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Invest in Topsail Island

Even with the ups and downs of the economy, real estate continues to be one of the best long term investments a cautious, well informed person can make with the help of an experienced real estate company. The majority of the wealth in the United States has been built or maintained through real estate investments and there isn’t any reason that the average American can’t participate. In the Topsail Island Area, there are many ways to get a healthy return on real estate purchases.

Our area is well known for our Vacation Rental Properties that guests from around the world come to enjoy helping the property owners build equity and realize their investment. The advantage of a Vacation Rental Property in a resort destination like Surf City, Topsail Beach, or North Topsail Beach is that as a property owner, you get to use the vacant times or specific times for your own enjoyment of the beach.

Not all real estate on the island has a demand as a Vacation Rental Property, but can make for a good Long Term Rental Investment. Properties on the mainland towns of Sneads Ferry, Holly Ridge, and Hampstead make excellent Long Term Rentals. With the two cities of Wilmington and Jacksonville and the Marine Corp base Camp Lejune within easy commuting distance, our long terms rentals typically do not stay vacant for very long at all.

Most of the horror stories we have heard in recent years regarding real estate investments have involved the infamous “Flipper”; or person(s) who plan to buy low and sell high in a short (1 month to 3 year) time span. Generally speaking; Flipping is not for the average person nor would we recommend it to the average person. It is full of risk and isn’t everything that it’s cracked up to be on television or that you hear tall tales within your circles. For every successful story of “flipping” real estate that you hear about (whether true or not), there are typically 5 bad stories or situations that you’ll never hear about. Our advice is to proceed cautiously and with the help of an experienced Realtor, CPA, Attorney, and Contractor if you decide to get involved with flipping.

Some key points to talk your Realtor and CPA or Financial Advisor about regarding real estate investments are briefly described below. Keep in mind that with real estate investments you typically can take advantage of several of the opportunities below at the same time which ultimately lead to unparalleled returns:

• Rental Yield: This is your return from rental income which takes expenses, taxes, and other costs into account and then divides by the cost or value of the property. An example looks like this:
  • Annual Rent: $32,000.00
  • Annual Insurance Cost $1,200.00
    Annual Taxes $1,400.00
    Annual Repairs Budget $1500.00
    Percent of Rent Mgmt Fee of 18%
    These expenses total to Annual Cash Out of $9860
  • Income of $32,000 minus cost of $9860 = $22,140 rental income after expenses
  • Property Acquisition Cost $400,000.00
  • $22,140 divided by property value of $400,000 = Rental Yield of 5.5%
• Appreciation: While property values have shown that they do not always increase (as some people have thought before the financial crisis), they do historically appreciate over long term time frames and in short term time frames when bought at the right side of the value cycle. Obviously our advice is to buy at the bottom of the market, but don’t get hung up on finding the absolute bottom or you may miss your opportunity. Appreciation ultimately means realizing a gain when you do sell, or providing equity for a line of credit to use for other investments.
• Rent is Inflation Friendly: Rents typically increase with inflation, while your mortgage payments on your loan are typically stable. This increases your cash flow with more rental income but without the increased expense of owning the property. When inflation is up or during difficult financial times when it’s difficult for people to obtain loans, it can also mean more renters, more renters increase demand, more demand increases rents.
• Leverage: Using other people’s money to build value and wealth. Why buy one investment with a good yield when you can purchase three investments with good yields? Watch out for “creative financing”. Creative Financing may sound good on the front side, but it’s destroyed hundreds of thousands of families with foreclosures and bankruptcies on the backside.
• Paying Down the Loan: Amortization, or paying down the principle of the loan, frees up equity which can potentially be used for additional leverage for additional investments.
• Property Improvement for Equity: Most of us have seen the television shows in which an investor buys a house at a lower value because there’s something wrong with it, it’s missing critical features that today’s buyers want, or it’s just plain ugly. They have calculated the value of the improvement to potential buyers and if it exceeds the cost; they have an immediate increase in equity. Keep in mind that it needs to have a LARGE After Repair Value to make up for any sales costs or equity line expenses. This type of investment is not for the amateur and they need a good (and realistic) sense of construction, style, and value.

If you’re interested in real estate investments in the Topsail Island Area, please call our offices and ask to speak to one of our Real Estate Professionals. We have helped thousands of families build wealth through real estate and we can help you too.