Raleigh for BRRR, beginner investor
Hi! I was considering a move to Raleigh but was curious about the market for investing. I see it makes all the hot lists but I'm wondering if it's for a more moderate or advanced investor? The price point seems high there and I was curious if it had many distressed properties in the surrounding areas that would work for the BRRR method? To me it looks like the market would do well for appreciation but I'm not sure about cash flow. I'm a beginner investor with not a lot of capital. Any insights would be appreciated.
@Jennifer Sovia Raleigh is a great place to invest and is one of the hottest markets. Raleigh however, is not a buy anything and make money place though. I don't know of any market that is that way so you will have to do some research so if that is moderate or advanced then I would agree with you. Raleigh has grown a lot in the last few years and had better than average growth even before the shutdowns. Most people agree that the growth will continue as more people, jobs, and companies move in every day. Apple, Facebook, Microsoft and many other companies are moving in and giving people a lot of hope for the future. While prices are high, people out west and northeast still are surprised at how affordable the area still is. Like most things its relative. There are plenty of areas that you can find homes that need repair. Really the further out you go the more you will find. Areas south and south east (Zipcode 27610) of Raleigh have the most left to run but also the least desirable followed by east (Knightdale, Wendell, Zebulon) and north east (Millbrook, and capital area). Areas like Fuquay, Holly Springs, Apex, Garner Clayton are all good areas too but are seeing much more new builds but you will still find properties that need rehabbed. Raleigh is really an appreciation play, especially now that the prices have gone up so I would make sure that aligns with your goals. If you want cashflow the secondary markets outside of raleigh are where you want to look.
Hope this helps.
Hi, thank you! I've been hearing so much about the growth! I'd like to move there but unfortunately the salary for my position hasn't caught up with the growth, so I'm on the fence. When I mentioned moderate to advanced investors, I meant portfolio/capital wise due to the prices! Thanks for the reply and recommendations. 😊
Hi @Jennifer Sovia, Raleigh is definitely getting more expensive in terms of home prices.
If you are thinking about moving, a primary residence would likely be the best way to mitigate this, however.
That way, you need a minimal down payment, still get all the benefits of appreciation, and are not subject to the high rental appreciation experienced there.
If you are priced out of the market and are looking for a fixer-upper, you can use an FHA 203k or a Fannie Mae HomeStyle loan to finance the repairs of the property while getting built-in equity.
Hope this helps! Let me know if I can be of any assistance.
Quote from @Mitch Miller:
@Jennifer Sovia Raleigh is a great place to invest and is one of the hottest markets. Raleigh however, is not a buy anything and make money place though. I don't know of any market that is that way so you will have to do some research so if that is moderate or advanced then I would agree with you. Raleigh has grown a lot in the last few years and had better than average growth even before the shutdowns. Most people agree that the growth will continue as more people, jobs, and companies move in every day. Apple, Facebook, Microsoft and many other companies are moving in and giving people a lot of hope for the future. While prices are high, people out west and northeast still are surprised at how affordable the area still is. Like most things its relative. There are plenty of areas that you can find homes that need repair. Really the further out you go the more you will find. Areas south and south east (Zipcode 27610) of Raleigh have the most left to run but also the least desirable followed by east (Knightdale, Wendell, Zebulon) and north east (Millbrook, and capital area). Areas like Fuquay, Holly Springs, Apex, Garner Clayton are all good areas too but are seeing much more new builds but you will still find properties that need rehabbed. Raleigh is really an appreciation play, especially now that the prices have gone up so I would make sure that aligns with your goals. If you want cashflow the secondary markets outside of raleigh are where you want to look.
Hope this helps.
Hi Mitch, seems you know the market very well. i bought a new build in Durham, near southpoint and made tons of equity and am currently renting with positive cash flow. I am trying to replicate this and it seems soo difficult to do. I can't seem to find anything that breaks even let alone BRRRR. would love to know your buy box, i don't mind rehabbing, i have a team of contractors there.
thanks,
Thanks! I appreciate the advice!
I've grew up here in Raleigh born and raised! It's really a tremendous amount of growth and we are always on top lists for growing cities. There is more than enough to go around no matter what experience as long as you have a solid plan, team, and just reaching out! I know someone you can contact if you need hard money that way you can spread out that capital for potentially 2 or 3 properties for BRRR and get back more within that same time frame potentially with more capital on the backend. If you feel you just need that security for one project though they can help with that as well. Would love to connect!
I agree with @Andrew Garcia, as a new investor with limited capital, a primary residence would allow you to use a lower down payment loan option such as an FHA 3.5% down loan. @Mitch Miller is absolutely correct, this market is an appreciation market, it is VERY hard to find cash cows. What I would suggest, is utilize either a Conventional loan as low as 3% down or an FHA 3.5% down to buy a house and rent out rooms to roommates which would subsidize your living costs. If you are uncomfortable with this option, there are plenty of homes throughout the Raleigh area that are on hills and have walk out basements that you could convert into a separate space. Unless you can find a house with a finished basement already, this option might cost a little more due to renovations but is an excellent option to create an investment property out of your primary residence.
The cool thing about this option is you do this for a year, save the money you are collecting from your tenants paying your mortgage, and go buy another primary residence using the same loan next year.
Hi Jennifer! Congrats on starting your real estate journey. I have a few properties in Raleigh that are performing SO well. The cashflow is amazing. I used 0-5% down loan options on all of them so I didnt start with a lot myself. Happy to connect and share what worked for me!
Wow, what was your strategy for 0-5% down?
@Jennifer Sovia I don't know anything about the Raleigh market, but it's generally tough to BRRRR right now, especially with low capital. BRRRRing is expensive, and the transaction and holding costs often get glossed over on BP. You really have to find a killer deal for it to work, and there is cash to shell out at each stage - closing costs, potential down payment, holding costs, insurance, rehab, and then more closing costs at the refi. It just cannot be done without cash.
So - I agree with the others who have mentioned house hacking as a better way to get started. Or... RENT! Renting is a great deal in the short term. No closing costs, no rushing into a bad deal. Get to know the market, network, build contacts, look at dozens or hundreds of properties. Then buy. =-)
Thanks Nicholas. We are still deciding if we will just stay in the PNW and invest in the Midwest to start. We have been looking into house hacking here. It's pricey too. We would buy a duplex, build our a garage/ basement or do a DADU. We need capital for those too since we aren't into renting out rooms in our primary home. We are doing a BRRR mentorship and my husband is looking into flipping and wholesaling, so we will see!