Are you looking for a new real estate investment market to diversify your portfolio? Have you thought about investing in Raleigh real estate? Maybe not, but here are the reasons why you should consider this option this year and beyond.
How Does the Market for Raleigh Real Estate Investments Look Like?
Although not a typical investors’ choice until recently, the Raleigh real estate market is picking up fast as home prices and appreciation rates are starting to exceed the national averages. In 2016 the median home price for a Raleigh investment property surpassed the national level, while the 1-year appreciation rate of 4.4% was similar to the country-wide one. However, appreciation has been a major factor if you look at long-term trends. For example, a Raleigh investment property purchased 3 years ago has appreciated by $70,500, compared to the national average of $46,900. At the same time, Raleigh real estate investments have appreciated by $84,200 for the past 9 years, much above the national average of $31,100. The Raleigh real estate market has been leading the North Carolina state in terms of sale volumes and home appreciation since 2010.
As a real estate investor, you will be happy to hear that investing in Raleigh real estate is quite a safe option. During the real estate market crash of 2008, prices collapsed in most major markets such as Detroit, New York, and San Francisco, and it took them years to recover. Declines in prices in North Carolina in general and in Raleigh in specific, on the other hand, were much smoother. So, that’s definitely something you should keep in mind when going for Raleigh real estate investments.
What Is Driving the Market for Raleigh Real Estate Investments?
It seems that the Raleigh real estate market is doing quite good, but what are the reasons behind this above-average performance? As usual, the driving force behind any top real estate market is the local economy. Raleigh’s economy is strong and growing, with growth rates above the national average and unemployment below most of the US. Young professionals who find ample job opportunities here are the main determinant of the conditions for investing in Raleigh real estate. On the one hand, those of them planning to stay around in the long run and are thus looking for homes are competing with real estate investors, pushing real estate prices up. On the other hand, there are those young employees who are still not ready to own a home, so they form a strong cohort of potential tenants looking to rent a rental property in the city. Thus, hurry up in purchasing your Raleigh investment property in order to start collecting rental income from these renters.
How Do the Numbers for Raleigh Real Estate Investments Look Like?
One of the first things you should do before purchasing an income property is to perform a real estate market analysis and to get the real estate comps. Needless to say, that takes a lot of time and energy, both of which you should be trying to save in any time possible in your real estate investing business. After all, time is money! The good news is that Mashvisor’s investment property calculator will provide you with comps at the city, neighborhood, and property level within a few moments after the start of your search. Following are the figures for Raleigh real estate investments computed by our rental property calculator:
- Median Property Price: $487,000
- Traditional Rental Income: $1,600
- Airbnb Rental Income: $2,100
- Traditional CoC Return: 1.7%
- Airbnb CoC Return: 3.0%
- Traditional Cap Rate: 4.5%
- Airbnb Cap Rate: 5.9%
- Airbnb Occupancy Rate: 43.5%
The median prices for Raleigh real estate investments are quickly picking up and are already similar to or even above the prices in many hot markets such as New York ($494,000), Miami ($494,000), Chicago ($366,000), and Philadelphia ($344,000). The average rental income is quite high, offering good profitability in terms of cash on cash return but also with regards to the capitalization rate. Airbnb is a more profitable rental strategy than traditional when it comes to Raleigh real estate investments. So, let’s look at the legal framework for Airbnb Raleigh real estate investments before you can make your decision.
Related: Should You Go for Chicago Real Estate Investing?
Are Airbnb Raleigh Real Estate Investments Legal?
You will be happy to hear that currently Raleigh has no Airbnb rules or regulations. That’s why it scored 0 in a 2016 report on Airbnb regulations in US cities by R Street Institute. Cities which have legislation particularly favorable to short-term rental received positive scores, while cities which have laws adverse to Airbnb got negative scores.
What Are the Best Neighborhoods for Raleigh Real Estate Investments?
Before you can proceed with looking for a specific Raleigh investment property, you should know which the right neighborhood is:
1. East Raleigh
- Median Property Price: $200,000
- Traditional Rental Income: $1,400
- Airbnb Rental Income: $2,100
- Traditional CoC Return: 3.7%
- Airbnb CoC Return: 7.4%
- Traditional Cap Rate: 7.2%
- Airbnb Cap Rate: 11.1%
- Airbnb Occupancy Rate: 48.0%
Across the city, East Raleigh is the most profitable neighborhood for investing in Raleigh real estate, both for traditional and Airbnb. Whereas the median property price here is less than half of the average for Raleigh, the expected rental income is comparable to the rest of the city. About 55% of the population of East Raleigh is homeowners, while the remaining 45% are renters. The average population age is 44 years.
2. Central Raleigh
- Median Property Price: $340,000
- Traditional Rental Income: $1,900
- Airbnb Rental Income: $1,700
- Traditional CoC Return: 3.6%
- Airbnb CoC Return: 2.9%
- Traditional Cap Rate: 6.7%
- Airbnb Cap Rate: 5.9%
- Airbnb Occupancy Rate: 45.4%
Central Raleigh is another excellent neighborhood for investing in this city. The median property price is below the average for a Raleigh investment property, but so is the rental income. The better strategy here is traditional.
3. Wade
- Median Property Price: $422,000
- Traditional Rental Income: $1,600
- Airbnb Rental Income: $2,600
- Traditional CoC Return: 1.8%
- Airbnb CoC Return: 4.6%
- Traditional Cap Rate: 4.7%
- Airbnb Cap Rate: 7.6%
- Airbnb Occupancy Rate: 46.8%
The third top neighborhood for Raleigh real estate investments is Wade, where property prices are similar to the city level. Airbnb is the preferable strategy here.
Related: 7 Reasons Why Real Estate Is the Best Investment Strategy
Real estate investors need to be on constant alert, looking for new opportunities in new real estate markets. You should look into investing in Raleigh real estate for your next purchase.