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We are looking to invest in a home in the Raleigh area that we can buy and rent out. Can anyone give me some advice on what would be an ideal area to buy in?
We are looking for something that is either new or under 5 years old so we don't have to worry about maintenance issues and is in the $180,000 - $200,000 price range.
We have heard that some good areas to look at are Fuquay-Varina, Apex and Holly Springs. Does this sound right? Do you know of any other areas that would be good to look at?
What in your experience is a good size home to buy? We have heard that a 4 bed/2.5 bath is ideal, does that sound right?
Does anyone know what the average rent for a home in the $200,000 price range goes for?
Just for fun, you might want to check the Raleigh craigslist houses for rent secton. Look for those houses in the MLS as well. I found one that's for sale at $350K and looking to rent for $1950 a month (4 bed, 3 bath, 2800 sq ft). The seller/new landlord is paying a touch over 3K in taxes a year, probably going up with the reassessment. Insurance is probably $500-1000 a year. Looks like you can pay him $70K (a 20% down payment) to buy the opportunity to lose a few hundred bucks a month for the next 30 years. At the very least, you'll be competing with people like him who can't afford to sell and are just trying to break even on a house that won't sell because he's competing with identical new construction (looks like his exact model sold a few months ago for what he paid 2 years back).
I'm not convinced that this is a real estate environment that's going to be kind to beginners. It might make sense to wait this one out.
Edited to add -
But if you want, Craigslist, the online MLS listings, and the wake county property search (easy to find via google) will at least get you some data to work with. Just keep in mind that the Craiglist prices are asking prices, not final rent prices.
My husband and I have put a lot of thought into this, and done general research. We have $10,000 to put down on an investment home. We’ve looked up Triangle appreciation rates, which have been 5-6% for the past 5 years. If we buy a$200,000 rental property and plan to own it for 10 years or longer, here'sthe calculations I've got: Assume 4% appreciation (which is pretty conservative, only about 2/3 of the current rate). $200000 1.04
$208,000
$216,320
$224,973
$233,972
$243,331
$253,064
$263,186
$273,714
$284,662
$296,049
The property will have appreciated by $96K over 10 years. In the Meantime, we'll also have paid down the mortgage for 10 years, or have about $30,000 additional equity. Even if we have to make up $200-300 per month difference for the first few years, that's an initial investment that seems to be well worth the time
If we took that same $10,000 and put it into a money market account instead, at 6% interest, we'd only have $17,800 after the same 10 years, including our initial $10,000! We know that real estate is not a quick in, quick out game - we're planning long term. And we're doing our research so that we know we're focusing on the best area to do this in
That is why we are looking for help to know what people are putting out of pocket and what kind of return they are getting in rent. This will help us know if buying a home in the $200,000 range is worth it or if we should look for something else.
Since we know this will be a long term investment, we want to make sure that we cover all areas in our research to find the best location and price for our money.
According to our research, now is the time to buy in the Raleigh area before prices keep going up. We know that other areas of the county are having problems right now, but the Raleigh market still seems to be growing and we want to get in before the prices jump. We'd love to hear from anyone else who's got an investment property or who is in the process of getting one.
Don't be an amateur landlord - you can really get burned.
Apt deposits are minimal here, and you may have trouble breaking even.
Thanks Saturnfan. We're not necessarily looking to break even in the first couple of years, even with our 10% down. We've got friends in other areas who use a property management company to handle all of that, and it sounds like that's a good way to work. Sounds like we'd have to pay about 8% for that.
I am not sure if this is the market for you to do this in. Rent is very cheap in this market, in some places probably half of what you would be paying on your mortgage and with only 10% down you will still have a "hefty" mortgage compared to rent. Saturnfan is correct in the sense that this is not a market for "new" investors. There are a LOT of variables (school redistricting all of the time, job industry variances, lower cost of living, over abundance of homes on the market etc.). A property management company is just going to take more from you AND like it was stated all it takes is one bad renter and you will be in the hole even more. Good luck if you do it but really be careful.
A few caveats...., you can do all right with landlording. But I wouldn't consider being an absentee SFR landlord.
Maybe a condo with on-site management, but not a SFR.
Some folks are doing all right with the university condos, but that is cash flow and amortization, with no appreciation.
$200,000 house.
$190,000 mortgage @ 6.0% interest. (For a best case rate, and a round number. I doubt you will get 6% money on a cross country rental.)
Monthly Mtg payment = $1140.00 No PMI allowed for...
Taxes and insurance = $ 190.00
Monthly PITI...................1340.00
Annual PITI = $16080.00 fixed cost
Rent on a $200,000 4/2 = $1400.00 Tops.
Annual gross maximum revenue = $16,080.00
11 month revenue, allowing for a vacant month = $14,740.00
And figure on giving the Property manager a month's rent for giving you a tenant.
(10% property management fee) = $13,266.00
Cash flow negative at this point.
(5% for repairs etc ) = $12,690.00 hope-for revenue vs. $16,080.00 fixed cost.
The every other move-out where you are trashed out?
Another $5,000-$10,000.
Figure your 6% appreciation reduced to 1%-2%-3% due to it being a rental property.
Your amortization and depreciation won't make you positive, I'm afraid. And the depreciation is recaptured after you sell the property.
Thank you. I've read some of your other answers here and you seem to know what you're talking about! Would you suggest townhomes or duplexes instead? How hard is it to find condos for sale with onsite management?
We have friends in the area that could help us keep an eye on things, that's how we started researching this area. Are there certain areas where "trashing" is less likely to happen? Someone must do ok with rentals or there wouldn't be any houses for rent!
It seems like with mortgages being harder to get, there would be more people looking for homes to rent.
Thanks again for your help, I appreciate it. We're really not looking for a magic get rich quick solution, we're thinking ahead 30 years to retirement.
And figure on giving the Property manager a month's rent for giving you a tenant.
(10% property management fee) = $13,266.00
Cash flow negative at this point.
And for that very reason is why my husband [MOD CUT] started his own property management company last year - he got tired of referring out the business to companies and then people complaining to him about the service they are getting.
Moderator cut: soliciting for business is prohibited per site TOS
Last edited by da jammer; 01-04-2008 at 07:10 PM..
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