House hacking SFH in Durham - Research Triangle Park area

Dawn BrenengenBusiness Member

Moderator

Real Estate Broker · Raleigh, NC · Member since 2014 · 2k+ posts · 1k+ votes

3y

HI Vaishaag! You're right. Nothing is going to cash flow with just 5% down. The rents are steadily creeping up here, but they didn't keep pace with the sales prices, so even if you were putting down 25% as most investors do, you'd probably just be slightly positive once you really account for everything. So, what most people do here is option 1. You're going to have to have some place to live, so might as well house hack and offset some of your own living costs. But, this is not likely going to be cash flow positive AND give you a free place to stay. Your roommates will likely pay most or all of the mortgage but you'll have some other expenses too, so not truly cash flow positive. BUT, this area is great for growth!

Where will your wife be working? Most of the home in hope valley, woodcroft, etc are more than 20 years old. How important is that to you to have a newer home?

Pat LulewiczBusiness Member

Realtor · Raleigh NC and Greensboro, NC · Member since 2019 · 391 posts · 392 votes

3y

Looking for slightly older homes, and particularly ones without HOAs (or at least very minimal ones), will definitely help the projection numbers. You'll usually see a lower price point however that can come at the expense of deferred maintenance or other cosmetic repairs. If you're going to live in first, may not be the worst situation to do few little updates monthly until you're ready to move-out. Just have to be patient (marathon) on the selection and search process and fast (sprint) when the right home comes up with making a competitive offer and getting the financing lined up.

I figure a lot of your returns projections are spreadsheet-based. In my experience, newer homes in great neighborhoods may not: 1) have the type or frequency of vacancy that the spreadsheet projects out (4% vacancy assumption means the house is vacant 2 weeks a year...generally see renters stay in a home over a year, so your vacancy is drastically down), and 2) Newer homes can generally come with less expenses and capex; the tenants also treat A or B+ class homes better so there's just a lot less wear and tear which is usually reflected in your maintenance/repairs being lower than budgeted.

If you go the Airbnb route, just drop HOA'd communities from your search criteria. This will generally result in older homes however your returns will, generally, be much higher.

OP

Raleigh, NC · Member since 2021 · 19 posts · 6 votes

3y

@Dawn Brenengen

Thank you for the response Dawn! My wife will be working in the RTP area. We’re targeting homes less than 20-25 years old.

I have read about those neighborhoods having older homes but I have also read that they are the good neighborhoods in the area.

I know this is a subjective question but in your opinion, what are some good neighborhoods that Durham area investors are looking at for growth?

OP

Raleigh, NC · Member since 2021 · 19 posts · 6 votes

3y

@Pat Lulewicz

Thank you for the response, Pat.

I appreciate your suggestions! I agree that there’s pros and cons to both a newer and older home. I’d tend to lean on an older home that needs fewer updates to avoid the competition. Just need to find a home with that right balance.

I have seen newer homes in great neighborhoods having 5-10 offers.

Graham Storey

Real Estate Broker · Durham, NC · Member since 2020 · 49 posts · 42 votes

3y

Vaishaag,

Durham is a hard market to make anything cashflow on market. I am a commercial broker and the market seems to be softening. Deals are getting negotiated, so in the next few months you may have better opportunities come up. I am seeing a lot of price cuts. Have you considered getting in touch with a wholesaler, finding a private or hard money lender and BRRRing into a traditional mortgage? I am on a few good wholesalers lists and properties sometimes come up in those areas. They're obviously distressed. Just an idea, but like the others said it will still likely be difficult to cashflow with 5% down.

Woodcroft, Hope Valley Farms, Woodlake, Parkwood, Bradbury, Brier Creek, are all great areas. Some of the ones you listed I think you will have trouble finding something under 450K, but others it is possible. I personally live in Brier Creek area and love it. Its close to RTP, Raleigh, Durham and pretty much everything else. Any of the neighborhoods you listed above you can't go wrong with. I would certainly visit each one because they all have very different vibes.

Also @Pat Lulewicz, I hope we can get a deal done on our Car Washes.

Dawn BrenengenBusiness Member

Moderator

Real Estate Broker · Raleigh, NC · Member since 2014 · 2k+ posts · 1k+ votes

3y

Quote from @Vaishaag P.:

@Dawn Brenengen

Thank you for the response Dawn! My wife will be working in the RTP area. We’re targeting homes less than 20-25 years old.

I have read about those neighborhoods having older homes but I have also read that they are the good neighborhoods in the area.

I know this is a subjective question but in your opinion, what are some good neighborhoods that Durham area investors are looking at for growth?

The particular neighborhoods won't be too important, but the general areas of Durham that are popular are the west side where Hope Vally Farms is (east of 501), south of hwy 85, west of Alston Ave, and all areas to the south to RTP. The brier creek area is also popular, and there are some scattered neighborhoods outside of this that can be desirable or are growing too. Are you only considering Durham? What about Raleigh?

OP

Raleigh, NC · Member since 2021 · 19 posts · 6 votes

3y

@Dawn Brenengen

Thanks again, Dawn. We’re looking at a 20 minute commute (with traffic) to the RTP area. Are there neighborhoods in Raleigh within this distance and my price range that I should consider?

OP

Raleigh, NC · Member since 2021 · 19 posts · 6 votes

3y

@Graham Storey

Appreciate the response, Graham!

I’m certainly open to the idea of buying a distressed property but given that I’m out of state (currently in Virginia) and I’m just relying on forums like these and Reddit to educate myself about the area and I still need to do a lot more networking/education to go that route.

OP

Raleigh, NC · Member since 2021 · 19 posts · 6 votes

3y

@Graham Storey

I agree that prices in the good neighborhoods are outside my budget. :(

Based on current listings, Bradbury may fit that price range. I have seen a lot of homes listed for sale in that neighborhood recently.

Click Here to View Listings

Dawn BrenengenBusiness Member

Moderator

Real Estate Broker · Raleigh, NC · Member since 2014 · 2k+ posts · 1k+ votes

3y

Quote from @Vaishaag P.:

@Dawn Brenengen

Thanks again, Dawn. We’re looking at a 20 minute commute (with traffic) to the RTP area. Are there neighborhoods in Raleigh within this distance and my price range that I should consider?

These are a few with Raleigh addresses that should be around 20 min or less to get to RTP, but it depends on where you are going, of course. Harrington and Lake Johnson Harbour are both pretty popular neighborhoods. The Harrington area is in the flight path of the airport, but no one really seems to care. It's a super popular area still.

Chris London

Property Manager · Raleigh/Durham NC · Member since 2015 · 210 posts · 293 votes

3y

@Vaishaag P.: I think South Durham is an excellent place to invest in the Triangle. I hear you about the 20-year age but I'd suggest downgrading that requirement so you can open your options up. Just look at when the roof and HVAC were replaced in the disclosures and if you don't like it negotiate during the due diligence period. Below are a few SFH in S. Durham with very high days on market (motivated sellers). I'd start writing some lowball offers and then try and negotiate closing costs during your contingency period.

5113 Carolwood Lane: 107 days on market (agent remarks say seller is motivated) LP $445K. Hope Valley Farms.

102 Cottage Lane: 102 DOM, $362K, near SouthPoint. I like the lot, pretty dated inside.

4612 Dolwick Drive: 92 DOM, $376K, like Hope Valley Farms North. I manage properties here for others.

5102 Gable Ridge Dr: 69 DOM, $344K, Small remodeled home in Hope Valley Farms near the above Dolwick Dr house.

OP

Raleigh, NC · Member since 2021 · 19 posts · 6 votes

3y

Thank you all for the replies and suggestions!

Are there any particular bad areas of Durham/NW Raleigh that you would recommend avoiding?

Second question-

I’m actively looking at properties near the universities-Duke university, UNC Chapel hill, NCSU as well for house hacking. Is that a good idea?

Graham Storey

Real Estate Broker · Durham, NC · Member since 2020 · 49 posts · 42 votes

3y

Feel free to call me and I can walk you through some of the Durham neighborhoods.

Dawn BrenengenBusiness Member

Moderator

Real Estate Broker · Raleigh, NC · Member since 2014 · 2k+ posts · 1k+ votes

3y

NW Raleigh is overall a pretty nice area. I doubt you'll go wrong there, but feel free to send me any particular listing if you want to know for that home specifically. I can do the same for Durham, and Durham is much more hit or miss. The areas you are looking around the universities are all pretty much good, except for some of the areas around Duke.

Bradley Dosch

Real Estate Agent · Seattle, WA · Member since 2019 · 301 posts · 188 votes

3y

Hey Vaishaag, good question and a common problem. In expensive markets, with these prices, high interest rates, and low down payments it can be very difficult to break even. Here are a few things that have helped my clients and me:

Consider buying a single family house that you can be creative with rather than a new townhome. It'll be tough to make a new townhome work, especially with a HOA.

Of the 3 options you've presented, I like option 2 the best. Is there a basement you can add a second kitchen to? Many MLS filters have search options for an existing second kitchen. Is there enough space and does the local zoning allow for a DADU play? Get a good agent who can negotiate price down in the market. How else can you be creative to generate more income from the property?

While it may seem like the 5% down payment is your enemy, it is truly the catalyst for house hacking. This allows real estate investing to become way more accessible for people. Remember to keep a long term vision with investing.

I don't know the Durham area but this is what works in my and many other markets. Good luck Vaishaag!

Account Closed

Rental Property Investor · Raleigh · Member since 2022 · 18 posts · 18 votes

3y

Quote from @Dawn Brenengen:

HI Vaishaag! You're right. Nothing is going to cash flow with just 5% down. The rents are steadily creeping up here, but they didn't keep pace with the sales prices, so even if you were putting down 25% as most investors do, you'd probably just be slightly positive once you really account for everything. So, what most people do here is option 1. You're going to have to have some place to live, so might as well house hack and offset some of your own living costs. But, this is not likely going to be cash flow positive AND give you a free place to stay. Your roommates will likely pay most or all of the mortgage but you'll have some other expenses too, so not truly cash flow positive. BUT, this area is great for growth!

Where will your wife be working? Most of the home in hope valley, woodcroft, etc are more than 20 years old. How important is that to you to have a newer home?

^ Agreed with this. I bought my first property when interest rates were low, in East Raleigh, put 20% down, and then house hacked it with a tenant while me and my husband lived in it as well. Did that for a year and a half and am now getting ready to rent out the whole house (as one unit), and now we're getting ready to buy another property in a different part of Raleigh (using my VA loan privileges), live in that for a year, repeat, etc. The numbers all work in my case, but for me it is a combination of timing/great financing, sticking closely to my criteria, having a big enough down payment, being patient, doing research, and building the right team to help out.

Over the next year, I'm hoping to scale things up a bit and buy even more properties (all 1 story SFH in decent locations for me strategy wise), but it'll probably take time, and I'll almost certainly not be buying within Raleigh after this next house, because the numbers are pretty challenging to get to work cash flow wise. But I am looking at outlying markets.

Dawn BrenengenBusiness Member

Moderator

Real Estate Broker · Raleigh, NC · Member since 2014 · 2k+ posts · 1k+ votes

3y

@Account Closed We've been having better luck in Fayetteville getting the numbers to work correctly. Raleigh is great for an appreciating market, but if you already own one or two here, I'd look into a cashflow market too....like Fayetteville.

3 Reply

OP

Raleigh, NC · Member since 2021 · 19 posts · 6 votes

3y

Thanks all for the replies, I appreciate everyone’s inputs.

@Dawn Brenengen @Graham Storey

Would you classify Bradbury as an undervalued neighborhood? Most houses are in the lower 400s or even under 400. Just curious to know why they are priced low compared to other neighborhoods near RTP.

For example-

https://www.zillow.com/homedetails/4802-Rockport-Dr-Durham-NC-27703/70923150_zpid/?utm_campaign=iosappmessage&utm_medium=referral&utm_source=txtshare

Dawn BrenengenBusiness Member

Moderator

Real Estate Broker · Raleigh, NC · Member since 2014 · 2k+ posts · 1k+ votes

3y

I think they are just priced lower because it competes with nearby newer construction, and there are a number for sale in the neighborhood. I like the area/neighborhood because of its proximity to RTP, and we used to manage a home on Appling, which is just a few streets down from Bradbury. It always did very well.