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Miker, I'm sorry that you think I'm trying to derail the thread. I haven't posted much, if anything, about crime in CLT. I brought up crime because you mentioned the university area and I know people who have been victims of violent crime in that area.
Having grown up in CLT, I have a pretty extensive network of friends in the area, most of whom are 25 to 35 years old. Many of them went to UNCC so it isn't like they don't know the university area. My friends live downtown, the Southpark area, Elizabeth, NoDa, Cotswold, etc. but not a single one lives in the university area.
The deals are out there. I see two or 3 a day. It really depends on what your looking to do. I like to do the buy and hold and also "flip" (hate that buzz word) assign contracts blah blah.. I am not strictly after positive cash flow either since I need to write off as much as I can at tax time.
Lower income housing can be easily rented and give your $100+ per month. Once you get into middle class America the threshold gets tighter with payment client and DOM (days on market).
University IMO is due for some boom again but this will not happen for a few years as the city is looking at the West side right now as well as Beatties Ford and Trade. Also if your not to scared Lasalle Street is hotting up.
If you want to really get an investment - look at Churchhill Downs Condos - Great area for singles - I agree with everyone when they say University is high crime. ( I am a native) We have a condo in Churchhill downs and the value has sky rocketed in two years. Since the are building million dollar homes across the street.
I talk about this subject all the time and unfortunately it is rather complex but in the simplest terms there is a relationship between cash flow and appreciation. To discuss it effectively there are a few ground rules: 1.) All markets are in equilibrium at all times. What this means is that basically people aren’t stupid, sellers are smart, buyers are smart, the uses and flows of capital are smart so all things (prices) move in some kind of relation to one another. The question is what is the relationship. 2.) Cash flow is a measurement of incomes versus expenses (rent vs. mortgage) based on this technically speaking you can have positive cash flow on anything . . .it’s a function of your equity position (how much you put down) 3.) Mathamatically, the process of Appreciation will provide a greater rate of return than the process of Cash Flow. Primary reason for this is the leveraged position you can achieve in owning real estate. Which would you rather have? The spread on an amortized amount or the full equity of the difference in valuation (increase in selling price). Net effect appreciation will beat the pants off of cash flow everytime.
Now that said what is the relationship between Cash Flow and Appreciation? It is an inverse relationship. Increased cash flow will suppress appreciation and vice versa. First thing to consider is this: Over time, how much can rents be increased? And over time how much can a home appreciate? Short story is that there are some limiters to how much and how rapidly you can increase rent (if you have been holding rental property for some time I am sure you know this) 3-5% is about the norm. Rent is a relatively inelastic index. A valuation process that is tied to this kind of index is also relatively inelastic. If the reason you bought it is related to cash flow at some point the reason someone else will buy it should also be related to cash flow, and given that rents are a component of that barometer and can only grow at a modest amount you should have only modest growth on that future valuation. Once upon a time US currency was tied to gold bars; was called the gold standard. Why did that change? Now on the other hand, technically there is no real cap on Appreciation. 10%-20%-40% is and has not been unheard of. The factors that drive appreciation do not have to be tied to an index like rent. The factors of appreciation are tied to some VERY elastic indexes that are loosely termed as “demand”. A simple way to see this difference is the idea that an investor buys homes to earn a certain rate of return on their investment. A primary homeowner buys homes because they need/want a place to live and generally buy to a maximum of what they can “afford”. This idea also gives insight as to what kinds of properties an investor should hold to get the maximum effect of these elastic indexes. But we digress. The next component to this whole puzzle is that rental markets look backwards, rents generally compare themselves to other properties currently on the market. Acquisition and therefore Appreciation markets generally look forward they look at comps but also some component that is yet to be in existence. The driver is something that is going to happen in the future. Think about it this way. Why is it that you see increases in the value of a home when some kind of development is announced (new road, shopping mall, factory etc?) The new development isn’t there yet, so why should the home be worth more? I mean if you owned a piece of land and knew that in a year a major highway was going to pass right infront of it would you not use that fact to increase your asking price? Would a potential buyer not be able to see that future benefit? This phenomenon is known as the Discounted Present Value of the Future Benefit. Essentially markets attempt to extract the benefit of some future event in todays dollars. The more obvious and immediate this future benefit is, the stronger the extraction of current dollars, the weaker and more distant time wise this benefit is the weaker the extraction. If you want to look at this another way, try this: If you looked at a house and saw that there was going to be something great about it in the future that would raise its value significantly would you be willing to pay a premium to own that property beyond merely the income that it could generate in rent (positive cash flow)? Would you be willing to make that bet and back it up with dollars dependent on how strong the driver was of its future value? And in this process would you not be moving the price higher relative to its cash flow and therefore not have positive cash flow?
So, given a fixed equity stake (downpayment) at acquisition a property with positive cash flow is basically saying that the market views me as not having any additional value beyond my income generating potential relative to existing alternatives (other rental property). A non cash flowing property is saying that the market perceives me to have an additional value beyond my income generating potential but you have to pay more for that priveledge today. For those of you with stock portfolios consider this: Stocks that pay high dividends tend to not grow very fast, yet they are remarkably stable. Growth stocks essentially reinvest the dividend that would normally be paid to the investor and use those funds for some future expansion/development and subsequently can see rapid acceleration of not their earnings . .but their valuation and this is what the payoff is for the investor. (hopefully you see the similarities)
Keep in mind that we are talking about AT acquisition, overtime rents will increase and catch-up to costs . .but again the key is not the cash flow but the appreciation. Now here is the million dollar question: What are the drivers of that appreciation and how certain are they? I welcome the feedback and can already think of a few scenarios you are likely to want to throw out.
From what I've heard, Charlotte is not a good area right now for investing in rental properties. I've heard it's impossible to find properties to rent where the rent covers the mortgage payment. Is this true, or is this only true in certain parts of Charlotte? Any advice would be appreciated. Thanks.
I have to agree you what you and Miker are saying. Flipping with out high risk is out for this area. Rentals are also tough you may find one here or there but the vast majority are not money makers. A few co workers went the real estate rental route instead of the 401k and stock market retirement route. They purchased several low priced houses in what they thought would be high growth/appreciation areas. The areas are not growing as they thought and know they are having trouble renting the houses full time and maintenance cost are above what they estimated. Also avoid purchasing coimmercial real estate I know of several Realtors and brokers that bought into commercail real estate thinking that since the people were coming to the are so would the businesses and now they are having there heads handed to them because they can not find anyone to lease the properties to. Commercial real estate in Charlotte is over built by a huge amount.
I have to agree you what you and Miker are saying. Flipping with out high risk is out for this area. Rentals are also tough you may find one here or there but the vast majority are not money makers. A few co workers went the real estate rental route instead of the 401k and stock market retirement route. They purchased several low priced houses in what they thought would be high growth/appreciation areas. The areas are not growing as they thought and know they are having trouble renting the houses full time and maintenance cost are above what they estimated. Also avoid purchasing coimmercial real estate I know of several Realtors and brokers that bought into commercail real estate thinking that since the people were coming to the are so would the businesses and now they are having there heads handed to them because they can not find anyone to lease the properties to. Commercial real estate in Charlotte is over built by a huge amount.
It all depends on what type of market you are hoping to rent in/to
As far as the University area being an "unsafe" place to live...I am sure there have been unfortunate incidents, and that there are pockets of "bad areas" as with most any place. It is unfortunate that crime really has no address.
I manage an apartment community in the University/Research Park area, and I have to say that the communities that are not student based, really are quite nice. There are some beautiful, and well managed communities all along the Harris Blvd., Mallard Creek Rd. and Mallard Creek Church Rd. areas. I realize we aren't just talking about apartments here...but overall, I think this is not a place to put such immediate judgement on as being riddled with violent crime.
There are 1000's of professionals living in the university area. Highland Creek has ton's of High end houses on golf courses. THere are white collar criminals and low lifes everywhere. The hot areas are Uptown and South Charlotte, and Pineville & Matthew's which if they had a choice wouldn't be part of Meck County. There are serious violent crimes committed all over the City and surrounding areas.
Stay away from West Charlotte, it's a seedy part of town. Now, looks are deceving. Most areas are really crowded, you can buy a house for less than it costs to rent in many areas, therefore, there is a flood of rental homes on the market. At the end of the day people will say what they need to get you to buy. Renting is tricker. Also, Section 8 Housing vouchers are hot commodities too. Good LUck.
I live on the outskirts of Charlotte and would Buy and Build New in Charlotte before I"d consider renting. Rents are around $1k to $2k for decent Highland Creek home. You gotta offer rental houses in hot areas where you know people want to live, ofcourse, your investor you'd know that.
Having grown up in CLT, I have a pretty extensive network of friends in the area, most of whom are 25 to 35 years old... My friends live downtown, the Southpark area, Elizabeth, NoDa, Cotswold, etc. but not a single one lives in the university area.
HookEmHorns: I'd like to rent an apartment, town home or loft/condo in an area with a concentration of YSPs. I'm in my mid twenties and will be working downtown - commuting is not an issue. I'm not much of a partier and prefer lounges or outdoor bars over clubs. I'd prefer to live within walking distance (or short ride on public transport) to professional sporting events, live theatre & music, libraries, cafes etc. Is that possible in Charlotte? I used to live in downtown Chicago and never drove my car in order to find things to do.
I'm curious about the flavor of the areas you mentioned - I know NoDa might be considered artsy. Otherwise, I could use some insight....
Quote:
Originally Posted by XNYgirl
There are 1000's of professionals living in the university area. Highland Creek has ton's of High end houses on golf courses. ... The hot areas are Uptown and South Charlotte, and Pineville & Matthew's which if they had a choice wouldn't be part of Meck County. ...Most areas are really crowded, you can buy a house for less than it costs to rent in many areas, therefore, there is a flood of rental homes on the market. ...I live on the outskirts of Charlotte and would Buy and Build New in Charlotte before I"d consider renting. Rents are around $1k to $2k for decent Highland Creek home. You gotta offer rental houses in hot areas where you know people want to live, ofcourse, your investor you'd know that.
Good Luck in the Queen City.
XNYgirl, I'd appreciate your opinion on the personalities of these "hot" areas as well. What do you think are the benefits of living in SC or P&M verses Uptown? Would I really be paying $1-2k in rent for a 1 bedroom in these areas or is this rental homes only?
I hate to throw money away on rent but I wouldn't purchase in an area without living there a year.
I’ve heard Uptown referred to as districts 1-4. Are there any distinct differences I should be aware of?
From what I've heard, Charlotte is not a good area right now for investing in rental properties. I've heard it's impossible to find properties to rent where the rent covers the mortgage payment. Is this true, or is this only true in certain parts of Charlotte? Any advice would be appreciated. Thanks.
If you need positive cash flow think multi-family. There aren't as many as in the northeast, but good buildings do become available with positive cash flow, I did two last year. On SF, the only positive cash flows I've seen are with 30% or more down.
And Miker, for whatever reason, the University area is one of the slow appreciating areas in the city, well below average. However, I do know investors who have very stable University rentals there.
Pm me if you need more.
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Cotswold Area
young single professional (ysp)
