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Your thoughts on this as an investment property?
Old 04-14-2009, 10:10 PM   #1
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Your thoughts on this as an investment property?

235 Jay St, Chapel Hill, NC 27516 - Zillow
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Old 04-14-2009, 11:05 PM   #2
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Looks like a steal to me. Man, $152k for two units. I can only dream about here in the Northeast.

I street view walked through the neighborhood, and it looks OK though I would say that the realtor used a bit of creative license to say that it's within walking distance to the campus. It's certainly within a short biking distance though.
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Old 04-15-2009, 12:34 AM   #3
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I would agree with the biking statement, but its UNC and school that big has to have students spread out pretty far. With that in mind, I'd say you should have no problem finding tenants if you price rent competitively.
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Old 04-15-2009, 05:39 AM   #4
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Looks good from outside pictures, though no good pictures of inside. Near RR tracks, but for renting to college students, shouldn't be a big deal. Also on public bus route so tenants would have option to get to campus.
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Old 04-15-2009, 09:58 AM   #5
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I visit the area yearly and there is no way to make a judgement from the internet. If all the neighboring places are going for $120K or even $90K, then what's the point of this overpriced place?

Also you should know that rents for students are very competitive. This place looks ugly, so I wouldn't want to live there ... especially when nicer cheaper places are nearby.
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Old 04-15-2009, 10:12 AM   #6
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From a former Chapel Hill landlord to another future one, good luck!

My take is that with 20% down, a 6.5% mortgage, taxes, insurance, you're looking at $1100/month in expenses, assuming no HOA.

Even with some vacancies, 2 units, 2 BR each should fetch at least $1200/month or so unless things have changed drastically in chapel hill. I was getting $750/month for a much larger 2 BR, 2.5 BA unit in a location a little further out back in 2004-2005.

A few things to note: chapel hill property taxes are ridiculous. Make sure the property isn't in a floodplain. I recall flooding with some areas along Umstead Rd. Landlording is a headache. Make sure the n'hood and surrounding area are decent. IIRC, the area just to the south across the creek is the crackhead part of town (or it was 6-8 yrs ago). Probably not walking walking distance to campus. 1.25 miles to corner of Franklin and rosemary (top of the hill). RR tracks lie less than 1/10 mile to west of property. In my experience, many UNC students are looking for upmarket housing. Not to say this place won't serve the student market though. May also be good for lower paid staff. Not dealbreakers, just something to consider.

I found a nice pair of PhD students with graduate stipends to tenant my place. Nice cash flow while I owned it but being a landlord is a headache. good luck!
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Old 04-15-2009, 10:14 AM   #7
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Originally Posted by LOL! View Post
I visit the area yearly and there is no way to make a judgement from the internet. If all the neighboring places are going for $120K or even $90K, then what's the point of this overpriced place?
I haven't looked lately, but back in 2001 when I was ghetto house shopping, a slummy slumlord craphole single family house in the middle of crackheadville riddled with bullet holes and hypodermic needles would run you $125k. So $150k for a duplex is probably not too bad.

My take is the place would cashflow if you can keep your maintenance costs to a min.
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Old 04-15-2009, 10:36 AM   #8
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From a former Chapel Hill landlord to another future one, good luck!

My take is that with 20% down, a 6.5% mortgage, taxes, insurance, you're looking at $1100/month in expenses, assuming no HOA.

Even with some vacancies, 2 units, 2 BR each should fetch at least $1200/month or so unless things have changed drastically in chapel hill. I was getting $750/month for a much larger 2 BR, 2.5 BA unit in a location a little further out back in 2004-2005.

A few things to note: chapel hill property taxes are ridiculous. Make sure the property isn't in a floodplain. I recall flooding with some areas along Umstead Rd. Landlording is a headache. Make sure the n'hood and surrounding area are decent. IIRC, the area just to the south across the creek is the crackhead part of town (or it was 6-8 yrs ago). Probably not walking walking distance to campus. 1.25 miles to corner of Franklin and rosemary (top of the hill). RR tracks lie less than 1/10 mile to west of property. In my experience, many UNC students are looking for upmarket housing. Not to say this place won't serve the student market though. May also be good for lower paid staff. Not dealbreakers, just something to consider.

I found a nice pair of PhD students with graduate stipends to tenant my place. Nice cash flow while I owned it but being a landlord is a headache. good luck!
Yeah, Chapel Hill taxes are ridiculously high. I think the tax rate would be 0.01809 which is more than 2.5x what I pay on my house. That's a good point about the floodplain. That would be a deal breaker. My friends pay $450/year in home insurance and $2000/year in flood insurance. Their basement flooded and their flood insurance didn't even cover their stuff that was ruined.

I'll probably wait to make any moves unless everything looks very good.
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Old 04-15-2009, 10:40 AM   #9
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Originally Posted by BunsGettingFirm View Post
Looks like a steal to me. Man, $152k for two units. I can only dream about here in the Northeast.

I street view walked through the neighborhood, and it looks OK though I would say that the realtor used a bit of creative license to say that it's within walking distance to the campus. It's certainly within a short biking distance though.
I used to live just outside of Boston so I know what you mean about the RE prices.

"Walking" distance stuck out at me too. Makes me assume that the realtor isn't going to give a straight answer about everything.
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Old 04-15-2009, 10:50 AM   #10
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Yeah, Chapel Hill taxes are ridiculously high. I think the tax rate would be 0.01809 which is more than 2.5x what I pay on my house. That's a good point about the floodplain. That would be a deal breaker. My friends pay $450/year in home insurance and $2000/year in flood insurance. Their basement flooded and their flood insurance didn't even cover their stuff that was ruined.
Yep, flood insurance is super expensive compared to regular insurance if you are in the 100 year floodplain. And the deductibles are usually much higher, and they are generally stingier on paying you. I technically live in a delineated 100 year floodplain but opted to forgo flood insurance based on a risk reward calculation and my engineering judgment as to the likelihood of experiencing a flood (don't try this at home folks!). FEMA hasn't updated their flood maps in years to reflect changed conditions either.
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Old 04-15-2009, 12:12 PM   #11
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Chapel Hill has had average annual appreciation of 7.65% city wide since 1990. This area has had 9.17% over the same time. Looks like the market is going up this last quarter. $14,000 a year + rents of $28,000 a year looks pretty good to me. If you can't find anything better I'd JUMP on this.
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Old 04-15-2009, 12:55 PM   #12
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Chapel Hill has had average annual appreciation of 7.65% city wide since 1990. This area has had 9.17% over the same time. Looks like the market is going up this last quarter. $14,000 a year + rents of $28,000 a year looks pretty good to me. If you can't find anything better I'd JUMP on this.
Appreciation of 9% per year MAY happen, but $28000 per year in rents will NEVER happen today at this place. That is $1228 per month per unit with a 95% vacancy rate. Those rental rates would equate to a high end 3 br place in Chapel Hill most likely in a better location and better neighborhood (actually walkable to campus/Franklin St).
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Old 04-15-2009, 01:07 PM   #13
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Appreciation of 9% per year MAY happen, but $28000 per year in rents will NEVER happen today at this place. That is $1228 per month per unit with a 95% vacancy rate. Those rental rates would equate to a high end 3 br place in Chapel Hill most likely in a better location and better neighborhood (actually walkable to campus/Franklin St).
I'm guessing ~$700/month per unit would probably be closer. I just searched CL and this was one of the first things that came up - Charming apartment homes at Camden Governors Village Granted it's 5 miles from campus but it seems like rentals are dirt cheap
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Old 04-15-2009, 01:12 PM   #14
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I just got off the phone with a friend of mine who's a realtor. He said it's kind of odd that 4 homes on the small gravel street are for sale (3 by the same owner). The prices have also dropped drastically in the last few weeks. Is there a way to figure out why the owners are selling?
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Old 04-15-2009, 01:24 PM   #15
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From a former Chapel Hill landlord to another future one, good luck!


Even with some vacancies, 2 units, 2 BR each should fetch at least $1200/month
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Appreciation of 9% per year MAY happen, but $28000 per year in rents will NEVER happen today at this place. That is $1228 per month per unit with a 95% vacancy rate. Those rental rates would equate to a high end 3 br place in Chapel Hill most likely in a better location and better neighborhood (actually walkable to campus/Franklin St).
You're argueing with your self. I used your rents.
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Old 04-15-2009, 01:28 PM   #16
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I'm guessing ~$700/month per unit would probably be closer. I just searched CL and this was one of the first things that came up - Charming apartment homes at Camden Governors Village Granted it's 5 miles from campus but it seems like rentals are dirt cheap
Camden Governors village is probably a bad comp for the Jay St. property. It is way further out and is actually in the county next door. Much higher scale and newer construction it seems. And they offer full amenities, an extra BR, and larger floorplan. Their rates are pretty typical for the area, maybe a little lower (prob because they are further out) for the nice "upscale" apartments. Plenty of these places have popped up in Chapel hill and durham in the last years to serve upscale desires of UNC and Duke students. Rents are usually 750-900/month depending on location, amenities, size, and rental contract length.

For a good comp, search craigslist for duplexes, quads, or condo/apts, or "apartment over garage" type stuff about a mile or two out from campus (bike/bus access but no walking access). My gut says $700 is probably ballpark accurate. I think you could probably break even or be cash flow positive from day 1 with 20% down.

Oh yeah, make the realtor earn their keep and ask them to give you some rental comps in the area!
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Old 04-15-2009, 01:31 PM   #17
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You're argueing with your self. I used your rents.
Oh, simple misunderstanding. I meant "2 units, 2 BR each should fetch at least $1200/month" total rent, not per unit. My bad!
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