As a Charlotte
real estate investor and property manager
for almost a decade, I’ve spoken to a lot of clients about buying Charlotte investment
homes. Many different clients have many
different goals, but the goals typically fall into three camps (all cash flow, cash
flow and equity, all equity). Below are
these 3 types of investment strategies and the residential houses used to
achieve them:
1. All cash flow ($10K -
$50K priced homes): These homes make investors lick their lips. “I could just put the house on my credit card
or write a check!” Yes, this is true and
it has been done! It’s nice that these
homes will rent anywhere from $250 - $500 a month. With home payments less than $150/month
(figure taxes around $50/month and insurance around $35/month), vacancy doesn’t
hurt too much. The plan is to buy up a
bunch of these homes, fill them with good tenants, and enjoy the cash flow!
The downside is that these homes are not in desirable
neighborhoods and are barely liquid, even in great real estate markets; selling
them to home owners (non-investors) is close to impossible, which allows for
virtually no capital appreciation.
Vacancy costs don’t hurt that much, but the damage and theft expenses can
add up quickly (you may see your home’s missing HVAC unit for sale on the street…
Hint: buy it back! It’s cheaper!). “Good tenants” are tougher to find than with
higher-priced homes. Bottom line, this
strategy is either high risk or high reward (if managed well) depending on what
month you ask. It’s a boat that goes up
and down on the waves- buckle up!
2. Both cash flow and equity
(home price appreciation) ($90K - $140K homes): These homes are my personal
favorite to invest in. The tenants are
typically stable and treat the homes well.
If the home is bought properly, they fill quickly and do appreciate in
rising real estate markets. These are
moderate risk investments. Vacancies and
fix-up costs hurt more than the less expensive homes, but monthly positive cash
flow can be in the $200-$400 range (if bought correctly). These homes are more liquid and are appealing
to both retail and investor buyers.
3. All equity ($250K+
homes): These more expensive homes can be bought at great discounts because
most real estate investors don’t hold them (too expensive) and most home owners
don’t like buying major fixer-uppers.
However, buying a house $100K-$200K below retail value, fixing it up
(gulp- maybe a $50K cost?), putting a renter in it to net out the monthly mortgage
costs, and then flipping it when the subdivision the home is in stabilizes can
be a very profitable venture (with time).
Utilizing this strategy requires a good cash reserve and patience to sit
on the home before cashing it out. The
good news is that the tenants in these homes are typically very stable, pay on
time, and will take care of them. As the
Tom Petty song goes, “the waiting is the hardest part.”
And the FYI:
Investors love multi-family units! But multi-family homes (1 to 4 units) are not
that prevalent in Charlotte . I don’t know why more of them weren’t built
(maybe due to cheaper land here?), but there are typically very few of them
available for sale.
Brett Furniss is the President
& Owner of BDF Realty (Charlotte
Property Management) which works with Charlotte real estate investors and
homeowners and Rent-To-Sell Realty
(“When You Need a New Solution to Sell Your Home”) which specialize in rent-to-own (lease options) and
rent-to-sell homes. His newest book, A Real Estate Agent’s Complete Guide to
Representing Rent-To-Own (Lease Option) Tenants (Delight Clients, Fill Vacant
Homes, and Earn $2,250* Upfront! (*Minimum!)
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