Birmingham Market by Class

General Real Estate Investing
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Birmingham Market by Class

Jason CoryPro Member
Real Estate Broker · Birmingham, AL · Member since 2018 · 264 posts · 381 votes

Class A

Mountain Brook - https://www.neighborhoodscout.com/al/mountain-brook

Homewood - https://www.neighborhoodscout.com/al/homewood

Vestavia Hills - https://www.neighborhoodscout.com/al/vestavia-hills

Hoover - https://www.neighborhoodscout.com/al/hoover

Class B

Alabaster - https://www.neighborhoodscout.com/al/alabaster

Pelham - https://www.neighborhoodscout.com/al/pelham

Gardendale - https://www.neighborhoodscout.com/al/gardendale

Trussville - https://www.neighborhoodscout.com/al/trussville

Helena - https://www.neighborhoodscout.com/al/helena

Chelsea - https://www.neighborhoodscout.com/al/chelsea

Indian Springs - https://www.neighborhoodscout.com/al/indian-springs-village

Class C

Fultondale - https://www.neighborhoodscout.com/al/fultondale

Centerpoint - https://www.neighborhoodscout.com/al/center-point

Roebuck - https://www.neighborhoodscout.com/al/birmingham/roebuck-crest-estates

Forestdale - https://www.neighborhoodscout.com/al/birmingham (Unincorporated)

Adamsville - https://www.neighborhoodscout.com/al/adamsville

Graysville - https://www.neighborhoodscout.com/al/graysville

Hueytown - https://www.neighborhoodscout.com/al/hueytown

Pleasant Grove - https://www.neighborhoodscout.com/al/pleasant-grove

Mt. Olive - https://www.neighborhoodscout.com/al/gardendale

Irondale - https://www.neighborhoodscout.com/al/irondale

Moody - https://www.neighborhoodscout.com/al/moody

Leeds - https://www.neighborhoodscout.com/al/leeds

Grayson Valley - https://www.neighborhoodscout.com/al/birmingham (Unincorporated)

Pinson - https://www.neighborhoodscout.com/al/pinson

McCalla - https://www.neighborhoodscout.com/al/bessemer (Unincorporated)

Mulga - https://www.neighborhoodscout.com/al/mulga

Minor - https://www.neighborhoodscout.com/al/mulga (Unincorporated)

Morris - https://www.neighborhoodscout.com/al/kimberly (Unincorporated)

Kimberly - https://www.neighborhoodscout.com/al/kimberly

Class D

Midfield - https://www.neighborhoodscout.com/al/midfield

Tarrant - https://www.neighborhoodscout.com/al/tarrant

West End - https://www.neighborhoodscout.com/al/birmingham/zipcode/35211

Ensley - https://www.neighborhoodscout.com/al/birmingham/zipcode/35208

Inglenook - https://www.neighborhoodscout.com/al/birmingham/inglenook

Class F

Bessemer - https://www.neighborhoodscout.com/al/bessemer

Fairfield - https://www.neighborhoodscout.com/al/fairfield

Eastlake - https://www.neighborhoodscout.com/al/birmingham/zipcode/35206

Lipscomb - https://www.neighborhoodscout.com/al/lipscomb

Brighton - https://www.neighborhoodscout.com/al/brighton

North Birmingham - https://www.neighborhoodscout.com/al/birmingham/zipcode/35207

Comparison by Class

Homewood – Class A

Median Home Value - $379,563

Median Household Income - $66,573

Individuals Below the Poverty Level – 11.1%

Crime Index – 8 out of 100 (100 being Safest)

School System – Top 10 in the State

Average Market Rent - $1,420

Alabaster – Class B

Median Home Value - $179,984

Median Household Income - $73,325

Individuals Below the Poverty Level – 10.2%

Crime Index – 40 out of 100 (100 being Safest)

School System – Top 50 in the State

Average Market Rent - $1,362

Centerpoint – Class C

Median Home Value - $117,940

Median Household Income - $39,134

Individuals Below the Poverty Level – 26.7%

Crime Index – 12 out of 100 (100 being Safest)

School System – Lower 3rd of State

Average Market Rent - $1,162

Tarrant - Class D

Median Home Value - $73,542

Median Household Income - $26,800

Individuals Below the Poverty Level – 32.6%

Crime Index – 1 out of 100 (100 being Safest)

School System – Lower 3rd of State

Average Market Rent - $1,045

Alabama is similar to all other states regarding property class. They are driven mainly by school systems and crime statistics. Since Birmingham is a smaller MSA the per capita rates for crime are skewed and typically reflect more crime than actually happens.

Homewood is a Class A area however, due to recent annexations the crime stats reflect an area of higher than normal crime. Homewood is an affluent suburb of Birmingham. It was chosen as a comparison to show this fact. It has one of the highest median home values and income in the state. The school system is consistently rated in the top 5 of the state. This is a predominately owner-occupied market.

Tarrant City is a lower income area that is a predominately tenant-occupied market that receives assistance in one form or another. This area consistently rents above market. It is a higher crime area of Birmingham.

Birmingham is not the crime filled market data would typically suggest. It consists mainly of domestic abuse and/or petty vandalism.

If you are investing in Birmingham I ask you do your own research to verify the data provided. Class C & D areas are the best markets for renting properties. The Class D areas in Birmingham would likely be Class C areas in other markets however, the classes have been assigned based on local activity and knowledge of the markets as a whole for Birmingham and the MSA.

I used to Appraise Real Estate prior to Investing. I only invest in Class C or D areas since the return is higher and the pool of potential occupants never decreases. In Class A or B areas the return is lower since the entry prices are higher and the return is typically half of predominately rental areas. If you are investing for cash flow it is better to invest in areas that reflect your goals instead of investing in areas that do not offer the returns you are seeking.

If you have any questions about Birmingham I welcome you to reach out to discuss further.

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Most Popular Reply

Tal Simpson
Rental Property Investor · Birmingham, AL · Member since 2017 · 53 posts · 56 votes
7y

@Cliff C. East Lake has some areas I’d recommend, but like many of the investor-heavy areas in Bham, it’s a block to block situation. In East Lake, stay on the South East Lake side, and try to stay in the eastern part toward Ruffner. At about 77th St South and northeast towards Roebuck Springs you will start to see a noticeable change for the better.

A little further north of East Lake is Roebuck, which is a better area but still modest enough to offer the occasional 50k or less house. Also on the north side, there are parts of Tarrant that are pretty decent.

In west Bham I would look at midfield and then some more discreet areas of west Bham like Belview Heights, Bush Hills, Central Park, and West End Manor.

Happy hunting!

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  • Sol Renato
    Member since 2018 · 2 posts · 1 vote
    8y

    Great information Jason, thanks!

    I`m new at this market and it gave me a lot of clarification.

    1Reply
  • Cliff C.Pro Member
    Rental Property Investor · Spring Hill, TN · Member since 2015 · 45 posts · 12 votes
    7y
    Originally posted by @Tal Simpson:
    Originally posted by @Account Closed:

    I fully expect rent ratios to be different at D and A class properties. I do see that in other markets where I invest in. For example in Indy a class B 100-120K home rents at 1% while a class C 70-80K home rents at 1.2% and class D 50K home may rent at almost 2%. But there is a large drop in actual rents from 1200/month down to $500/month. What  I have a hard time with is your statement of a Class D property renting for over 1K per month in Birmingham while a class A $300K property only fetches 1400.

     I don't agree at all with OP's assessment.  I'll give you an example - I have a Class A rental house (Mountain Brook) that brings in $2800/mo (multi year lease) that I bought for $350k, and then I have about 15 or so Class C to C- rentals (Eastlake, Midfield, Fairfield, Tarrant, West End) that on average pull in $600-650/mo after picking them up for 25-28k each and put a little work into them.  Bham sounds similar to Indy - solid Class B houses that don't need much work will come in around the 100k up to 200k price range and pull in $900-1500 in rent per month.  Basically, you can hit the 1% rule in Bham Class B areas, the 2% rule in Class C/C- and below areas, and are lucky to get the 0.75% range in Class A areas.

    What class C areas do you suggest and like the most?  I am looking to invest in some houses less than $50k in the birmingham area. I have heard East Lake is decent area for cash flow with a good mix and not a war zone  

    I am driving there tomorrow to look at some neighborhoods so any input is very much appreciated. Thanks!

    0Reply
  • Jason CoryPro Member
    OP
    Real Estate Broker · Birmingham, AL · Member since 2018 · 264 posts · 381 votes
    7y
    Originally posted by @Cliff C.:
    Originally posted by @Tal Simpson:
    Originally posted by @Account Closed:

    I fully expect rent ratios to be different at D and A class properties. I do see that in other markets where I invest in. For example in Indy a class B 100-120K home rents at 1% while a class C 70-80K home rents at 1.2% and class D 50K home may rent at almost 2%. But there is a large drop in actual rents from 1200/month down to $500/month. What  I have a hard time with is your statement of a Class D property renting for over 1K per month in Birmingham while a class A $300K property only fetches 1400.

     I don't agree at all with OP's assessment.  I'll give you an example - I have a Class A rental house (Mountain Brook) that brings in $2800/mo (multi year lease) that I bought for $350k, and then I have about 15 or so Class C to C- rentals (Eastlake, Midfield, Fairfield, Tarrant, West End) that on average pull in $600-650/mo after picking them up for 25-28k each and put a little work into them.  Bham sounds similar to Indy - solid Class B houses that don't need much work will come in around the 100k up to 200k price range and pull in $900-1500 in rent per month.  Basically, you can hit the 1% rule in Bham Class B areas, the 2% rule in Class C/C- and below areas, and are lucky to get the 0.75% range in Class A areas.

    What class C areas do you suggest and like the most?  I am looking to invest in some houses less than $50k in the birmingham area. I have heard East Lake is decent area for cash flow with a good mix and not a war zone  

    I am driving there tomorrow to look at some neighborhoods so any input is very much appreciated. Thanks!

    The only areas you'll find under $50k all in are the D areas I listed. Every C area I listed will eventually turn into a D because of the turnkey providers selling them as rentals. All C areas used to be predominantly owner occupied areas but are moving to predominantly rental areas. Rumor has it that the turnkey providers & funds have completely left Centerpoint because they ruined the area with tenants & can't sell them to investors anymore. Value goes down, crime goes up every time.

    Go to areas where rent drives demand not where mortgages drive demand if you're looking for cash flow. Those are always the D areas. Values are low & returns are high. 

    0Reply
  • Tal Simpson
    Rental Property Investor · Birmingham, AL · Member since 2017 · 53 posts · 56 votes
    7y

    @Cliff C. East Lake has some areas I’d recommend, but like many of the investor-heavy areas in Bham, it’s a block to block situation. In East Lake, stay on the South East Lake side, and try to stay in the eastern part toward Ruffner. At about 77th St South and northeast towards Roebuck Springs you will start to see a noticeable change for the better.

    A little further north of East Lake is Roebuck, which is a better area but still modest enough to offer the occasional 50k or less house. Also on the north side, there are parts of Tarrant that are pretty decent.

    In west Bham I would look at midfield and then some more discreet areas of west Bham like Belview Heights, Bush Hills, Central Park, and West End Manor.

    Happy hunting!

    4Reply
  • Jay HinrichsBusiness Member
    Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
    7y

    James wise did this :)

    Podcast Guest on Show #222
    JLH Capital Partners51 Review
    WebsiteView Page
    2Reply
  • James Wise
    Real Estate Broker · Cleveland Dayton Cincinnati Toledo Columbus & Akron, OH · Member since 2013 · 31k+ posts · 20k+ votes
    7y
    Originally posted by @Jay Hinrichs:

    James wise did this :)

    It's true Jason Cory. Watch out, you never know who's going to accuse you of being a racist for creating this Birmingham document lol. Apparently analyzing the risk of an investment based on things like crime, property condition, & income of the tenant base is racist these days.

    0Reply
  • Jason CoryPro Member
    OP
    Real Estate Broker · Birmingham, AL · Member since 2018 · 264 posts · 381 votes
    7y
    Originally posted by @James Wise:
    Originally posted by @Jay Hinrichs:

    James wise did this :)

    It's true Jason Cory. Watch out, you never know who's going to accuse you of being a racist for creating this Birmingham document lol. Apparently analyzing the risk of an investment based on things like crime, property condition, & income of the tenant base is racist these days.

    I guess it's a good thing that when the truth is told it always finds a way to work itself out. 

    0Reply
  • James Wise
    Real Estate Broker · Cleveland Dayton Cincinnati Toledo Columbus & Akron, OH · Member since 2013 · 31k+ posts · 20k+ votes
    7y
    Originally posted by @Jason Cory:
    Originally posted by @James Wise:
    Originally posted by @Jay Hinrichs:

    James wise did this :)

    It's true Jason Cory. Watch out, you never know who's going to accuse you of being a racist for creating this Birmingham document lol. Apparently analyzing the risk of an investment based on things like crime, property condition, & income of the tenant base is racist these days.

    I guess it's a good thing that when the truth is told it always finds a way to work itself out. 

     It does tend to put the trolls in their place.

    1Reply
  • Jay HinrichsBusiness Member
    Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
    7y
    Originally posted by @Jason Cory:
    Originally posted by @James Wise:
    Originally posted by @Jay Hinrichs:

    James wise did this :)

    It's true Jason Cory. Watch out, you never know who's going to accuse you of being a racist for creating this Birmingham document lol. Apparently analyzing the risk of an investment based on things like crime, property condition, & income of the tenant base is racist these days.

    I guess it's a good thing that when the truth is told it always finds a way to work itself out. 

    the newspaper I think I read this right.. was specifically claiming that by Jim doing this list of areas by ABCDF that he was in essence redlining  which in fact is a bank term.. not an investor term ..  

    Podcast Guest on Show #222
    JLH Capital Partners51 Review
    WebsiteView Page
    0Reply
  • Jason CoryPro Member
    OP
    Real Estate Broker · Birmingham, AL · Member since 2018 · 264 posts · 381 votes
    7y
    Originally posted by @Jay Hinrichs:
    Originally posted by @Jason Cory:
    Originally posted by @James Wise:
    Originally posted by @Jay Hinrichs:

    James wise did this :)

    It's true Jason Cory. Watch out, you never know who's going to accuse you of being a racist for creating this Birmingham document lol. Apparently analyzing the risk of an investment based on things like crime, property condition, & income of the tenant base is racist these days.

    I guess it's a good thing that when the truth is told it always finds a way to work itself out. 

    the newspaper I think I read this right.. was specifically claiming that by Jim doing this list of areas by ABCDF that he was in essence redlining  which in fact is a bank term.. not an investor term ..  

    When I was growing up my father said if you're in Real Estate & no one talks about you, you aren't any good. 

    It's a compliment in this business. 

    1Reply
  • Jay HinrichsBusiness Member
    Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
    7y
    Originally posted by @Jason Cory:
    Originally posted by @Jay Hinrichs:
    Originally posted by @Jason Cory:
    Originally posted by @James Wise:
    Originally posted by @Jay Hinrichs:

    James wise did this :)

    It's true Jason Cory. Watch out, you never know who's going to accuse you of being a racist for creating this Birmingham document lol. Apparently analyzing the risk of an investment based on things like crime, property condition, & income of the tenant base is racist these days.

    I guess it's a good thing that when the truth is told it always finds a way to work itself out. 

    the newspaper I think I read this right.. was specifically claiming that by Jim doing this list of areas by ABCDF that he was in essence redlining  which in fact is a bank term.. not an investor term ..  

    When I was growing up my father said if you're in Real Estate & no one talks about you, you aren't any good. 

    It's a compliment in this business. 

    And my Dads attorney back in the 60s said any press is good press except heinous criminal acts..   and of course this was pre internet  :)

    Podcast Guest on Show #222
    JLH Capital Partners51 Review
    WebsiteView Page
    2Reply
  • Russell Pitts
    Rental Property Investor · Kirkland, WA · Member since 2016 · 60 posts · 19 votes
    7y

    Hi Jason, what are your thoughts on this neighborhood? I didn't see it in your list. I'm researching a property on Northland Ave SW.

    https://www.neighborhoodscout.com/al/birmingham/powderly

    0Reply
  • Jason CoryPro Member
    OP
    Real Estate Broker · Birmingham, AL · Member since 2018 · 264 posts · 381 votes
    7y
    Originally posted by @Russell Pitts:

    Hi Jason, what are your thoughts on this neighborhood? I didn't see it in your list. I'm researching a property on Northland Ave SW.

    https://www.neighborhoodscout.com/al/birmingham/powderly

     Powderly is part of West End Community. It's included in the 35211 zip code. I own a couple of houses in the area. it's not difficult to buy and renovate for $35,000-$40,000 & receive $750 or higher rent.  The last house I rented in powderly West End was in August with an $858 voucher from the Housing Authority for a 3-bedroom 1-bath house. It's a D area driven by assistance to pay the rent. Just like every other D area it's Street by Street so you really need to either buy with the tenant in place or visit & purchase a house on a street you think is good. 

    0Reply
  • Cliff C.Pro Member
    Rental Property Investor · Spring Hill, TN · Member since 2015 · 45 posts · 12 votes
    7y

    @Tal Simpson have you had any trouble financing these properties in Eastlake? I had a deal in Center Point and it didn’t appraise. Would i run into the same issue in this area? The market prices seem to have increased.

    Thanks!!!

    0Reply
  • Tal Simpson
    Rental Property Investor · Birmingham, AL · Member since 2017 · 53 posts · 56 votes
    7y

    @Cliff C. We have had much better success with the local banks here. The nationwide lenders tend to want properties worth at least 75k each - and East Lake does have some but most are more like 40-50k - but the local banks feel better about knowing their collateral is right there in their back yard. But to answer your question, yes we have gotten loans on cheap rental houses.  One of our houses on our last blanket loan with a local bank appraised for 19k - which is crazy because we get $625/mo for it and could sell it for 40k - but others appraised for much more than we paid and so it evened out and wasn't a problem. 

    0Reply
  • Rob Barry
    Rental Property Investor · Ramsey, NJ · Member since 2016 · 72 posts · 55 votes
    7y

    @Cliff C. I know someone who bought a block of properties in BHam with a commercial loan. That seems to be the thing to do if you’re out-of-state, so your holdings have some gravity. Especially with all the funds buying up big swaths of neighborhoods everywhere. 

    0Reply
  • Jordan Page
    Rental Property Investor · Birmingham, AL · Member since 2018 · 31 posts · 11 votes
    7y

    @Jason Cory Woah, this thread goes deep... can’t wait to dive into this!

    I have a question about the current/future state of Eastlake area... particularly near the Ruffner Mtn area. I’m noticing a lot of that area is being fixed and flipped right. It seems like the majority of the houses for sale in Bham are near that area. Nice but still very affordable.

    Do you think that Eastlake has the potential to turn into a nice area, yet still affordable since it’s not really close to downtown? I’d love any thoughts from anybody, looking for that first rental property & for some reason getting drawn to Eastlake!

    0Reply
  • Jason CoryPro Member
    OP
    Real Estate Broker · Birmingham, AL · Member since 2018 · 264 posts · 381 votes
    7y

    @Jordan Page You can make money in Eastlake around Ruffner Mountain. The issue is that the east precinct had 84 armed robberies in 2017 compared to what we think as our worst area of North Birmingham only having 19. 4 times as many doesn't set well with me. I have been selling my Eastlake houses because I'm not sure what is coming or why the uptick in crime. Usually when outsiders begin moving in there is an uptick in crime. One side trying to keep it the same with the other side trying to make it better. It's a who is going to win scenario. As I said you can make money renting in Eastlake but while there is a struggle for who is going to win I am leaving the area until it's sorted out. If you decide to invest there you will come out great if the side trying to make it better wins. If the side trying to keep it the same wins you will lose money when prices plummet since no one will be able to sell their houses for what they paid for them. There's a risk with every investment but that's your risk with Eastlake currently.

    I typically stick to holding in areas where people are happy with the way things are, whether nice or junk. People always resist change. It's human nature. 

    0Reply
  • Cliff C.Pro Member
    Rental Property Investor · Spring Hill, TN · Member since 2015 · 45 posts · 12 votes
    7y

    I have a question about Section 8 properties. What do you budget for repairs and maintentance usually when evaluating these properties?  I understand that i should expect and budget for more repairs expense with low income housing but what should my expectation be?

    Also, in your experience is the increase in repairs with Sec 8 housing typically due to the tenant or the quality of house?

    Thanks for everyone’s help!

    0Reply
  • Jason CoryPro Member
    OP
    Real Estate Broker · Birmingham, AL · Member since 2018 · 264 posts · 381 votes
    7y
    Originally posted by @Cliff C.:

    I have a question about Section 8 properties. What do you budget for repairs and maintentance usually when evaluating these properties?  I understand that i should expect and budget for more repairs expense with low income housing but what should my expectation be?

    Also, in your experience is the increase in repairs with Sec 8 housing typically due to the tenant or the quality of house?

    Thanks for everyone’s help!

     My cost are always less than with a property not on Section 8. If you repair any house the right way it will need less repairs, depending on the tenant of course. Older houses were built a lot better than houses from even the 70's or 80's. It takes a real effort to tear up an older house. The needing more repairs is a myth. I've had one that was rented in July. I've heard from the tenant twice in 8 months. Both times were the p-trap because they store their pots below the sink and keep bumping the p-trap. I haven't had a call from another tenant in that time.

    Everyone thinks because it's low income it's low quality but it's the opposite. They don't appraise like suburb houses that never actually produce a profit to the buy and hold investor. They look better and they can get a loan. Investing in Section 8 is where you will actually make money and not be dependent on the economy. Even in a downturn there will be more people that need assistance. Of course picking the right house in the area is important but everything you've heard about Section 8 is probably inaccurate. The margins are too low for most turnkey providers to make money selling them. You have to hold them a couple of years before selling them to make money with a sale. By then it's paid for itself and you wind up making twice as much since the sales price is completely profit.

    Invest for how you intend to use the property.

    Highest and Best Use

    It’s not enough to have money to buy Real Estate as an investment. You also need to make sure each investment passes the 4 tests of the Highest and Best Use of the property.

    The 4 tests of the Highest and Best Use are;

    • Financially Feasible – the property must generate adequate revenue to justify the cost plus provide a profit for the investor. Examining the remaining economic life of a property is important because it directly affects the profitability. This can be overcome by renovating the property so long as, the cost doesn’t exceed the value of the property in the current market and/or foreseeable future.
    • Legally Permissible – This test includes those properties that conform to current zoning, government regulations, and not restricted by deed or covenants. Property that predate existing zoning and/or other regulations may be legally nonconforming. This is referred to as grandfathered use. If the property is damaged or destroyed the property will have to become a conforming property. This usually means the existing structure is demolished and building a new structure that is legally conforming to current zoning and other regulations.
    • Physically Possible – This is the test that is easier to understand. For example, you can’t build a 15,000 sq ft building on a 10,000 sq ft lot. If you can physically do it this test is passed.
    • Maximally Productive – This is the test that many investors fail in Real Estate. This test provides the avenue to determine if the property makes the most money. In order to be maximally productive, the correct usage of the property is analyzed. You wouldn’t rent an office as a house and expect to make the most money. This is also where buying homes in affluent areas to rent doesn’t make sense. Affluent areas bring people that can buy their home therefore, the rent amount wouldn’t return the most money. The demand in affluent areas is created by retail sales. The demand in predominately rental areas, i.e., lower income areas, is created by available properties that can be rented. These are maximally productive usages in Real Estate.

    You can read more on my website about property usage.

    0Reply
  • Miguel Francis Jr
    Rental Property Investor · Birmingham, AL · Member since 2017 · 3 posts · 2 votes
    7y

    @Ariel Robinson are you still interested in Ensley area?

    0Reply
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