Happy New Year to everyone and
best wishes for a happy, healthy and prosperous 2018. This will be my first blog post of 2018, and
I will briefly explore a subject of great interest to many people in our
currently very hot Charlotte real estate market: investing in real estate. Of course, even your principal residence—the
home in which you live—is an investment.
In fact, it is most often the single largest investment anyone will ever
make. So the same property investment
principles discussed here will have general application to “investing” in any
real property. But, since I work mostly
with investors, and since many people have considered the notion of real estate
investing but are unsure of where to begin, I thought I would devote a blog
post or two to investment in the Charlotte real estate market.
Most people have heard the old
saying that the three most important considerations in real estate investing
are: (1)Location, (2)Location, and (3)Location.
That old adage generally applies to real estate investing here in
Charlotte, too. But what specific
locations can generate the best “yield” or return on investment? This is a very important consideration in
this very hot—perhaps overheated—market because it is not uncommon to find
multiple offers competing to get a home under contract, when it has been
identified as a good value. I don’t want
to make things any more complicated than they have to be, but the answer often
depends on the investment strategy. If
you are buying a property to generate rental income and hold for future
appreciation, the geographical areas of interest may be a bit different than if
you are buying property to renovate and “flip” quickly for a profit. Why?
Because flippers must make their profit in a short time, and many
flippers use more costly financing to purchase their properties. “Buy and Hold” investors have a longer view
and more favorable financing available to them.
One general geographic area I
currently find to be favorable to both flippers and buy-and-hold investors with
a longer view is the area just south of Uptown Charlotte comprised of smaller,
older homes. Subdivisions such as
Starmount, Montclaire, Madison Park and Colonial Village are good examples of
this area and general location. It is
possible to find an “old original” home built in the late 1950’s or early
1960’s that has not been updated in many years—perhaps never updated at
all. Proximity to Uptown, light rail,
shopping and entertainment have made these areas increasingly very popular with
younger, somewhat more affluent buyers. For
these reasons, this general location is enjoying much revitalization. It is possible to buy a home that needs
significant updating at a substantially lower price than its “ARV” or “after
renovation value.” I find focus on these
areas is actually much more likely to yield good results in this market than a
focus on “distress sales” like foreclosures.
Why? Because most foreclosures
have been absorbed back into the market.
There are far fewer of them now than there were in 2010, for example;
and the banks that own these foreclosures know the market is hot and price
their REO inventory (“real estate owned” after foreclosure) accordingly
high.
A focus on specific
subdivisions—specific locations—calculated to yield more profitable investment
prospects is more likely to be successful in this current Charlotte market than
a focus on circumstances indicating some sort of distress, such as foreclosure
or short sale. This applies to most
general investment strategies, from fast flip projects to buy-and-hold rental
investment. For more information and for
assistance identifying, researching and analyzing good real estate investment
prospects in metropolitan Charlotte, please do not hesitate to contact us. “Solid analysis identifies great
opportunities,” and this is what we do all day, every day.
