By Jeff Herman
Love where you live?
Maybe now is the time to invest in its future growth. The Upstate is expected to hit about 1.75 million residents by 2040, an increase of about 400,000 from where it is now. Of that, an estimated 220,000 will be in Greenville County alone.
To put that in perspective, Greenville grew by about 130,000 between 1990 and 2010, and the entire Upstate by about 300,000, so this is more than just growth for the sake of growth. People are coming, and they are coming fast. While there are myriad questions of where they are going to live and how they are going to get around, they also provide myriad investing opportunities.
Assuming this plays out as expected, the Upstate will continue growing its housing, office parks and entertainment options. This could be a golden age for you to make money on where you live. There are opportunities in education, health care, utilities and technology, but residential and commercial real estate is the way to invest in this big wave.
Investment properties can largely be broken down into two categories: residential and commercial, with pros and cons for each. In the residential world, HGTV has shown many people that, yes, you can buy an old house, fix it up and sell for a profit, but it’s not guaranteed. The old adage “do your homework” has never been more important. Is the fixer-upper in a good neighborhood? Do you have enough profit margin built into the project for purchase, repair and the unexpected expenses or delays that always happen? There really is a formula, but you must work the numbers backward. What is your expected sales price – minus your cost of repairs/the amount of time it takes to repair and get to market? On TV, flips occur in a matter of days or weeks. That is TV magic. I’ve never had a flip take less than six months, but it is very rewarding to improve a property and hand the keys to a new homeowner.
Another option is the rental-house route in which you collect enough money from tenants to make the loan payment, while you wait for property prices to appreciate. Many times, this works just as planned, but you should anticipate those possible late-night calls from tenants whose homes need repairs. Obviously, the newer the home, the fewer repair calls one would expect. One strategy I have seen work is to purchase one of the first homes in a new neighborhood. The thinking is that developers may be willing to allow more customization in order to get sales started. Additionally, many developers increase the price based on the number of homes sold, so getting in early can have a large benefit.
Commercial properties come with some added advantages in that the tenant should be easier to work with. Just imagine having a large company, such as NAPA Auto Parts or Bojangles’, send you a check each month. In addition, you can negotiate a triple-net lease, where they will make all the repairs. The downside is you may have to make some much bigger down payments. In addition, while Greenville has been relatively on the back end of the “retail apocalypse” of the past few years, national chains may not be your best option. If you do go commercial, look for uniquely local or destination stores that can survive the battle with online shopping.
Now, it’s one thing to know about the possibilities; it is another thing to find them and capitalize on them. An easy way to get involved with these is through investment fund groups where people can pool their money and then work with brokers to buy and sell property.
As an investor, remember that these are all long-term growth patterns. These are not overnight dollars. Greenville and the Upstate will continue to grow, but you have to be patient and smart when following these trends.
Jeff Herman, a 25-year veteran of the financial services industry, is an equity partner with Wagner Wealth Management. He can be reached by email at [email protected] Securities offered through Triad Advisors, member FINRA/SIPC. Advisory services offered through Wealth Management Advisors. Wealth Management Advisors is not affiliated with Triad Advisors.