People ask all the time why they should invest in Charlotte. First of all, compared to many cities, especially cities further north, you can buy homes here inexpensively. It’s very easy to find a property for under $100,000. You can even find high quality homes for under $70,000. If you’re willing to expand your horizons and invest in an older home, you can even find something that costs as little as $30,000 or maybe $25,000. People from the north who live in expensive communities don’t understand that Charlotte is a very different market. We have strong rental properties in all price ranges. This explains why hedge funds have been buying thousands of homes over the last few years. They know the properties are undervalued by about 20 to 30 percent.
In Charlotte, we also have properties where the values are floored by rent. This means the price of the home is not going to drop below what the investment can cashflow. Home prices to rent are very favorable. Investors need to look at the ratio of what it costs to buy and how much it will rent for. There are plenty of neighborhoods where that ratio creates a perfect cashflow opportunity for investors. You can look in Uptown Charlotte, Clanton Park and Revolution Park for smart investments. In areas like NoDa, prices go up a bit but those properties are seeing a lot of appreciation in value.
When we look at an investment property for our clients, we are looking for at least a 10 percent return. That means on a $100,000 house, we want our clients to bring in at least $10,000 per year in rent. Earning $12,000 would be even better. On a $50,000 house, you’d want to charge at least $500 per month in rent, and we like to see that go up a bit higher. There are other costs to remember. For example, as you move down in price, our research indicates that you have to factor in higher turnover costs and more frequent turnovers.
Investors often say they don’t want to deal with tenants. You don’t have to. Hire a property manager, and let a professional deal with the tenants. As long as you understand the expectations and the philosophy of your property management company, you can view your investment like a stock.
Sometimes, we’ll help investors get tenant-occupied homes. These are often long term tenants, and you can find good deals. There are lots of lower priced homes still available on the market because the hedge funds are looking for newer homes built after 1990. They want homes in subdivisions that are two stories with garages and several bathrooms. With investor neighborhoods, you really want three bedrooms and one bath, maybe a solid brick home build in the 1960s. That will get you a good tenant, a great cashflow opportunity and a huge return on your investment. If you have any questions, please contact us at Alarca Property Management, and we’d be happy to talk to you.
