Birmingham Alabama. Any advice?

21 Replies

I primarily invest in Indianapolis and I am looking to expand my portfolio into another market.  Birmingham Alabama has been on my radar for awhile and I'm looking to take it one step further and dig deeper into researching this market.  

Can any of you investors out there give me your thoughts on this area?  

What does Birmingham have going for it that makes it a good market to invest in? 

Much appreciated.  

Hi Joey,

I've been looking at these two markets and am actually in the process of closing on a property in Birmingham. From posts by local investors, the neighborhoods in both cities can vary greatly by the block. For the "B" class 3BR SFH properties that I have researched, the rent/price ratios are similar and on paper good cash flow can be found in both cities. Property taxes in Birmingham are lower - about 1% of the assessed value, compared to 2% to 2.5% in Indianapolis. Insurance rates from what I can tell are similar. According to the BLS, in December the two cities had similar unemployment rates with Birmingham at 5.2% and Indy at 5.4%, although media reports seem to indicate that job growth in Birmingham has been slower than expected. The winters are more harsh in Indy but Birmingham has had tornado damage in recent years. And the hedge funds seem to have bought more in Indy up until now.

Bobby

Well done @Bobby Theerathorn  !  You've got it pretty well figured out. 

@Joey Noel  our market is pretty much easily divided by territory into C's and B's.  Most of the stuff south of downtown is A market.  Going way south brings you back to the B's.  It is very much a block by block deal in the C market.  Some areas have a better concentration of great houses and others are not so much.  Are you looking to buy turn key or build it yourself? If Decas Group can help with management, please let us know.

@J Benoit  I'm looking to buy turnkey properties.  Any suggestions on companies that could help me?  

@J Benoit are you looking in Indy or Birmingham? If Indy, I can help you. Just PM me if interested.

I'm trying to diversify and move into another market.  I already have 5 properties in Indy.

@Joey Noel  

  I own properties in both markets... As with your Indy properties PM will be key...

Along with buying right to begin with...

I see B ham as a little under the radar,,, and a market that is being found by bigger players.. B ham  is showing some run up in values from what I see... could be prime time !!

Jay,

I don't want to hijack the thread, but from other postings I've read of yours I was under the impression that you were divested from all of your SFR rentals. May I ask if you are buying mostly B-class in B-Ham?

We own a few C-class in Eastlake (perhaps C-) and I am finding that lenders are shying from including these in a blanket loan we are putting together. Even if they appraise for expected value, one lender is limiting the LTV and raising the rate on the entire package because of demographics from these homes, which are only about 10% of the total portfolio value.

As a lender yourself, could you guide me toward areas which would be more lender-friendly, even if the cash flow is not quite as good? 

Many thanks.

@Joey Noel  I'll be moving into the Bham market in 3 months and looking to get the real estate game. Let me know if I can be of assistance.

@J Benoit

@Jay Hinrichs

J & Jay,

What is your knowledge/experience with Alabama's tenant laws. Is it an investor friendly state for buy and holds?

Thanks.

@Tony Gunter

  I will defer to @J Benoit

  since he manages about 500 of these bad boys...

as a general statement land lord laws in the south are pro landlord. When I visit the south and am looking at inventory etc.. I will always see a few set outs.. you know all the tenants stuff sitting on the curb.. not sure who ends up picking it all up.. but when they say set out they mean set out.

@Tony Gunter

 Alabama is not as aggressive as Texas and some other states that are very Pro Landlord.  We have a strong tenant population and thus we have an average state in terms of tenant laws (in my opinion).  Evictions can and do happen.  The time can be a little lengthy depending on how much hard ball the tenant wants to play.  They key is to screen the tenants in the beginning and curb most of that unpleasantness the can come along.

We have gone through the eviction process with a few tenants.  The attorney we use is well versed in the Landlord/Tenant laws and can also assist the owners with wage garnishments if the owner wishes to pursue that.

Feel free to read up on the topic here:

http://ali.state.al.us/legislation/landlord_tenant.pdf

I'd be happy to help with more specific information if you need anything else.

Funny you post that. I just glanced over that document actually.

@J Benoit

Alabama does seem a more tenant friendly  than some of the other southern states. I noticed in section 4.401 dealing with evictions they seemed to get mushy with regards to supplying a timeline for things to happen with regards to evictions. A lot of the wording felt like "when the sheriff gets around to it" kind of nebulous wording. As you say though, the trick is to get good people in you homes and avoid the issue all together.

I will be relocating to an area within striking distance of B'ham this summer. I am just scoping it out for now.

Thanks to you and @Jay Hinrichs for your input.

Now after looking into the census data on Birmingham it gives me pause. The area is population static, if not shrinking slightly.

Anyone have any thoughts? I am looking at this from a B&H perspective.

@Tony Gunter , greetings from a former UD alum, now living in Alabama.  You can get an eviction fairly quickly in Alabama, but it requires managing the lawyer and the process. For example, most lawyers will file the eviction lawsuit and also ask for damages for unpaid rent, damage to property, etc. This requires personal service on the tenant, which is often hard to do. If your initial lawsuit simply asks for the eviction order (you can amend later and ask for damages) then all you need is what is called "nail and mail" service.  The process server makes one attempt to serve the papers on an adult at the premises, if nobody is there, he tapes a copy to the door, and mails the papers via regular mail within 24 hours. Service is counted as effective from the date of mailing. I recommend they mail the same day--it cuts out one extra day in the process.  You can wait for a Sheriff's deputy to do this, or you can hire a private process server yourself, for around $50. It can be anybody except a party to the lawsuit. Once you have service, the tenant has 14 days to answer. No answer, and you get a default judgment. It's not automatic, you have to ask for it. That's where many lawyers let you down, by not doing things as quickly as they can. The tenant has 7 days after that to appeal to the next higher court (what you call District Court in Texas, but is called Circuit Court in Alabama), but must pay all past due rent into court or the eviction order will proceed.

@Denise Evans

Denise. Unfortunately your advise sound like you have actually personally traveled this road before. I have too, but not in AL. Thanks for your detailed DIY guide, very insightful.

Do you happen to have an opinion about my comment related tot he demographics of Birmingham? Is it shrinking, up and coming, flat lined? It is always nice to put your money in a B&H's that might get some appreciation too. How about the RE market in general in the area?

@Tony Gunter

The Birmingham market is stable because of the healthcare and biosciences industries.  Parts of town like Eastlake and Avondale are coming back, being gentrified.  Trussville, to the NE of town, is a very strong market.  Houses in the $50K range are being snapped up by REITs, who are doing $20K of rehab/upgrades, and then placing on the market for rents at $1,200 per month. They are staying vacant, because the market for those houses is down around $700.  But, the REITs keep buying more houses. Must be something to do with funky REIT accounting, because nobody seems able to understand it.  Properties in other price ranges are hard to find, but there are bargains, still.

If you are interested, I can connect you with someone who used to be a student of mine at University of Alabama College of Commerce, and who got himself through school on income from his real estate investments. He's now in Birmingham, doing well, but always looking for equity partners so he can do more deals. Very conservative, very solid, exceptionally smart and hard working. Never cuts corners. Analyzes everything six ways from Sunday.  Knows the market intimately.

There is a HUGE market of tax sale properties on the state inventory, located in Jefferson County. Contact me via PM, and I'll tell you about that play. It's rather more complicated than a BP post.

@Tony Gunter

@Denise Evans

I've seen the medical buildings there in person.  Very impressive campus.  Birmingham seems to have a lot of revitalization going on throughout the entire city.  The uptown area also impressed us and there is clearly evidence of new construction and revitalization in the downtown core.  

This post has been removed.

Free eBook from BiggerPockets!

Ultimate Beginner's Guide Book Cover

Join BiggerPockets and get The Ultimate Beginner's Guide to Real Estate Investing for FREE - read by more than 100,000 people - AND get exclusive real estate investing tips, tricks and techniques delivered straight to your inbox twice weekly!

  • Actionable advice for getting started,
  • Discover the 10 Most Lucrative Real Estate Niches,
  • Learn how to get started with or without money,
  • Explore Real-Life Strategies for Building Wealth,
  • And a LOT more.

Lock We hate spam just as much as you