Christmastime in Charlotte Real Estate: You May Be Sorta Rich

 

“Holy Moley!  I’m sorta rich!”

(Long-time Charlotte real estate investor)

 

I was surfing the Charlotte MLS doing some “research” this morning (aka wasting time looking at home values in neighborhoods I’ve worked in) and was truly amazed.  I can’t believe how much Charlotte properties have shot up in value in terms of both rental and sale prices! 

 

Here is some background on where I’m coming from.  I started working in Charlotte real estate in 2003 and saw a hot market until about midway through 2007 when the mortgage market (and our economy) was decimated.  This caused home and rental prices to drop until there was a market resurgence 5 years later in 2013.  Rental and sales prices have been on a consistent upwards trajectory since then. 

 

However, even before 2008, relatively inexpensive Charlotte investment opportunities were abundant.  What did you want?  “Starter homes” from $80-$120K were plentiful, but so were tons of homes in less desirable areas that could be had for $10K - $60K.   And then in a bad market from 2008-2012, really great deals were there for the taking if you had money and really good credit. 

 

When I look at the market now in 2017, all of the Starter homes have climbed to $150K+ and they all rent north of $1K.  The $10K - $60K home market is gone. When I searched for those houses in the MLS today, there were 6 available (the lowest being around $40K and all being sold “as-is”- likely meaning they need a lot of rehab).   There are only two (2!) rental homes under $900 available in Charlotte as of this writing.  So putting two and two together, these formerly valued homes of $10-$60K are probably now renting for over $900/month.  Hmmm…

 

For full disclosure, I am only using data from the Charlotte Multiple Listing Service (CMLS); I’m sure there are many houses that are for rent that do not list them on CMLS.  But the 7,000+ Realtors in Charlotte do list their properties on it, so it is a good (and regularly cited) source of information.  And the numbers I listed are for the City of Charlotte only and not the surrounding towns which would add some additional lower cost housing supply.

 

But still…

 

Only five years ago, I remember seeing several Charlotte houses in the $10K range; some of which were in the now hot “North End” district.  I had people wanting to sell some 2 BR/2 BA condos for $30K that were 5 minutes out of Uptown Charlotte.  I was “too savvy” of an investor to go for those deals!

 

Now you are a winner if you bought at those prices.  If you are holding them, you’ve got a nice equity build up and a great rental cash flow.  And if you sold them, you made a nice chunk of change.  Well done!

 

In conclusion, if you bought any real estate in Charlotte prior to 2013, you may want to take a fresh look at your portfolio.  You may be sorta rich.

 

Merry Christmas & Happy Landlording!

Like Dr. Bull, Sometimes the Best Property Management Looks Bad

I occasionally watch the television show, Bull.  Dr. Bull, played by Michael Weatherly (formerly the affable “Tony” from NCIS until he left to get his own show), is a “jury consultant” who helps his criminally-charged clients pick a jury who will be sensitive to their plights and vote “not guilty” when the time comes.  He and his talented team of specialists measure jurists’ reactions during the trial and change defense strategy based on their body language and other factors. 

 

Of course, like most TV shows, things always go from bad to worse in the first 45 minutes of the show.  “The client didn’t tell them he was romantically involved with the deceased!” or “Not only was she the CEO of the pharmaceutical company who would benefit the most from the stolen formula of the new cancer drug, she also happened to be the hired dog walker of the pup who had to have its irritated stomach operated on in which the stolen cancer pills were discovered!” (OK- that storyline hasn’t made the show yet…)  But Dr. Bull and his team are inevitably able to pull the strings in the last moment to get the favorable outcome we all hoped for, no matter the odds.  Bravo, Dr. Bull and associates!

 

But real life isn’t always so neat and uplifting.  I remember in 2008-2012 we had clients asking us to sell their homes that were saddled with loans that were 25% more than the market value of their houses.  So, much like Dr. Bull making magic for his clients… no, we actually couldn’t find anyone to buy them. 

 

But that’s just the part when things go from bad to worse- it’s like TV, right?  So we thought like Dr. Bull and came up with the silver bullet to just rent the unsellable houses out in the meantime.  Yeah!  That will work…. But the market rents (and our fee for management included) left the rental homes negative cash-flowing a few hundred dollars a month for our clients…

 

Well, this is the season cliff hanger, right?  Where things go from bad - to worse - to much worse - before the glorious ending?  This is how excitement builds, right?

 

So our next Dr. Bull-like epiphany is to hold the property for years while it negative cash flows.  So, not only are these clients losing a few hundred dollars a month, there are also losses due to repairs, maintenance, and vacancies.  And this goes on for years…

 

OK, this sounds like a downer, a depressing TV show that needs to be cancelled!

 

But, the funny thing is, I always felt like our best work happened back in those years when it could be argued that the results were the worst.  We were able to fund stable tenants in a tough job market and economy to keep income flowing in.  But it didn’t look pretty.

 

I haven’t seen any episodes of Bull where the good doctor gets a slam-shut life sentence case knocked down to only 20 years in prison for his client.  Or a 20-year sentence knocked down to 5 years.  That doesn’t sell.  But, if he wasn’t a fictional character, it might be some of the case work that he was most proud of.  There’s maybe some skill in taking really bad situations and turning them around slightly to make them better, albeit still imperfect.

 

It’s been on my mind as we’ve had some of the aforementioned underwater homes from almost a decade ago sell in the past few months.  These long term clients who mucked through some tough market times with us walked out of their closings with $50K-$75K checks in hand.  Not too shabby!

 

So maybe there is a  future Bull storyline here after all?

 

Happy Landlording!