Rental

Investors See Big Returns on Charlotte Rental Properties

Rental Housing Demand Boom in Charlotte, NC

Charlotte, NC’s real estate market is one of the hottest in the country, with a housing boom that shows no signs of stopping.

The Queen City is North Carolina’s most populated city and one of the fastest-growing metro areas. With over 850,000 people residing in the city of Charlotte and over 2.6 million residents in the metropolitan area, Charlotte and Mecklenburg County have ranked near the top for population growth in the U.S.

In 2020, real estate sales in the Charlotte metro area were steady until spring. At the beginning of the pandemic and quarantine, 3,630 homes were sold in March, a YOY increase of 4.9%. In April, the real estate sales dropped significantly to 2,960. Despite the decrease, however, Charlotte’s home prices stayed strong. In the rebound post-pandemic, Charlotte real estate has thrived.

A bird’s eye view of the Charlotte metro real estate market shows:

• Median sales price for homes: $300,000
• Months’ supply of inventory: 0.6
• New real estate listings: 3,791
• Total active real estate listings: 2.332
• Housing affordability: Charlotte is ranked as 4 out of 10, meaning that the Charlotte metro area is one of the more affordable places to own a home in the U.S.

There are several factors that help to explain why Charlotte’s housing market is so hot. It’s home to seven Fortune 500 companies, a number of prestigious universities, the NASCAR hall of fame, home to popular sports teams such as the Carolina Panthers and the Charlotte Hornets, and boasts a high-octane blend of high-tech, white collar, and service and distribution jobs.

Charlotte’s Housing Boom and Inventory

The popularity that brings people to Charlotte has created an incredibly tight housing inventory. New home listings in the Queen City were down 6.2% in February 2021 compared to February 2020. Evelyn McCorkle, a real estate agent in the Charlotte, NC area, told the Charlotte Observer she has seen Black Friday-sized crowds at open houses.

Millennials are flocking to Charlotte because of the diverse job market and quality of life. Charlotte ranks sixth on this list of places attractive to millennials, and the state of North Carolina ranks fifth on the list of states people moved to in 2020. In fact, statistics show that 122 people move to Charlotte, NC each day. The city is currently home to more than 850,000 people, while the Charlotte Metropolitan Statistical Area encompasses nearly 2.6 million people.

Charlotte’s popularity and continued growth has created a severe housing shortage, which has caused housing prices to surge. The median sales price shot up 11.9% from 2020, which the months’ supply of inventory dropped 64.7%. The Charlotte area’s supply of available homes has dropped to its lowest level in 17 years. In February 2021, there were 2,958 homes for sale in the Charlotte region – equating to about 18 days’ worth of available inventory. Real estate experts agree that a balanced market should have about six months’ worth of homes available.

So, what does this mean for homebuyers? The most obvious – Charlotte’s available housing inventory is critically low, leading to fierce competition, bidding wars between interested buyers, and buyers purchasing homes sight unseen. As the price tags on available homes continue to skyrocket, people are getting priced out of the market. With low inventory, many investors are building homes in Charlotte, NC with the intention of holding them in their portfolio.

Obviously, investors need different expertise in building rental properties than managing a real estate portfolio. These two real estate strategies use different property financing structures as well—interest-only short-term loans for the construction period, and then long-term financing for the hold portion.

Enter build to rent, one of the fastest-growing trends in the real estate rental market. The build to rent trend is booming nationwide, but it is especially prevalent in Charlotte.

What is Build to Rent?

Nationally, build to rent single-family properties have increased 27% from 2019 to 2020. Single-family homes have been a staple of the real estate market for a while, typically seen in the form of small multifamily properties such as duplexes and triplexes. Now, the concept of building to rent is being used for single-family homes to capitalize on the booming market.

Prior to the pandemic, the build to rent strategy was already booming. Post-COVID-19, the demand for rental properties is even higher. A tight rental housing inventory and increasing home prices have caused real estate investors to try new real estate strategies and approaches. Plus, with new home construction loan financing and rates on rental property loans at all-time lows, the value proposition on build to rent is too attractive when compared with other types of investments. Real estate investors can find both a loan to build rental property and long-term rental loans for investment properties in Charlotte, NC from Lima One Capital.

Real estate investors typically have very low maintenance costs for the first several years on new builds, which helps to improve their net cash flow. Build to rent properties also tend to rent at a higher rate than older homes. After a few years, if an investor decides to do a cash-out refinance on their rental property, they can easily refinance the home to put leverage back to work or sell individual investment properties in a cross-collateralized investment portfolio, which provides far more flexibility than multifamily investing, where selling doors is an all-or-nothing proposition.

The combination of solid profits and maximum flexibility means that the build-to-rent real estate investment strategy is set up to provide ROI that is both solid and dependable for real estate investors.

Lima One’s Build2Rent® loans are designed for investors who are interested in building one or two rental homes in an upcoming development, as well as model homes, spec homes, and urban in-fill lots. These investment rental properties are akin to traditional, gated residential neighborhoods with upgraded features like keypad locks, wireless technology in the home, and upgraded appliances. These rental properties offer renters the benefits of living in a single-family home without the burden of HOA costs or servicing mortgage debt.

The Charlotte, NC Rental Market

The rental market has been red hot across the country, and it’s only getting hotter.

As a result of that popularity, nearly 2 million people nationwide have opted to rent a home instead of buying a home. The demand for single-family rentals has prompted real estate investors, developers, and home builders to look at new home construction and build to rent properties as the answer to bring more available housing for those in the market to rent.

Charlotte-based real estate developer Crescent Communities recently announced it would create a build to rent community to help meet the needs of Charlotte’s rental market. The community will have 100 to 200 residences for rent, with a combination of three and four-bedroom townhomes and detached single-family houses.

Build to rent properties in Charlotte appeal to multiple demographics: families with young children, single parents, millennials saddled with student loan debt, young professionals who primarily work from home, the elderly, and people with dogs to name a few. Nearly 41% of the households in Charlotte are renter-occupied while 58% are owner-occupied. RENTCafé shows that the average cost of rent in Charlotte is $1,301 a month, a 3% increase from March 2020 but still lower than the national average of $1,407.

Charlotte, North Carolina is a seller’s market, and real estate investors are jumping on it. According to city data, 99% of sellers are getting their asking price or more within 23 days of being listed on the market. Buyers appear ready and willing to act immediately because they want to secure a low interest rate before prices are expected to rise. As Charlotte’s unemployment rate continues to fall, buyers are exhibiting more confidence and tenacity when it comes to home buying. Interest rates for homes remain at an all-time low, and it’s never been cheaper to open new home construction loans, rental property loans, or fix-and flip loans.

Looking Forward

For real estate investors who dream of purchasing land and building new properties, the Charlotte housing market is one to watch. The Emerging Trends in Real Estate report ranked Charlotte:

• 11th for home buying
• 2nd for development opportunities
• 5th for the availability of debt and equity capital (an important consideration for investors raising funds for construction projects)

The report also notes that Charlotte is one of six “boomtowns” attracting people from other cities who are interested in the diverse lifestyle, the mix of a big city and suburban feel, and the varied job markets. These are just a few factors that make Charlotte a prime target for new construction and real estate development, as there is expected to continue to be a demand for housing.

Mashvisor data shows that Charlotte’s home price to rent ratio is 23, meaning it will be far more affordable for the influx of people relocating to the city to rent rather than to purchase a home. That’s a huge positive for real estate investors because they won’t have to worry about low occupancy rates in Charlotte. While the Charlotte housing market is not the most affordable market, it’s also not the most expensive. This puts Charlotte in a great position for real estate investors who are looking for dependable returns and profits. Experts expect home values to continue to rise, which will give real estate investors the opportunity to build equity through steady real estate appreciation.

While inventory might be harder to find, investors with strong real estate investment strategies can still profit. It’s more important than ever to have a lender capable of helping you:

• Secure a loan with the best price and maximum leverage for your next rental investment
• Close properties quickly and certainly
• Run your home construction and rehab projects smoothly

Lima One Capital offers that and much more for real estate investors. We are experts in financing new home construction for builders on urban in-fill, spec homes, model homes, teardown/rebuild projects and build to rent homes. Our team of experienced professionals will help guide you through how to get a new construction loan for your next investment.

If you’re interested in obtaining a loan for build to rent homes in Charlotte, North Carolina call us today. Get started today and scale your rental property portfolio with Lima One.