Real-estate investing in Wilmington, NC can present many fantastic opportunities to invest in a growing, thriving city. BUT be forewarned as there are many pit traps such as high-risk areas, shady realtors, and individuals that pitch the “perfect” investments. Here are some solid tips so that you don’t wind up with a low performing rental property in Wilmington:
First, are you totally new to real-estate investing?
If you are new to real-estate investing overall it may be wise to obtain a “knowledge base” for real-estate investing. Real-estate investing isn’t rocket science, but there is some upfront knowledge required to prevent yourself from making costly mistakes.
#1. Learn how-to do the math behind a real-estate investment
This is probably the most important. Real-estate is a “numbers games” and calculating a few simple equations can help you really grasp the concept of real-estate investing: NOI, Cap-Rate, Cash-flow, and Cash-on-Cash Return are %90 of what you need to know.
Video on how-to caluclate a cap-rate:
#2. Be patient and watch the market
The biggest place I see investors go wrong is they are impatient! Nobody wants to admit they have a “get rich quick” attitude, but MANY investors do. Relax. Watch the market and realize that you need to wait a while to find a good property. If a deal passes you up, just realize one will come later and don’t rush into a deal. It also can be helpful to have a real-estate agent set you up with an MLS subscription to consistently be on the look out for properties!
- Have a real-estate agent set you up with an MLS alert that sends you e-mails every morning (There’s an opt-in down below, if you’d like me to set you up with one)
- Set up an alert on Zillow
- Scan craigslists every morning
- Network on BiggerPockets.com and the local REIA
As the market has grown hotter, many investors have grown pessimistic about finding investments. Overall, there are still motivated sellers in any market. It just takes more time and patience to find them. Sometimes people purchasing investment real-estate are still used to the 2012 market conditions. You must be patient. BUT when a deal comes along you must act fast! One of the most difficult parts about investing is that it takes discipline, courage, and incredibly entrepreneurialism.
Most people get too stressed out and quit before they ever see and single deal.
#3. Start talking to a mortgage person
You can’t buy real-estate without money and much of your success in real-estate investing will be how “well” you obtain financing.
- First real-estate purchase? Ask about “government back loans”
- Are you interested in flipping? Tell the mortgage person this.
- It’s possible to “negotiate” with mortgage professionals so don’t leave money on the table!
- Realize that the objective here is to MAXIMIZE CASH-FLOW ABOVE ALL ELSE
Overall, I’ve learned that a mortgage person could make or break a deal. Mortgage professionals are like real-estate agents. There’s a ton of them out there, but VERY few actually know real-estate investments (especially when it comes to renovations).
- Do they answer the phone?
- Do they know what cash-flow is?
- Are they commission-based? Salaried mortgage brokers usually don’t work a deal quite like a commissioned-based.
- Are they familiar with various types of renovation loans?
How much money do I need to real-estate invest in Wilmington?
This question makes me uncomfortable and I don’t like answering because MANY people can’t handle the truth. To be honest, it will depend on many factors: How much are you willing to finance? What price range are you looking to buy? How much are you willing to risk?
If I had to say, the number would be between $20-30,000 for a residential investment (and this is on the low end). You will have to cover yourself for things called capital expenditures (roof needs to be replaced, HVAC system fails, tenant stops paying rent, etc). Real-estate is fraught with risk and it may be wise to stay away from zero down deals if you are a beginner investor.
The last thing you want to do is to sell a property at a huge loss. I’ve seen many people over-leverage and actually end up worse then when they first starting investing. Real-estate investing isn’t like the stock market. You could lose your initial investment and MORE. It’s better to build your real-estate kingdom slowly, piece-by-piece then to fly too high and burn up in a financial meltdown (Like my illusion to Icarus?).
I heard that Wilmington, NC is one of the best places to invest in real-estate! Is this true?
Yes, Wilmington can be a great place to invest in real-estate, BUT so can any location if you look hard enough! As a real-estate investor myself I truly believe that money can be made anywhere that land can be owned. Nonetheless, here are some fantastic reasons why Wilmington continues to be invested in foreign and locally by people of all types:
- Cheap compared to other locations (You can’t get much for $126K in Charlotte, Raleigh, and other major cities)
- Heavily diversified economic base with a major university, tourism industry, port city, and an emerging corporate sector.
- Not much competition with amongst bigger investors, institutions, and hedge funds.
- High growth
Don’t let people fool you, there are some bad things about investing in Wilmington:
- There’s hype building in Wilmington and competition is heating up.
- Wilmington faces threats of over-development
- Cap-rates are becoming compressed (But this is true anywhere as of July 2017)
- Wilmington is the smallest county in NC land-wise. Developing land is expensive and difficult to make profitable.
Where is the best place to real-estate invest in Wilmington?
Many people wonder where are the best places to real estate invest in Wilmington. This is a very difficult question to answer and will depend on many factors. Broadly speaking there are three main investment areas in Wilmington:
- Near UNCW
College rentals are a very popular subset of real-estate investing and Wilmington is LOADED with college rental properties. They do have higher returns, but they also come with some risk. Check out my article, for an in-depth explanation of college rental investing.
Put blankly, I’m not a fan of down-town investing. There’s tons of cheap investments, BUT they will be very management intensive. If you are interested in properties with high-cash flow and huge risk, Wilmington downtown may appeal to you. Most investors are seeking wealth building and downtown has poor appreciation potential. This isn’t ALWAYS the case and there are some areas with good wealth building potential.
Mid-town is great if you are seeking a property in a “blue collar” subdivision and don’t want to go the college investment route. Mid-town actually has a larger supply of investments then the college market due to it’s size. There is also a very healthy economic base with hospitals, offices, and businesses about!
- Beach (Depends on what you call an “investment”)
Just like downtown, I’m not a fan of beach investing either. Properties on Wrightsville Beach and Carolina *usually* have abysmal returns, but not always. Be very wary when beach investing because I’ve seen a ton of brokers that “puff up” the pro-forma in order to make the property look more appealing. Also, beach investments have such volatile cash-flows that they are very hard to predict how well they will perform.
- Castle Hayne
I’ve recently grown very fond of Castle Hayne as my go-to recommendation for investors looking for a place under $100K. In Castle Hayne, there is less competition and plenty of neighborhoods with Class B properties. Castle Hayne is one of the few places in town that isn’t increasingly being developed and it MAY (I can’t predict the future!) be an up-and-coming area by most standards.
- “Everywhere else”
As you may have noticed, I’m a big fan of college rentals. BUT there are nice pockets of investment neighborhoods everywhere and there really isn’t a part of Wilmington that you couldn’t find a decent property in. Is it better to take a fantastic deal in a relatively obscure part of the city then a mediocre deal in a hot subdivision? Simply put. Yes.
Want more in-depth information? Check out my other blogs!:
- 4 Great Neighborhoods To Invest In Wilmington, NC
- 3 Investment Properties near UNCW
- 3 Tips For Finding A College Investment Property in Wilmington, NC
- Duplex Investing in Wilmington, NC
- Triplex Investing in Wilmington, NC
- Quadplexes in Wilmington NC
- Vacation Rental Investing in Wilmington, NC
- Why Is Vacant Land So Expensive In Wilmington?!
- Places To Get Investment Property Financing
- What Is A “Good” Rental Property in Wilmington?
More helpful tips when buying real-estate investments in Wilmington, NC!:
- Gauge your risk
Remember this simple slogan: “More return = more risk“. Do you like evicting dead-beat tenants? Do you love fixing properties that need tons of work? Do you enjoy screening potential tenants like a private investigator? Buy a piece of real-estate that has a %15 percent return and that’s what you’ll get!
Before you jump into a property with a %15 return (Yes, there are properties in Wilmington that do!) remember that when you see something with a huge return, it means there’s a ton of management involved.
- Do the research and stick to your guns
Every invested off a “stock tip” from your drunk uncle? I did and I lost my investment! Real-estate investing is no different. Stick to the numbers and don’t buy into the hype. When you hear someone say things like “Perfect investment”, “HUGE returns!”, “High GROWTH”, just brush it off and look at the numbers. I’ve seen many investors get caught up in the new “thing” and lose money when things didn’t pan out.
- Stick to a specific area
I’m a real-estate broker, so I have the privilege of being paid to look at real-estate ALL DAY. The vast majority of investors don’t and will burn themselves out trying to become an expert on every corner of the market. Real-estate deals are lurking around every corner and trying to seek that “perfect” investment somewhere will drive you nuts. The most successful investors I’ve ever seen didn’t make fortunes investing in areas they didn’t know.
- Call people, network, and speak with real-estate professionals
We all know that real-estate is a “people” business, but have you ever asked yourself why? It’s mostly because real-estate is “hyper local”; meaning that the information can’t be found online or in one specific place. In order to become a true expert in your area, you have to get out there and see what other people are doing. Let others know you are interested in real-estate. Read books on real-estate, talk about real-estate, and/or start a real-estate blog like I did to share knowledge.
Is the Wilmington market “too hot” to find good investments?
No matter how hot a market is there will always be deals. As the turnover and absorption rate increases, so chances of finding properties under markets value DECREASES:
- People have jobs and don’t need to liquidate assets
- After a long bull market, people have money saved
- Sellers have more bargaining power due to increased buyer demand
But in every market, there will be motivated sellers. It just takes time a persistence to find the right deal.
- Network with other REI investors, investor friendly brokers, wholesalers, or anybody within the real-estate industry.
- Send out mailers to absentee owners
- Cold-call absentee owners
- Set up a lead capture page
- Hang out “We buy houses” signs
- Set up alerts on Zillow or the MLS
- Advertise on Craigslist stating you will buy an investment property in any condition
Overall, in a seller’s market you will have to get creative and do hardwork to find a good deal. The better you get at finding deals the more likely deals just seem to fall into your lap. Just like a real-estate agent eventually gets listing through word-of-mouth, so will the likelihood you will find a deal!
Finding zero down deals in Wilmington, NC. Are they worth it?
I believe that many people have misconceptions when it comes to zero-down deals and investing with no money. Many people miss the idea that the deal is zero down but real-estate investing is not an activity that can be done without money.
- Not all zero down deals are good and often times you will have to agree to crappy terms to get in
- Make sure you have money saved to handle missed rent payments, HVAC replacements, and/or a re-roofing.
- When the market is good, people will be less motivated to use a zero down tactic
Seller financing is BY FAR the most common form of no money down investing in real-estate. In fact, you can find many chances to invest in real-estate using seller financing, especially with higher risk properties or real-estate that needs alot of work. I see seller financing options ALL THE TIME on the MLS. Fill out the form below and I can set you up with a feed that will alert you when deals like this come on the market.
Subject-to deals are the second most common but are far from everyday. To find a subject-to deal, you’ll need to find a lead that is just about to walk away from a mortgage and has no choice but to walk away.
Sandwich lease-options are another popular zero-down tactic, but take tremendous networking, effort, and prospecting to locate. Given that Wilmington is a huge absentee market and monay potential renters, the potential for lease options are out there but are not nearly as easy as the gurus make it seem.
This brings me to my final and BEST tactic to obtain property with little money down. Government subsidized loans like FHA, VA, and/or USDA. While not the sexiest tactic to obtain property, these methods are one of the best ways to build wealth for someone new to real-estate investing.
- Obtain a low interest FHA loan with %3 down and house hack a duplex for maximum cash-flow
- Find a property that needs work and use a 203K to add-value and gain some serious equity
- Owner occupy a property the first year, use the time to renovate, and rent it out when you find a good deal on another property
- Use the equity you’ve built to obtain more property