I am narrowing down to develop a BRRR strategy with a local team to invest in for the next few years. I have narrowed down and looked at high Cash on Cash returns in two very similar cities. Birmingham Alabama vs Jackson Mississippi. Both seems very similar on low appreciation (not very high) and average price of single family residence homes (pretty low). Income levels are about the same. Rents are surprisingly high compared to the cost of the homes, which is why I am looking at these two cities now vs higher cost areas like Kansas City and Atlanta. I read that vacancy rates are high, both in the 17-22% which worries me. I am not sure why vacancy so high? I am not sure about the job growth. Alabama is a college town so there are always students to rent to. Seems like jobs are mainly medical and college type jobs. In Birmingham, there seems like there might be areas outside to invest in, if Birmingham gets dried up. We don't know anything about Jackson and what immediate local areas that are outside of that city. Seems more limited.
My goal is with a cash investment, I am targeting single family homes in the price range $50-$150k. Then rehab, rent and cash refinance. I want to establish a good and reliable team (agent, property manager, contractor) who can help me find distressed properties and fix and rent and manage. And do this for the next few years. Since the two cities, looking at stats and numbers, seem very similar, it might just come down to finding a great team that is willing to work with while we build a portfolio. Buy, rehab, rent, refinance, manage, and repeat.
Can someone help me understand the dynamics between this two cities and what makes BRRR better in one vs the other? Please reach out so we can have a conversation. Thank you in advance.
I grew up a large portion of my child hood right outside Jackson, MS. I don't think homes will appreciate enough to successfully implement the BRRRR strategy. Most of Jackson is low income and below the poverty line so yes cheap homes are plenty. I would say areas surrounding Jackson would be your best bet. Those areas are Madison, Brandon, Pearl, Flowood, Byram, Ridgeland, and Clinton. I am not familiar with Birmingham but it seems to have way more going for itself than Jackson. It has UAB and their building a brand new football stadium in downtown. With that being said I would say Birmingham is the better choice.
Also I have plenty of contacts in the Jackson area to assist if you decide to go that route. Just let me know and I can provide contact info.
Birmingham will have lower property taxes.
My three properties in Birmingham are in
Pinson - Price $70k in 2016, now worth $114k. Rents for $905, never been vacant, rented first week on the market, same tenant, and they want to stay long term. Taxes $1,129
Fultondale - Price $98k in 2019, worth $103k. Rents $990, rented first week on the market. Taxes $465
Chalkville Valley - Price $104,900, in 2020, worth $110k, currently getting it rent ready, going to try $999. Taxes $791
@Jay Weathersby I looked at the appreciation for Birmingham and it says it was about 2% for the last decade, which was about the same as Jackson.
With BRRR, as long as you can find a distressed property and fix it up so that the ARV is high enough, it would be repeatable right? Since the appreciation rats of Birmingham and Jackson are about the same 2% over the last ten years, wouldn't Birmingham have challenges with BRRR?
@Cory S. Thanks for the response. I am assuming the taxes you listed are annually. How come Pinson taxes are so high at 1.6% ($1,129/$70,000)?
I thought Jefferson County property taxes were around 0.7% annually?
Yes, those tax figures are annually.
The taxes on the Pinson house were $777 when I first bought the property back in 2016 and have increased every year since.
2016 - $777
2017 - $995
2018 - $996
2019 - $1,129
Looking back in the tax history it has been as high as $976 back in 2007.
2019 tax summary -
About $500 for the schools
I am from MS and have lived in Brandon for about 18 years. Licensed broker with property management experience but real estate is a side hustle so I use a local, full-time agent. I am looking at a couple properties in the Broadmoor neighborhood in Jackson and would be happy to share what I see and know about the market in exchange for what you know about investing.