Alabama Pros vs Cons

22 Replies

So, was looking into investing in the state of Al.  If anyone would like to chime in with a personal experience on what it means to be an investor in Al.  Examples like tax rates, renter problems (renter friendly vs landlord friendly), closing problems, tax implications etc...  Any and all input is appreciated.  

Also, if anyone has any ideas of areas to avoid please let me know as well, thanks.

Hi Paul, welcome!

Alabama is a big state, and your question is very vague. Can you be more specific in your questions? What are you looking at investing in? Single family or multi family? Commercial? MH parks? 

The more specific you are, the better the answers you will get. This is a great community with pretty much every investment covered. Good luck!

I live and invest in a Georgia town that boarders Alabama.  I tried to invest on the Alabama side of the boarder once.

1st problem,  rent rates are extreme low compared to GA.
2nd Utilites cost more in AL then GA

The ROI and more frequent turn overs made me decide to stay on the GA side of the river but if your numbers match your criteria then go for it

Thanks for all the great reply's and sorry for getting back so late.  I just got back from a trip to Huntsville just looking around.  

@Kris Reeves I am looking for triplex/fourplex B/C neighborhood in the Huntsville area.  I have been there several times and have found that just minutes out of town there are some really good looking areas.  I would like to avoid downtown but have also found that one interstate exit to the next is a big difference in what you find.

@Michael S. thanks for that on the taxes that's something to look at.  Do you own in Huntsville?

@Scott Rogers could you give an example on comparable rents, what is the average for areas like Huntsville/Birmingham/Tuscaloosa?  I don't know if I really trust rentometer. 

Thanks guys.  I might just wind up staying in Ga but I have found some good looking properties and am having a hard time pulling the trigger with my first out of state rental.

@Paul Evans - yes, but we only have single family homes;  I don't have any experience with multiplex properties, as this is a side business to my full time employment, so we are keeping it simple.  You are correct about Huntsville - the property value/rent/appreciation is very tightly correlated with zip code/location.  35801 and 35805 are right next to each other, yet the difference in properties is tremendous.  The market here is ridiculous right now compared to one year ago - cost per square foot is dramatically up. 

I have four turnkeys in Birmingham and 5 in Atlanta. All of them rent for about the same. In my opinion although the houses in Atlanta are just a bit better the tenants in Birmingham have just been a bit better.

Maybe you get just a tad high percentile in terms of the tenant base.

I lived in Mobile, AL for about 5 years but decided to invest in Pensacola, FL instead. In Mobile I paid a 5% state income tax, 10% sales tax and the rents were not particularly high but I was still planning to invest there until getting into a conversation with two trailer park owners that I sold products to at the time. If a tenant doesn’t pay in Florida the process to get them out is relatively quick and straightforward, in Alabama it takes 2-3 times as long. I’ve purchased 12 doors in Pensacola in the last 3 years with great returns and couldn’t be happier with my decision to invest in FL instead of AL.

So I live and invest in the Birmingham market. 

Rents rates are good. 3-1 can gross 900 a month.

Section 8 is super easy to work with. I have been moving my houses as they roll over into that.

We have several deals that all in we are in 20k and netting 500 a door. Others we have it structured that we have nothing in the property as we did a cash-out refi and are netting 300 plus a door. 

Taxes are cheap compared to other states. Run around 600 a year for a 50k house. 

We have several turn keys you might be interested in, DM me for more information  

 I currently buy my own properties in both Birmingham and Montgomery. Alabama has the second lowest property taxes in the country —you go to Alabama for cash flow you don’t go to Alabama for growth and appreciation. Alabama is a landlord friendly state and you can move a tenant out very quickly, in fact usually you don’t have to go through courts because the tenants know that they don’t stand a chance and they don’t want to risk getting that eviction stamped on their credit so you can usually kick them out on your own very quickly. 

Depends on the level of risk that you want to take for the type of neighborhood you’re going to be in. You can’t go  ZIP Code in Alabama it is really street by street neighborhood by neighborhood. You can have an A class neighborhood and two blocks away is a C class neighborhood so you definitely need to be working with somebody who knows the area and also someone who knows the up-and-coming areas. And then once you find a good property and the property is now rent ready you need to make sure you’re working with a good property manager. Property managers are probably the silent killer here. I have worked with several terrible property managers In Alabama and I have also worked with a couple of awesome property managers. 

As long as your expectations going to Alabama are for cash flow and you’re clear on your strategy and the type of area on the type of tenants you want it is a win-win situation. I do both turn key and I work with a local group that helps me renovate a couple properties with the brrrr type program. 

 I think turnkey is generally the easiest way to get started and get into a market as long as you’re working with a vetted turnkey company and they Have a proven track record and they are not trying to get you into bad areas or tell you that you have to pay cash-  if you work with the turkey company and they have to tell you that they only except cash or you should use cash only, then you need to run from them as far away as you can get—- the only reason why they would be telling you to pay cash is because they know the property is not going to appraise. 

Message me if you want to discuss this market further-  or talk deeper about property managers in this area. 

Originally posted by @Paul Evans :

So, was looking into investing in the state of Al.  If anyone would like to chime in with a personal experience on what it means to be an investor in Al.  Examples like tax rates, renter problems (renter friendly vs landlord friendly), closing problems, tax implications etc...  Any and all input is appreciated.  

Also, if anyone has any ideas of areas to avoid please let me know as well, thanks.

 The Birmingham, Alabama market has some of the lowest property tax rates in the USA. Major pro to that market.

Please be careful of all these out of state investors and experts that grade neighbor hoods in Alabama  that they say are B streets but these neighbourhoods are burned up boarded up or shooting and stealing. 

Take time to ride around a city and look and stop and ask questions to people working the streets every day like postman like utility workers like firefighters at the fire house. They know what is going on in these neighbourhood were you are looking to invest your money  

I been doing this since 2007 and in the 1980’s i had guns pulled on me twice in Birmingham and that’s for real  Be careful  out there  

Or buy a brand new all brick house in good area with 20% down and 14-15 %ROI. I did last year and it works.

Good luck. JP

I live, invest, and am a real estate agent in the Shoals area ( about an hour west of Huntsville) I agree with what has been said previously. It’s definitely a street by street neighborhood analysis in our local market. There are some really good opportunities in our local market and some that look like good opportunities that I would not touch. Here the university proximity plays a big part in the rental market.

Originally posted by @Melissa Nash :

 I currently buy my own properties in both Birmingham and Montgomery. Alabama has the second lowest property taxes in the country —you go to Alabama for cash flow you don’t go to Alabama for growth and appreciation. Alabama is a landlord friendly state and you can move a tenant out very quickly, in fact usually you don’t have to go through courts because the tenants know that they don’t stand a chance and they don’t want to risk getting that eviction stamped on their credit so you can usually kick them out on your own very quickly. 

Depends on the level of risk that you want to take for the type of neighborhood you’re going to be in. You can’t go  ZIP Code in Alabama it is really street by street neighborhood by neighborhood. You can have an A class neighborhood and two blocks away is a C class neighborhood so you definitely need to be working with somebody who knows the area and also someone who knows the up-and-coming areas. And then once you find a good property and the property is now rent ready you need to make sure you’re working with a good property manager. Property managers are probably the silent killer here. I have worked with several terrible property managers In Alabama and I have also worked with a couple of awesome property managers. 

As long as your expectations going to Alabama are for cash flow and you’re clear on your strategy and the type of area on the type of tenants you want it is a win-win situation. I do both turn key and I work with a local group that helps me renovate a couple properties with the brrrr type program. 

 I think turnkey is generally the easiest way to get started and get into a market as long as you’re working with a vetted turnkey company and they Have a proven track record and they are not trying to get you into bad areas or tell you that you have to pay cash-  if you work with the turkey company and they have to tell you that they only except cash or you should use cash only, then you need to run from them as far away as you can get—- the only reason why they would be telling you to pay cash is because they know the property is not going to appraise. 

Message me if you want to discuss this market further-  or talk deeper about property managers in this area. 

Hey Melissa in your opinion would you say (for both Birmingham and Montgomery) that they favor buy and hold or flipping strategies for RE investors?

@Vernon Trice III   It is difficult (not impossible) to make money flipping in Montgomery.  You would need to buy a house in the perfect area at a "great" price and have some 'great" subs.  Definitely not something you could do from out of state.  I can do it and make money, but I live here and do a lot of the work myself.  But, buy and hold is working great.  I work with several investors that buy, do some simple renovations, and rent for 1% of all-in.

@Paul Evans I'm, of course, definitely biased in favor of AL as a state for investing, since my company invests in both Birmingham and Huntsville, so I won't try to sell you on the state. BUT I do realllly want to back up what others have said here about both these markets being street to street. 

If you can't invest in your own backyard, the people you work with are GOING to make or break your investment. You need honest boots on the ground feedback or you could end up with a money pit on your hands. I have personally seen Bham props advertised online as A- turnkeys that were ABSOLUTELY C+ AT BEST. How do I know? Because I know those neighborhoods and the addresses they listed were not anywhere I'd invest my money or anyone else's. So you really need to ensure that either YOU know the area or your work with someone who does. 

When it comes to out of state investing, your team is your number one priority – whether you build a team yourself or work with a full-service turnkey provider, either way, the people come even before the market. If you work with a team, make the trip out to visit the market and see the properties they build/rehab/sell/manage/whatever. Walk those streets and see them with your own eyes. Anyone who wants you to invest with them but can't accommodate a visit isn't worth your time – MAKE SURE you're getting what you pay for.

As a little tip, if you're still vetting providers or team members or markets, take a little virtual walk around different areas using Google Earth. It's not 100% reliable as things do change over time - and it's not a replacement for a visit, ESPECIALLY if it's your first investment in that market – but you'll see pretty quick if properties in each area are well maintained vs. have cars up on cinder blocks, have people loitering around outside during the day, etc. 

This is also helpful just in terms of weeding out less-than-virtuous marketers or faux turnkey providers (a la Morris Invest) - if they send you addresses, or have online listings, check the neighborhood out on google earth to see how truthful they're being about the quality and class of the properties their selling. If they're misrepresenting their property classes, it's time for your boots to do some walkin'.

I own 20+ rentals in Birmingham ranging from A to C class. I also work with a good amount of OOS buyers in the Birmingham market.

I think one of the greatest advantages buying here from OOS is that you can get true A/B properties very affordably. The numbers still make sense for properties that will appreciate and attract top notch tenants. They’ll pay for themselves and create minimal headaches for you.