Charlotte’s “Cinderella Homes” Meet the Fairy Godmother

“There is a time for everything, and a season for every activity under heaven: a time to be born and a time to die, a time to plant and a time to uproot…”

(Ecclesiastes 3:1-2)

As a long time Charlotte property manager, the growth of the city and its real estate here has been amazing.  I guess when you’ve been doing something for so long, you wind up telling stories about how things “used to be” which makes you sound old.  And maybe I am old as younger guys on the basketball court say (“you guard ‘old head’ (me) over there”) and my younger self would also have said “if you are doing something for 15-20 years, you’re probably old”.

Well, I’ll own it, so as an old man I might as well tell an old story.  I remember when I started investing in real estate back in the early 2000’s, there were these smaller, antiquated homes that people were always trying to get the public to buy.  The prices and stories were great- $10-$20K homes which would rent for $500-$600/month, great cash flow, and the possibility of great capital appreciation if the area became gentrified.  You could buy one on your credit card. 

But they were Cinderella homes before she met her fairy Godmother.  Many houses like this had been perpetually on the market for 10 years.  No one was taking them to the ball to dance the night way.  They were small, in bad/dangerous areas, and in serious need of major repairs.  The windows were boarded up and the feeling that your life expectancy was about to take a major dip was on your mind when you went to do a walk-through.  A friend of mine (much tougher then me) told me his strategy on owning a bunch of them:

I show up at my renters’ doorsteps each Friday evening when I knew they had been paid earlier in the day.  They would hand me cash for the rent and then I’d go on to the next house.  One time, I got ripped off when someone pulled a gun and took a few thousand dollars of rent from me.  Since then, I’ve been packing and I haven’t had a problem since.

Well, I haven’t spoken to this friend in several years, so I’m not sure if he is still among us.  But he sounded like a real man; my “smarts” (or arguably, my lack of courage) never allowed me to get too involved in buying many houses in that price range.  But I did succumb to allure of buying a few which led to some challenging situations throughout the years. 

Fast forward to 2019…  I’m getting letters, robo-calls, and text messages from random investors saying they want to buy these old houses with all-cash (no loans needed) and “as-is” (no repairs asked for).  Cinderella homes now seem to be the rage.  And they sell in the $100K range with no repairs.

So what to do?  The no-brainer answer seems to be to take the money and run.  An opportunity to unload these rental homes easily at a profit seems to be a gift horse that shouldn’t be looked at directly in the mouth area.

But then, on the other hand, you have that FOMO (Fear of Missing Out).  Values and rents in Charlotte keep rising as 66 people on average move into the region every day and that only seems to be growing, not abating.  Holding costs for these types of houses are relatively minimal with smaller mortgages (if applicable), low property taxes and insurance, and usually no HOA fees.  And most of these houses are located near Uptown which might mean they are primed for further future price and rent appreciation.  In this economy and market, the outlook for these homes looks pretty rosy.

At the time, it was not so obvious that the Prince should have chosen and married Cinderella.  He could have bypassed Cinderella and her difficult stepfamily and had his pick of the other princesses with less baggage and/or simply enjoyed a few more years of his bachelorhood.  And who knew that a momentary infatuation would last forever?

I guess the decision depends on one’s investment outlook.  A bird in the hand is worth two in the bush or more risk equals more reward?  The Charlotte market can’t keep going up indefinitely, can it? 

Sometimes it’s not clear on how to get to what “happily ever after” looks like in the rental home game.  Cash out, hold, or double-down?

Happy Landlording!

Charlotte Property Management Monthly: Investment Confessions of a Property Manager: 4 Takeaways

Many property managers first get into the property management business because they own investment properties and are already managing them. “Why not add a few more? The infrastructure is already in place!” This rationale brought me into this exciting world of property management.




Becoming proficient at investments is an ever-evolving process. It takes a lot of easy education (reading the investments guru rags) and hard education (making costly mistakes with leveraged property investments).



This current economy has really put investment decisions I’ve made in the past 8 years under the microscope. In a hot real estate market, investment decisions have a lot of leeway to succeed. The converse is also true in a bad economy and leads me to ask questions like: Did the properties I bought maintain value (relatively speaking) or did I misread the area? Do renters want to live in these homes when much more choice became available? Can I sell any of these investment homes in a flat or declining real estate market?



Tough questions. And, unfortunately, some tough answers.



When I look at my investment decisions, I’ve come away with these 4 takeaways:



1. Cash (flow) is always king. Properties always cost more in terms of vacancy, repairs, and fix up than expected. I remember an investment guru telling me, “If you need to pull out a calculator when analyzing a real estate deal, the deal isn’t good enough to buy.” Amen to that. When declining rents hit, I was hit hard as well.



One effective tool I’ve used is to liquidate some 15 and 30-year mortgages into interest-only. This has dramatically helped cash flow on my property portfolio. When the economy improves, interest rates will rise and I may need to pay the piper. But then I can look at refinancing or selling the investment homes in a rising real estate market, as opposed to selling in a buyer’s market.



2. Buying cheap isn’t always good. For a while, I loved telling the story about buying a home on my credit card. Not anymore. The problem is the home isn’t in a great area (making it tough to rent or sell) and has needed significant fix-up funds through the years. Sometimes there is a reason why homes can be bought on the cheap.



I like to defend this decision by saying, “At the time I bought it, it was a great deal in a transitional area on the rise.” I must have missed the newsflash at the time; in an overheated real estate market, almost every area is considered “on the rise”. This reminds me of two sports quotes that seem apropos:



a. “Having ‘potential’ means that you haven’t accomplished anything yet.” I never read any articles on Michael Jordan’s potential, but rather about his performance.



b. “Yeah, he has great talent. But there are a lot of talented people in prison.”



3. I like a well-rounded real estate investment strategy; it does the body good. We get many calls from prospective clients looking for options on what to do with their properties. I’m with you! Options are good! Good options are even better!



My idea of a well-rounded real estate portfolio consists of this:



A. Nice, expensive homes that will rise when the market comes back. Cash flow won’t be great, but will generate a nice chunk of cash when the market goes up. Then they need to be sold!



B. Cash flow properties that generate hundreds of dollars of positive cash flow a month. These will subsidize other properties that aren’t cash flowing. They probably won’t see any great amount of equity build-up (even in a rising market), but they will keep you solvent and smiling!



C. Long-term holds will be nice investment pieces for retirement. They are solid homes in solid neighborhoods that are really a mixture of the A & B properties above. They will give average cash flow and equity build-up, but should be easy to rent to good tenants for a long time.



4. The most important takeaway (by far) is to buy investment homes right (aka at a big of a discount as possible). This can cover up a whole lot of other mistakes. As another investment guru told me, “You make your money when you buy. Period.”



Best of luck with your real estate investing!



Brett Furniss is the President & Owner of BDF Realty (“Charlotte’s Most Innovative Property Management & Investment Company”), 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!)