Rental Property Investor · Newark, CA · Member since 2021 · 10 posts · 9 votes
Hi all,
I'm a new investor vetting multiple markets for buy and hold SFH. Based on my research, it looks like Birmingham is a great place to invest:
Diverse jobs/economy (Financial offices in BBVA and Wells Fargo, health care providers like UAB, car manufacturers with Mercedes and Honda, and growing distribution centers like Amazon)
Cost of living is affordable
High % of renters with low vacancy %
Best of all: Low property taxes!
However, it does look like Birmingham has had a steady population decline over the past few decades. Are any investors concerned that the population decline will lead to more vacancies, lower rents, etc in the future?
Birmingham will be fine. Jefferson County has been converting to a predominantly rental market in the past 5 years given the hedge funds & turnkey providers saturating the market.
The city goes as UAB goes. It's the most stable economy in Alabama because it's medical driven. Everything else is just gravy for the city.
Hunstville goes as NASA goes. Any time the budget is increased, Huntsville thrives. When the budget is cut, it retracts. If the Space Force is located there it'll help.
If you're buying in Birmingham or Jefferson County, you are buying for rent income not appreciation. Interstate 65 north & south of the city is an appreciation play. Interstate 20/59 is a rent long-term play. You see this reflected in the value of the houses when you compare.
Recent data says Alabama leads the country with tenants behind on rent. I'm not sure how it's allocated by city/area within the state but something to look at before you pull the trigger.
That's a pretty good analysis, Michael. I, personally think that the tide is actually turning, with a lot of the businesses just moving into the area and the local government trying to improve the situation with different programs.
Hope I'm right, because I chose this market few years ago, just like it looks you're doing now, and I'm sticking with it.
I think Birmingham will be fine long term - that said, I think a lot of tremendous growth in Huntsville/Madison has likely been somewhat at the expense of Birmingham. Just a thought - I have no data to prove it.
Your correct Michael. Birmingham is a terrible place to invest. Bad schools bad prisons shooting and stealing all over the place. Birmingham and Alabama really is not a good place for out of state investors.
Birmingham will be fine. Jefferson County has been converting to a predominantly rental market in the past 5 years given the hedge funds & turnkey providers saturating the market.
The city goes as UAB goes. It's the most stable economy in Alabama because it's medical driven. Everything else is just gravy for the city.
Hunstville goes as NASA goes. Any time the budget is increased, Huntsville thrives. When the budget is cut, it retracts. If the Space Force is located there it'll help.
If you're buying in Birmingham or Jefferson County, you are buying for rent income not appreciation. Interstate 65 north & south of the city is an appreciation play. Interstate 20/59 is a rent long-term play. You see this reflected in the value of the houses when you compare.
Recent data says Alabama leads the country with tenants behind on rent. I'm not sure how it's allocated by city/area within the state but something to look at before you pull the trigger.
@Jason Cory, @Michael S. - I've been looking into Huntsville a lot too. I actually like the job market better in Huntsville (stability of government jobs, focus on increasing STEM jobs). However, the pricing there is higher so it's probably more of an appreciation play. As a new investor, I'm focused on cash flow right now.
@Daniel Toshev - Thanks for the perspective. I certainly hope that things are turning around!
Do you mind if I ask which areas you are investing in Birmingham? Thus far, I've been looking at the Hueytown/Pleasant Grove area and the Forestdale/Adamsville area. Just wondering if you've found any success there?
@Jason Cory, @Michael S. - I've been looking into Huntsville a lot too. I actually like the job market better in Huntsville (stability of government jobs, focus on increasing STEM jobs). However, the pricing there is higher so it's probably more of an appreciation play. As a new investor, I'm focused on cash flow right now.
In no ways am I bashing Huntsville because it is a nice place but it doesn't hold up to Birmingham for STEM jobs.
Birmingham's problem is the change in property usage from owner occupied to tenant occupied. That's why you see the lower values. At the same time, every hedge fund & turnkey provider that works Birmingham is buying the Huntsville market now because they have worn out their welcome in Birmingham. They will do the same thing to Huntsville in the next 5 years that they have done to Birmingham. Supply is always finite. They go where they can make money from resales to out of state investors. Locals in every market know where to buy & hold. Locals sell what isn't a good buy & hold.
Thankfully, many investors are waking up to this across the country.
I'm not really betting or counting on appreciation. Instead I'm aiming at cash flow. So I'm going for the lower end of the market, C even some C- properties, but I'm getting around 20% on average. I know it's not much of a strategy, but it works for me
@Jason Cory - one correction I'll make is that Huntsville is much more dependent on military funding in general, rather than NASA specific funding, at this juncture; however, Huntsville and Madison have started to bring in other industries to fuel the economy; healthcare is a huge driver of the economy here as well. That said, you make a very good point about turnkey providers trying to work their way into this area; however, I think it has been tougher sledding than they anticipated, as the available SFHs are few and far between that will work for their model; I know at least one turnkey that gave up on this market already due to lack of inventory.
@Michael Choy - if I wasn't able to invest locally, I would definitely be looking at Birmingham regardless of the what the population pattern is; the city is still doing quite well overall, and I think it cash flows easier than Huntsville as well; however, I do like the appreciation play that comes with Huntsville/Madison. I also think you will have a much easier time finding properties in Birmingham that have adequate numbers overall than you will here in Huntsville.
@Jason Cory - one correction I'll make is that Huntsville is much more dependent on military funding in general, rather than NASA specific funding, at this juncture; however, Huntsville and Madison have started to bring in other industries to fuel the economy; healthcare is a huge driver of the economy here as well. That said, you make a very good point about turnkey providers trying to work their way into this area; however, I think it has been tougher sledding than they anticipated, as the available SFHs are few and far between that will work for their model; I know at least one turnkey that gave up on this market already due to lack of inventory.
@Michael Choy - if I wasn't able to invest locally, I would definitely be looking at Birmingham regardless of the what the population pattern is; the city is still doing quite well overall, and I think it cash flows easier than Huntsville as well; however, I do like the appreciation play that comes with Huntsville/Madison. I also think you will have a much easier time finding properties in Birmingham that have adequate numbers overall than you will here in Huntsville.
There in lies the problem. Huntsville is government dependent. They have brought in other industries trying to diversify but until it's the primary economic driver it's a volitale economy. Washington can't agree what color the sky is tomorrow.
I'm not sold on Birmingham right now either. The last house I renovated it went $25,000 over budget because we couldn't keep up with material cost. We started at the end of January & finished at the end of March. It was a full rehab but Home Depot is struggling so bad they actually charged me $15 for the wood pallet instead of including it like they have hundreds of times before when you buy a pallet of flooring.
People are already behind bc of the past year & you add the inflation to already struggling people, it squeezes until it chokes everyone.
I appraised during the foreclosure crisis & what led up to it. We lost 10m jobs to cause the foreclosure crisis when housing became unaffordable without inflation or a pandemic. If I compare then & now. My confidence level that we are about to be in a race to the bottom is a 10/10.
I'm not buying anything right now. It's all over priced, unaffordable to renovate, & out of touch with reality.
Just my opinion & what my company is doing right now.
Thankfully I only rent to Section 8 tenants so I haven't experienced the missed rental payments & tenant issues many investors have/are experiencing.
You're right, Jason. And nobody can argue that the market is bad. But there's still money to be made. You just need to be a bit more creative and lower your expectations a little. My philosophy is that a marginal deal is better than sitting on the sidelines and waiting for the good old times to come back
The Birmingham metro area consists of dozens of municipalities, of which the actual City of Birmingham is just a part. Be sure you are considering that when looking at population data.
To the best of my knowledge, the MSA is projected to have steady (albeit small) population growth going forward. Of course, there has been a nationwide trend over the past year of people fleeing the lockdown states, and especially migrating south. Hopefully this will benefit Birmingham, but it's likely too soon to be showing up in statistics.
Jason, regarding the data "Alabama leads the country with tenants behind on rent" - could you provide a reference link? I'd like to have this handy. Thanks!
Birmingham will be fine. Jefferson County has been converting to a predominantly rental market in the past 5 years given the hedge funds & turnkey providers saturating the market.
The city goes as UAB goes. It's the most stable economy in Alabama because it's medical driven. Everything else is just gravy for the city.
Hunstville goes as NASA goes. Any time the budget is increased, Huntsville thrives. When the budget is cut, it retracts. If the Space Force is located there it'll help.
If you're buying in Birmingham or Jefferson County, you are buying for rent income not appreciation. Interstate 65 north & south of the city is an appreciation play. Interstate 20/59 is a rent long-term play. You see this reflected in the value of the houses when you compare.
Recent data says Alabama leads the country with tenants behind on rent. I'm not sure how it's allocated by city/area within the state but something to look at before you pull the trigger.