Raleigh Area Real Estate Investment Opportunities

Thanks to a strong, diverse job market, real estate investment opportunities abound in the Raleigh, Durham and Chapel Hill areas of North Carolina, known as the Triangle Region. …

Thanks to a strong, diverse job market, real estate investment opportunities abound in the Raleigh, Durham and Chapel Hill areas of North Carolina, known as the Triangle Region. Cash flow is possible in many areas, with occupancy and rental rates on the rise throughout the region. Combined with solid appreciation, Raleigh offers the opportunity for a successful buy-and-hold investment strategy.

With “employment centers scattered around the Triangle,” real estate investment opportunities are available in many areas, Tiffany Elder, a Triangle Region real estate broker and investor, said. “Since we are spread out, there’s something for every investor’s appetite going on somewhere.”

Downtown and in-city

Downtown Raleigh is experiencing significant growth, Steve Deaton, president of Deaton Investment Real Estate in Raleigh, said. “For the first time ever, Raleigh is turning into a 24-hour city.”

Approximately $2 billion of investment have gone into downtown Raleigh, Scott Snyder, local investor and broker/owner of Raleigh Investment Real Estate, said.

“Our skyline is adding a 400-room hotel, a Marriott hotel downtown, and we have an RBC plaza that’s 33 floors going up. And we also have a new convention center that’s going to be opening up in 2008 that has about a half a million square feet,” Jan Wynns, a Raleigh real estate agent with Fonville Morisey Realty, said.

Downtown condos appeal to professionals who work downtown or who work at Research Triangle Park but are attracted by the nightlife downtown, Wynns said. “So the condo market downtown is one of the ones for investors to look at.”

As downtown improves, neighborhoods around it have begun to improve, creating opportunities for real estate investment, Deaton said.

The area within the Interstate 440 beltline has already experienced strong appreciation over the past 10 years, so properties are relatively expensive there, Deaton said.

“The appreciation factor is very high; in fact, I’ve looked at numbers that suggest it’s doubled there what it has been in other parts of town,” Deaton said. “Of course, you’re not generally getting cash flow; in many cases, you’re feeding the property, so it needs to be double. It’s just a different strategy.”

The northwest quadrant of downtown and the areas near it have seen substantial price appreciation, and that “will likely continue for the foreseeable future, certainly over the next three years,” Snyder said.

North Raleigh is known as an affluent, high-growth area, Wynns said.

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In contrast, the southeastern quadrant of the city is a lower income area, making cash flow easier to achieve, Deaton said.

East Raleigh has been “largely forgotten by investors looking for appreciation” because of its lower appreciation rate and higher crime, but investment in the area is increasing in anticipation of price growth, Snyder said.

“The southeast Raleigh area has not been stellar as far as past appreciation…maybe between 1 and 3 percent,” Wynns said.

However, a new southeast Raleigh development is in progress, with 2,400 homes being built around a golf course, Wynns said. “And with…the new homes come the shopping and the big box stores and offices. And it’s just going to be a wonderful, wonderful stimulating thing for the southeast Raleigh area.”

Nothing has yet been built in the new development, “but they’re moving a lot of dirt around,” Wynns said. “This is the early stage, and that’s the time that you like to get in.”

Wynns said that although the southeast is a more speculative area, she thinks it will prove to be a good investment.

Many downtown areas contain housing in “deplorable condition” that offer opportunity for rehabs and flips, Wynns said.

Rehabs and renovations are particularly successful “on the fringes of downtown,” Deaton said. “It’s the area that you wouldn’t have considered investing in five years ago that today doesn’t look so bad because of all the money that’s being poured in.”

Outskirts

The area within Raleigh’s original beltline, Interstate 440, is “pretty much built out,” Deaton said. “We have a second loop—it’s not complete yet—but the 540 loop, and as you look into the future, I believe that the area inside that loop over the next 10 years will become as popular and will appreciate much the same way as the properties inside the original loop did, especially to the north.”

“[If] you want to maximize cash flow, I think the best strategy is to look in the outskirts of the city,” Mike Brady, a Raleigh real estate investor, said. “The further you get away from the city, there’s kind of a sweet spot…where you can get a good price and still get a good rent.”

Cary, Wake Forest, Apex, Holly Springs and Fuquay are good areas for cash flow, Eva VanAken, a property manager with Block and Associates in Cary, said.

Major centers near Raleigh include Chapel Hill and Durham, the home of Research Triangle Park, both to the northwest. Western Wake, an area just south of Research Triangle Park, is attracting residents, Snyder said.

The areas surrounding Research Triangle Park are particularly good for investors seeking tenants from the workforce rather than student tenants, Elder said. Duke University in Durham and UNC in Chapel Hill both have world-renowned hospitals that generate rental demand as well, she said.

Brier Creek Country Club to the northwest of Raleigh has strong commercial and residential growth, making it good for long-term appreciation, Elder said.

In the past, Chapel Hill, Cary and Apex have appreciated faster than other areas, and “if the future were to mirror the past, then these are the areas that will probably do very well as far as appreciation,” Elder said.

Holly Springs and Apex, both south of Raleigh, offer predictability and strong appreciation, Wynns said.

“Apex has been growing tremendously,” Elder said. “A lot of individuals who previously were in the three primary cities are now moving down there, as are a lot of individuals moving here from out of state.”

Brady said he invested in Fuquay-Varina and Holly Springs because “both have good access to major highways, both are going to be very accessible by this outer [I-540] loop…and both are still relatively inexpensive.”

The new beltline is beginning to open up the eastern towns of Knightdale, Wendell and Zebulon by connecting them to job markets in Research Triangle Park and Durham, Wynns said.

“I think the next big boom is going to hit the Knightdale-Wendell area,” VanAken said.

The area south and east of Garner may offer opportunity because this will be the last section of the outer loop to be built, Brady said. “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.”

Further east

Approximately 60 miles east of Raleigh, the town of Rocky Mount is attracting attention from investors, including Brady, who said he is preparing to invest there.

Financial operations centers have moved to Rocky Mount and created jobs for a displaced workforce that suffered when tobacco jobs moved offshore, Snyder said. The city is “drawing in jobs in its own right, and now we’re seeing significant growth out there.”

Rocky Mount has its own economy and is on the Interstate 95 corridor between New York and Miami, Snyder said. “There’s a new construction duplex community that has literally zero percent vacancy and were sold out six months in advance.”

Nashville, Wilson and Greenville are also eastern North Carolina cities with potential for cash flow, Snyder said. New construction in Rocky Mount and other eastern towns is attractive for remote investors because it requires less maintenance than older properties and the low prices make cash flow possible, he said.

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