Best Locations for Investment Properties (In Times of High-Interest Rates)

best tax credits for real estate
Investor’s Guide to Tax Efficiency
December 20, 2023
financing rental property
Financial Planning and Budgeting For Investment Properties
January 24, 2024
Show all

Best Locations for Investment Properties (In Times of High-Interest Rates)

where to get investment property in nc

How To Invest Wisely

Real estate investment is widely regarded as a stable and profitable venture. Unlike volatile markets like stocks, property values rarely drop to zero, as evidenced by the resilience shown during the 2008 financial crisis. Henderson Investment Group, with over three decades of experience in investment management, provides an in-depth look into the attractiveness of North Carolina for real estate investments.

Investing in property offers the possibility of property appreciation and provides a steady source of rental income. This aspect of real estate investment is particularly appealing for those seeking a more predictable and less risky return on their investments, compared to the speculative nature of stock markets.

North Carolina’s Increasing Appeal

North Carolina is an appealing destination for property investors due to several reasons. The state enjoys high occupancy rates, indicating a strong demand for rental properties. There is a growing preference among residents to rent rather than own homes, leading to a diverse tenant demographic.

North Carolina has also been witnessing a robust demand for quality rentals and low long-term interest rates. Since 2008, the property market in North Carolina has outperformed broader indices like the S&P 500, showcasing its resilience and potential for growth.

north carolina real estate

Understanding Costs and Profitability in North Carolina

The average home value in North Carolina, as of September 2019, was around $186,000. Closing costs in the state typically range between 2 to 5 percent of the purchase price, with sellers often bearing most of these costs. Regarding rental property profitability, it’s important to calculate metrics such as cash flow, cap rate, and cash-on-cash return. These calculations help assess the actual returns from rental properties, considering the expenses and the initial investment.

Prime Locations for Investment in North Carolina

When considering real estate investment in North Carolina, several locations emerge as particularly promising due to their unique characteristics and growing market potential. These prime investment locations include:

  • Cashiers: Nestled in the picturesque Blue Ridge Mountains, Cashiers is a visual treat and a wise investment choice. The area is experiencing a steady rise in property values, fueled by its natural beauty and appeal to those seeking tranquility and scenic living.
  • Lake Toxaway and Sapphire Valley: Positioned east of Cashiers, these neighboring areas are becoming increasingly popular due to their thriving tourism industry. This visitor surge has led to a significant increase in rental demand and prices, making them hot spots for property investors looking to capitalize on short-term rental opportunities.
  • Highlands: Located on a plateau in the southern Appalachian Mountains, Highlands offers a unique combination of elevated, forested terrain and a peaceful environment. Its remote setting makes it particularly appealing for investment in vacation homes or retreats, away from the hustle and bustle of urban areas.
  • Franklin: This township in Macon County, within the boundaries of the Nantahala National Forest, is a haven for outdoor enthusiasts. Franklin’s appeal lies in its stunning natural surroundings, including hiking, kayaking, and mountain biking opportunities. Investment properties here are attractive for those looking to cater to the adventure tourism market or individuals seeking a nature-centric lifestyle.

Why Charlotte Is The #1 Rental Market

Charlotte’s rental property market presents a compelling mix of affordability, growth potential, and quality of life, making it a lucrative destination for real estate investors and renters. The city’s economic stability, population dynamics, attractive rental yields, and property value appreciation trends underscore its desirability in the real estate market.

According to Zillow, the median rental price in Charlotte is $1,909, indicating a balanced mix of affordable and premium rental options in the city. This price range extends from as low as $535 to as high as $11,621 per month.

Interestingly, this median rental price has seen a modest year-on-year increase of $41, although it is slightly lower by $5 compared to the previous month. With ~2,957 rental properties total, Charlotte offers various housing options to cater to different needs and preferences.

Charlotte’s rental market is competitively priced when compared to larger U.S. cities. For instance, its median rent is significantly lower than those in New York, Los Angeles, and San Diego, and it is also $51 less than the national median.

rental home market in charlotte north carolina

The Process of Acquiring Property in North Carolina

The process of acquiring property in North Carolina can be efficiently managed with the following key steps:

  1. Understand Investment Objectives: Clearly define your goals for the property investment.
  2. Secure Mortgage Preapproval: Obtain preapproval for a mortgage to clarify your budget and demonstrate seriousness to sellers.
  3. Conduct Property Inspections: Thoroughly inspect the property to assess its condition and identify potential issues.
  4. Manage Closing Process: Navigate the complexities of the closing process, including paperwork and legal requirements.

Understanding Costs and Profitability in North Carolina

In North Carolina, buyers typically face closing costs averaging around 1.1% of the total property purchase price, as reported by ClosingCorp. This figure represents a combination of financing expenses, property-related fees, and documentation costs, which can vary significantly based on the property’s location. For instance, consider a scenario in Raleigh where the median home value is $500,000; a buyer might incur closing costs of about $5,500. In contrast, in a city like Greensboro, with a median home value of $350,000, the closing costs could amount to approximately $3,850.

Regarding rental property profitability, it’s important to calculate metrics such as cash flow, cap rate, and cash-on-cash return. These calculations help assess the actual returns from rental properties, considering the expenses and the initial investment.

find investment properties in charlotte

Buying With High-Interest Rates

In the face of fluctuating market conditions and consistent housing demand, Henderson Investment Group offers a clear, strategic framework for real estate investment during high-interest periods.

Our analysis has identified three key strategies:

  1. Capitalizing on Lowered Demand through Strategic Purchasing: The rise in borrowing costs has reduced demand and potential price drops in the property market. This scenario offers a unique window for strategic property acquisitions. Investors are encouraged to consider higher down payments to secure more favorable mortgage terms and position themselves for long-term value appreciation in their investments.
  2. Focusing on Long-Term Investments in Rental Properties: The current market has shifted many potential homebuyers towards renting, increasing the demand for rental properties, especially in urban areas with high rental yields. Our recommendation is to invest in these rental properties, including multifamily units. Utilizing programs like Section 8 promises substantial returns over time and contributes to community development by addressing the need for affordable housing.
  3. Employing Tactical Financing Options: ARMs are particularly useful for short-term investment strategies due to their initially lower fixed rates. On the other hand, bridge loans facilitate rapid property acquisition, comparable to cash purchases. To maximize returns and mitigate risks, it’s crucial to have a robust exit strategy for these financing methods, whether through refinancing or reselling the property.

Ready To Get Started?

North Carolina’s market boasts high occupancy rates, a growing preference for renting, and robust demand for quality rentals, positioning it as a resilient and promising investment destination. Among the prime locations, Charlotte is the #1 rental market, known for affordability, growth prospects, and a high quality of life.

Our seasoned team is here to guide you through the intricacies of property acquisition in North Carolina, ensuring well-informed decisions and a successful investment journey. Sign up now and get started on your investment property journey!

Get Started HERE!