Birmingham, AL Market

11 Replies

I keep hearing about Birmingham market in numerous podcasts as an up and coming city for investment.  What are your thoughts on the market and its potential growth?  Alabama has a historic stigma of segregation and racism, and would such social issue be something to be concerned as an investor?  

Based on the economic datas, I don't see much migration into the city, or jump in job growth in recent years.  Also I see a bit of high unemployment rate compare to other hot cities like Indy, KC, Memphis.

My partner and I currently flip in the Birmingham area. It has great potential!

@Kee You - I would call it another table for rolling dice.

Good Luck Investing

Vivek

@Kee You We are a Birmingham, AL turnkey company and we love it here! There has been a huge revamp of the downtown area in recent years and Millennial entrepreneurs have been flocking to the city. In general, our population is getting younger, which bodes well for future growth. In fact, our median age is lower than the state and national averages. Things down here aren't as dramatic as other markets - our population, like our property prices, grows at a slow and steady pace. 

While our history isn't something we can or should erase - we can't pretend the south isn't...the south - it's also not something that has to define us as we move forward. Birmingham has grown into a multi cultural hub, with a great diversity in employment industries, a fantastic university and teaching hospital, and a great growth in the tech and healthcare sectors. I'm biased, of course, but there's a good reason you keep seeing Birmingham pop up ;)

One of our team members recently spent absolutely ages researching and pulling data for an updated report on the Birmingham market for Get Rich Education. If you (or anyone else) is interested, feel free to shoot me a PM, or you can get it yourself from Keith's awesome site: http://www.getricheducation.com/Birmingham/

There a many great markets all over the country, but we're happy to Birmingham-based!

Best of luck!

Kee You Birmingham is ten to twenty years behind us on the west coast. Shen I visit my properties... Starbucks is filled with affluent house wives and there is a lot of segregation... I would not say it's racism.... I mean it's not like it's the 1960s.

Look the numbers work and my portfolio performs per design. The schools aren't great but the numbers work and I cashflow like a MF.

@Clayton Mobley Thank you for the input.  I did catch your company on Get Rich Education, and it was one of the podcasts I was referring to.  I've connected with your company and looking into different opportunities at the moment.  More than the economic factors, I do believe that working with the right team is essential to successful investments.  

I'm in the same boat. BH seems like a great cashflow market to invest since it seems B properties are abundant for ~100k coupled with low tax, and reputable providers there. However, my concern is vacancy. I've dug through the forums and noticed a few people over the years comment that they've had longer vacancies (months). However, there may be other factors that's not accounted for so I'm not sure what to make of it. Others have commented on being leased before escrow closed too so...

@Lane Kawaoka twenty years is an eternity haha.  Sent you a PM

@Dylan Murray What areas do you recommend for buy and hold?  

@Albert L. I agree with the low tax rate.  low tax rate = more cashflow.  Maybe @Clayton Mobley can give his 2cents on vacancy rate.  I'm sure it depends on the areas and other factors as well

Hey @Albert L. and @Kee You, you're right, vacancy really depends on location. It, of course, also depends a lot on the quality of the management team (and Kee is right on the money that working with the right team is absolutely ESSENTIAL to a successful investment). 

For us, our vacancy is actually quite low, currently around 3.5% for the past 52 week rolling period. This is the product of a number of factors. 

Firstly, we only invest in areas that people will want to call home, only B/B+ properties. You'll find that vacancy and turnover go up considerably the further down the property class scale you go. 

Another factor is the rehab. Because we do such intense top-to-bottom rehabs, our properties are desirable to tenants that have the income and stability to pay rent on time every month, and who want homes, not just a place to stay for a few months. Our minimum lease term is 2 years, but our average tenancy is 36 months, so most people are staying longer than they have to. Having a high quality property with new capex items like HVAC, flooring, roof, etc, means our properties have fewer maintenance call outs, improving the quality of life for our tenants and keep our maintenance rate low (2.6%). S

Lastly, you have the issue PM quality. Since our rehabs are so thorough, we have fewer maintenance call outs. Plus our average time to resolve maintenance issues is 24 hours or less, so it's easy to keep good tenants happy. Since we never defer maintenance, we are able to re-lease properties and complete turnover pretty quickly, which further minimizes vacancy. In addition, the quality of the tenants we select means that when we do have turnover, it's usually smooth and cheap. Our average net move out cost is only $202, last I checked. Which means most of them come in at $0 because good tenants treat properties well and get their deposits back, while the few that require work push the average up a bit. These are the areas where the quality of your PM team can make or break your vacancy. You have to treat tenants well to keep the good ones - and ideal rental investment is one in which the investor and the tenant are happy, which is all about PM. Good tenants stay longer and treat the property better, which saves you money on vacancy, maintenance rates, and turnover.

Birmingham, like every city, has neighborhoods of every class. So to take the average vacancy rate for any whole city is not really a good way to assess investment potential.  You have to drill down to the vacancy rate experienced by a given team, because it so dependent on where they invest and how they do their jobs.

Hope that was helpful!

Hi all,

I also have kind of same question about birmingham, Al. Can you suggest some good neighborhoods to look for and is this pure cashflow market or we can also get some appreciation on property?

Howmuch does it take to maintain a property in this market?

Thanks for help in advance.

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