Investment Fact or Fiction

While the rest of the country's investment real estate fizzles, there's still money to be made here -- if you know what you're doing

After the last several months of bad housing news, many people think doom and gloom when they think about buying and selling a home. But for savvy investors/optimists it's time to strike while the iron is hot.

There's a thirteen-month inventory of homes available in the Charlotte market (a six-month supply is considered a balanced market), but prices are still rising, slightly. The good: there's still money to be made by investing in Queen City real estate. The bad: there's a lot of competition. Here's the truth behind common myths of investing in real estate.

Myth #1

Because they're foreclosures, bank owned/real estate owned (REO)/Housing and Urban Development (HUD) properties are always a great deal.

REALITY: If it sounds too good to be true, it probably is. Yes, some foreclosures can turn into lucrative investments. The problem is, by the time an inexperienced investor (read: you) starts searching a multiple listing service or takes a trip to the Mecklenburg County Courthouse, they've all been scooped up. Pros like Michael Knight and Mike Ivie of City View Capital, who know the foreclosure process inside and out, have a line on the best properties before they've even been foreclosed on. Bonus: they're willing to assist rookie investors, for a fee.

Myth #2

Old myth: it takes a lot of money to invest.
New myth: it takes no money to invest.

REALITY: It's somewhere in the middle. Not too long ago "anybody that could fog a mirror could get a loan," says Ivie. Those days are gone, so you'll actually need a few bucks to start investing. Ivie and Knight suggest having at least six months of mortgage payments socked away in case you can't rent or sell the house; $8,000 to $10,000 should be enough to get started.

Myth #3

It's easy to flip a house.

REALITY: Don't believe everything you see on TV. Most of these programs don't show all of the hidden costs that go into buying and renovating a house or the crew of professionals working while the cameras are off. Do you have a crew of professionals? Of course not. Scott Austin, owner of Austin Development Properties, says, "There are lawn chair quarterbacks who will tell you how easy it is, but they flip a house once every four years." And do lots of homework like studying market trends, scoping out a specific neighborhood, and learning about any commercial or residential development plans before they're announced.

Myth #4

Section 8 is a nightmare.

REALITY: Many people read "Section 8" and picture a neighborhood that looks like it belongs in Fallujah. In fact, Section 8 is a federal assistance voucher program that allows low-income families and individuals to rent homes. Many investors avoid renting their properties to Section 8 families because they don't want to deal with the hassle of a government inspection (very stringent) or fear the tenants will cause excessive damage. Savvy investors enjoy the peace of mind that comes with having the government pay the rent on time each and every month. Cha-ching.

Myth #5

This neighborhood is about to pop.

REALITY: Your buddy just told you the Cherry neighborhood is the next NoDa, so buy now and you'll triple your money in no time. Don't believe the hype. Sorry, Nostradamus, but if you're reading this article, odds are you won't be that far ahead of the curve. If the tip is too good to pass up, Austin suggests sticking to a strict purchase limit. Determine how much you'll be able to rent the property for and make sure your mortgage payment is going to be less than that. You know, in case the rumor about the light rail stop being planned for your backyard isn't true. 

Categories: Real Estate