Ft. Rucker Area Research - Investment Course of Action for review
BP I’m moving forward with my plan.
Recently I went down to the Enterprise, AL area to get an “eyes-on” what will be my future stomping ground. For context, I’ll be moving there for approximately a year to complete military training. I am also looking to start my real estate investment future with a “house-hack”. After an initial research phase (internet based) I decided to focus on multi-family properties, specifically quadplexes.
Here’s what I gathered from an area study:
This area (Enterprise, Daleville, Ozark: Coffee and Dale Counties) is anchored by aviation. Ft. Rucker is the largest employer in the area. This is supported by other aviation relation industries and then followed by poultry, automotive, and educational services. Make no mistake, outside of Dothan, AL (the nearest large city) this place runs on Rucker. That means a large part of the population is transient. Military members and family come into town for training (1 year) or a tour of duty (3 years) then rotate out or retire in place. The per capita income is ~24k and median household income is ~50k. Unemployment is sitting around 7-9% for most areas. So forth and so on… these are just facts without the context of actually being on the ground.
What I gathered from being on the ground:
-There seems to be a major gap in quality housing on the middle to lower end of housing. Interestingly enough, its also right below the military BAH (Basic Allowance for Housing) rate (less than $700).
-There is an overabundance of town homes/condos priced just at BAH rates for junior officers and warrant officers($700-1100), which is a large population on Ft. Rucker.
-There are fewer typical apartment complexes than I am used to seeing outside of military bases. This may because of the sheer number of town homes/condos. Rents are again, tied to BAH rates.
-The city of Enterprise is definitely the anchor of commercial options with its residential areas extending from the base gates as typical for military towns. Daleville seems to be the forgotten corner of base side living with some low income areas. Ozark is the northern, small town living area with not as many commercial/shopping/eating options as Enterprise.
-Ft. Rucker has 3, 24-hour gates. They exit into Enterprise, Daleville, and Ozark. As usual, most businesses and residential areas are found along these corridors. The corridors extend to the townhouse/apartment/commercial side (Rucker Blvd-Enterprise), the low income-forgotten side (North Daleville), and the rural area, small town of Ozark. Two other gates open during what are typical business hours and exit to high end housing areas (Faulkner) and rural areas (Newton). Traffic patterns are typical for military bases.
-On post housing has gone through a major facelift and most are well updated. Though there is a waiting list, its not nearly as long as other places and there is availability. With the required early hours of training it is very desirable to stay on post.
Here’s why I decided to focus on quadplexes specifically:
There are too many choices for military folks to live comfortably in their own dwellings. The rental market prices are not high enough to force people into renting individual rooms to make it work financially, as rents are generally tied to BAH rates. SFH prices are relatively low as well and there are many for sale or for rent.
For the sake of simple explanation I will now separate ‘military’ from ‘locals’, as in non-military affiliated renters.
For locals looking for sub-BAH rate housing there are many choices but, man….many aren't well kept. I'm referring to the quadplexes in the area, and they are not that many of them. (Duplexes are a rarity.) They seem to be a relic of the ‘old days' as town homes and apartment complexes are the preferred new build. You get your own place, a garage, a lawn, higher rents, and HOA's with those. No thanks. Pass. Back to quadplexes.
Most rent for $400-550. The really neglected ones go for less than $400. And it was the neglect that really jumped out at me. There are only a few renovated, clean, well-kept quadplex communities in the area. Let’s say they are in B class neighborhoods. Yet, there are many that are not well kept, these are the C to D neighborhoods. I want in on the C neighborhoods because the building structures are basically the same as the B class and I believe there is room for improvement that could fetch near the top end of this particular market rent, $550, without breaking the bank.
Needed improvements I gather from talking to local property managers and residents:
Customer service: Currently not good across nearly all properties. Being an owner-occupied property, prompt response and service could be a real advantage.
Deferred maintenance: Currently slow response to fix repairs, if at all. Owner-occupied advantage as well with on-site DIY fixes and initial renovations should catch up on major deferred maintenance.
General upkeep: Litter, trash-pickup, etc. Most I believe is a fault of poor tenants and inactive property management. General care for property, good tenant screening, and such will hopefully improve personal pride in folks' living space which will in turn attract better tenants.
Value to the tenant: Many of these properties have not been updated in decades and it shows. For the ones that have new roofs, some interior/exterior work, and updated appliances; the difference in the quality of neighborhoods is palatable. I think there is a high demand for this kind of mid-priced, good value housing. Its hard to find vacancies in these improved properties while there are many in the distressed properties.
So my focus is to find one of these quadplexes:
-In a B-/C class neighborhood
-That is somewhat distressed
-Owned by an absentee landlord
-Managed by a property management company that maybe isn’t the best
-That can fetch current or slightly below market rent as it stands.
-That has the potential to raise rents later with improved value to the tenant.
My next post will list some that I found that meet this criteria. All thoughts on my research and desired course of action are most welcomed.