Mike Brady, Raleigh investor
Mike has been investing in real estate in the Raleigh, N.C., area for about three years as part of a diversified investment strategy. His long-term real estate investment plan is to build a portfolio of both single and multi-family properties that have positive cash flow while offering a strong possibility of appreciation.
NuWire: What in particular about the Raleigh market should be exciting for investors? And what advantages does it have in comparison to other areas of the U.S.?
Brady: Things that I like about the Raleigh area is it's...ranked as one of the best places to live in the country.
The unemployment rate is very low. Seems like even though there is a lot of growth, there's also a lot of growth in employment, so it seems to be sustainable, at least for the near future. It's got a great climate. It's got still relatively decent prices to make the numbers work.
NuWire: How has the market changed over the last few years, and how do you see it changing over the next five years and into the future?
Brady: Over the last few years, prices have started to go up a bit in this area, probably because of all the growth and the attractiveness of the area. It still works, particularly if you can manage the property yourself, you can still get properties where the numbers will work and you'll achieve positive cash flow if that's your goal. Five years out, it's kind of hard to say. It seems like there's still going to be a lot of interest and growth in this area, but I would imagine that prices may start to creep up because of that interest.
NuWire: I know you manage several of your properties on your own. In your opinion, what advantages do you feel that this gives you in the market, especially in Raleigh, and if somebody is looking to invest in Raleigh, would you suggest that they do the same?
Brady: As far as managing properties on your own versus using a property manager, it does give you a couple of advantages. Number one, you're closer to your tenants, and that can be a good thing and it can be a bad thing.
Of course, it alleviates you of an 8 percent fee right off the bat, and a lot of times you can get repairs made in a more timely manner and at less expense if you can handle some of the work yourself or if you can find your own contractor to do the work.
The downside is, you can only do so many of these and still work a full-time job somewhere else....I've found that it may be about four or five is about the limit that I'd like to take on and still having a family and a full time job. Beyond that, I think it makes sense to go towards property management.
NuWire: Which areas of Raleigh are currently experiencing the greatest amount of growth in real estate, and why? And why have you chosen the particular areas of the city that you have?
Brady: The outskirts of Raleigh is where I've been focusing on....[There are a] couple of reasons for that. Number one, prices are lower. Number two, there's a good bit of growth in these areas. Some of the growth is being driven by an outer beltline that's being constructed around Raleigh. We have one beltline that's closer to the city and there's an outer loop that's being built and because of that it's going to really spread the growth out away from the city. So at this time, you can still get decent prices in areas that are growing and have even future upside for growth because of that outer loop that's being built around the city.
NuWire: Can you talk about specific neighborhoods and why you chose those neighborhoods?
Brady: I haven't looked to focus on any specific neighborhood, but what I have focused on is a couple of towns—Fuquay-Varina and Holly Springs. Both have good access to major highways, both are going to be very accessible by this outer loop that I just mentioned, and both are still relatively inexpensive....[You can] get a good deal without it costing you an arm and a leg.
NuWire: Which area would represent the best opportunity for somebody who is interested in investing to maximize their cash flow?
Brady: To maximize cash flow, I think the best strategy is to look in the outskirts of the city. As you get closer to the city, prices are such that it really prevents you from making a positive cash flow, unless you put a bunch of money down.
Most people are trying to put as little as possible down and yet still maintain a positive cash flow. So the further you get away from the city, there's kind of a sweet spot that I look for where you can get a good price and still get a good rent and...balance that cash flow aspect without putting a bunch of money down.
NuWire: Which areas represent the best opportunity for investors interested in capitalizing on their long-term appreciation?
Brady: For long-term appreciation, I still feel the outskirts of the city represent the best value. Again, prices are decent, and with that outer loop that's going to be constructed, I think the prices will do nothing but continue to rise.
Some people will invest inside the city, but those prices are already I think at a very high point. It's almost impossible to make a positive cash flow close to the city, and I really don't see the appreciable growth there like I do in the outer parts of the city.
NuWire: Are there any other trends that we haven't discussed here in this interview whether economic, demographic, housing wise, within Raleigh that you think investors should be aware of?
Brady: The housing market...seems to have slowed down around the U.S. a good bit. It seems in Raleigh we tend to be more insulated from these factors. So [we're] still seeing tremendous growth.
The school system in Wake County I think has about 110,000 students and adds another 7,000 or 8,000 students every year, so [we're] still seeing tremendous growth, and those people all have to live somewhere.
A lot of the jobs that are being created are opening up a nice market of people who can afford a $1,000 a month...rental payment, but maybe they're not quite ready to buy a house. Maybe they're not quite capable of buying a house. So it seems the Raleigh area at least for the time being, and I'm sure everything runs in cycles, but right now it seems to be pretty hot.
NuWire: Have you invested in any other markets outside of the Raleigh market?
Brady: I'm getting ready to. It's not too far outside the Raleigh market. There's a city called Rocky Mount, which is just about 45 minutes east of Raleigh. So it's maybe just outside the Raleigh market. It's right on Interstate 95, it's another...growing area, and I'm getting ready to buy a duplex there. It'll be the first time I've bought something other than a three-bedroom, two-bath house, and it'll be the first time that I've used property management. But so far it looks like the numbers should work out pretty well.
NuWire: What do you see as areas of future opportunity for some investors in the Raleigh market?
Brady: The southeast Raleigh area [is] probably the next area that I'll look at, a little bit south of a town called Garner and a little bit east of that town. Because of the outer [Interstate 540] loop that I mentioned, that'll be the last section that will be built. So right now could be a prime time to go out there and find properties that will be probably valued properly right now but in the next few years...there could be a good bit of appreciation and a good bit of rent increase.
