that, right? We owned a management company from 2009 -2013.  We lost our asses with that side of the company. I did it mostly for our turnkey clients. Good Rule of Thumb for any management folks who want to get in the business. Get 300 homes plus or get out of the business. Not profitable with out the inventory.

Now back to low end assets, very rare you are every going to sell, and get retail prices in these areas. How many USA folks move to rental areas? Once a area is over 50 % or more rentals, values will eventually drop as will the area. We have artificially inflated prices, in most of the areas with cash sales to out-of-state folks, or local  cash buyers. Basically most people are showing up to the table and all we have are scraps left! This is not just here; Kansas City, Indianapolis as most markets to just a name a few are going through same thing. I still jump on 3 to 5 webinars month with out-of-state folks seeing what they are selling. So limited sales potential down the road for every one.

I was working with these turnkey groups for a few years. We all setup table and booths in LA, San Fran, and other markets. Selling our cities, and our turnkey deals. Me and a few of the guys we got smart and jumped into the international markets. I still play there my self and see a strong demand for the turnkey product (just not worth it for me). Folks if someone was to start a local solid turnkey business (5/month ) there is a good demand out there for this product.

Now for the lact of inventory. We had a few smaller hedge funds here in 2011-12 buying before most folks realized. Then the big boys like invitation homes (Blackstone which is a large wall street fund for folks who don't know ) came in purchased 7000 plus homes in little under a year. Most of the vinyl villages, anything built 2000 above; 3bed 2 bath or larger was their focus. Banks are realizing they can go into the property now . Taking a lipstick approach to rehabbing. Sell it them selves as well. So that's a few reason for the lack of inventory.

Just my two cents,

Alex