Rental and Investment Overview for the Triangle

I’ve been asked recently to assess if there is a good case for investing in residential real estate in our area. If so, where would investors find the best returns?

With out- of- state real estate investors pouring into the Triangle market from New Jersey, California and Virginia -maybe it’s time for some locals to begin investing in our own real estate. Remember around 5 or 6 years ago, when the Dot.Com companies were crashing and everyone was bemoaning their “Cisco Stock’s” fall down the Dow? There were homes selling for very LOW prices because of that same early 2000’s slump. I’d like to compare holding onto a stock from 2000 to holding on to a home bought in 2000. Which one would have given the highest return today?

It would be the residential home if located in the path of growth in our area.

July sales were down slightly in the Triangle, but overall we have achieved nearly 2% stronger sales year-to-date than 2005. Cary, Raleigh and the Triangle continue to win numerous accolades as the place to start a new business, the place to find affordable housing, the best overall employment & low cost of living, great weather and safest neighborhoods. In addition, our area even won an award as one of the best places for young singles to work and meet. I guess all the downtown urban living trends have paid off.

These awards of national recognition and ratings have been a constant for over 20 years and show no sign of diminishing. It makes a very good case for long term growth. For the purposes of this discussion, let’s say the next 10 years look very bright for continued growth and prosperity in local Raleigh real estate, Cary real estate and surrounding markets.

I do recommend high growth areas for maximum gain on residential investing. The bulk of out of state investing has been focused on new home development below 200k. The out of state investor wants to “get in” our market and “get out” fast. That may be just the right approach for some of the new homes neighborhoods. I see out of state investors that never drive across the state line buying many new construction homes on-line.

I recommend a longer approach to investing and would target areas close to new commercial development such as Crabtree Valley, North Hills and Waverly in Cary. Generally speaking after looking at this month’s numbers, I would say almost any home under 300k should be considered if it has premium location. Homes in these areas usually rent well. If the home breaks even from rental income verse mortgage payment – and is poised for maximum appreciation – it’s usually a strong investment. The home still may be a good investment even if the mortgage minus the rent runs negative. My reason for saying this is that I’ve seen 20 to 30% cumulative gains in certain Wake County neighborhoods in the past 2.5 years. We all would gladly pay an extra 2 or 3 hundred dollars a month to pay the mortgage and get that kind of appreciation.

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