How is the return on investment for a rental property in Charlotte?


The city of Charlotte, one of the fastest-growing cities in the U.S., presents attractive opportunities for those who are looking to invest in the real estate market, specifically in rental properties. According to the “Emerging Trends in Real Estate” report by PwC and Urban Land Institute, Charlotte’s housing market ranked among the top 5 places to invest in real estate. To understand why Charlotte is an obvious choice for investors, we will look at the real estate market that the city has to offer.

The location where you choose to invest in a rental property is crucial to the return you will make on that rental property. In order to analyze the potential a location offers, you will need to look at certain factors such as the area’s population growth, the unemployment rate, and household income. Charlotte scores favorably in most of these areas, as we will see below.

Population Growth – According to the US & World News report, Charlotte ranks 22nd on the list of fastest-growing cities in the U.S.. This has a lot of implications for the real estate market. A growing population means a growing demand for houses and rental properties. In fact, according to the U.S. Census Bureau data, around 122 new people move to Charlotte every day, contributing to the city’s hot rental market. The population is expected to continue to grow at a high pace, which means that investors can be confident in their choice.

Diverse Job Market – The growing number of job opportunities in Charlotte is one of the reasons for the high population growth. The city is home to 7 Fortune 500 companies, including the Bank of America. Apart from its strong financial sector, the healthcare industry also provides tons of employment opportunities in the area. This boom in the job market contributes positively to lower unemployment rates, higher standard of living, and ultimately housing affordability. 

Lastly, North Carolina is considered a landlord-friendly state. Therefore, landlords do not need to worry too much about tenants being late on their rent payments or evicting them, because there are rules and regulations that protect the landlord. For example, in North Carolina, the landlord can get refunded for any attorney and court fees that result from evicting a tenant.

The Rental Market

Charlotte’s real estate market is one of the hottest markets in the country. The high rates of population growth have led to a housing shortage in Charlotte. It is in fact a seller’s market, where the sellers have the upper hand in setting prices. With more and more people looking to buy or rent, the price of houses has been on the rise making it less and less affordable for people to purchase a house in Charlotte. However, this part of the population who cannot afford to become homeowners turns their attention to rental properties. This is why investors have seen great opportunities in Charlotte’s rental market. A growing population and less affordable housing are driving factors for more demand in the rental market. In fact, 41% of the housing units in the market are rental-occupied households. 

Rental Properties’ ROI

The ROI of a rental property enables us to see how much the investment will yield us based on its cost and cash flows, as well as serves as a ground for comparison between multiple properties. 

To calculate the ROI of a rental property, you need to know the expected rental income, operating costs, financing costs, and whether you are financing the purchase of the rental property through a loan. In Charlotte, with a lot of people looking to rent, landlords have the upper hand in setting rent prices, which is the main contributor to the ROI of a rental property. In fact, around 60% of the rental units in Charlotte have a monthly rent of $1,000 to $1,500. Looking forward, the rent prices are expected to increase if there continues to be a housing shortage that will encourage bidding wars in the demand.

Turning our attention to the financing costs, with the rental property loan rates being at historical lows, it is now the best time to invest in rental properties and get fixed-rate financing. Locking in a low rate now will enable you to save a lot of money in interest down the line, which will increase the annual and overall return on your investment. Low financing costs and high rental income make for high net operating income and a strong ROI on Charlotte’s rental properties. 

However, if you decide to purchase an investment property in Charlotte using cash, you may want to look at the Cap Rate that the property offers. 

Build to Rent Homes

With a shortage of houses in the market, many investors are exploring the option of constructing homes to rent, also known as build-to-rent houses. Build-to-rent houses present a number of advantages for investors. First, the price of rents on build-to-rent houses is typically higher. This brings in more rental income for investors throughout the year. Second, maintenance costs for these types of houses are much lower due to their new condition. This means that operating expenses will be lower as not many repairs and replacements will be needed. Finally, many lenders offer short and long-term financing for investors who want to build houses and rent them out after, making it possible to invest even if you do not have the large amount of funds needed to construct a house.

Because of these characteristics, build-to-rent homes also present a high and dependable ROI for people looking to invest in rental properties in Charlotte.

In conclusion, if you are looking to invest in rental properties, the city of Charlotte in North Carolina is a safe bet. The growing job opportunities and standard of living that attract more people each day to the city, give Charlotte’s rental market great investment potential.