All Forum Posts by: Clayton Mobley

I know rents/values are higher in SD than in Birmingham, of course, but because of the size and density of big CA markets, you also are going to have more high-quality MFR props available - the kind people would actively choose to live in over having an independent house, and a greater percentage of the population that needs to rent apts because houses are so expensive. The financing aspect is a bit of a negative, as was mentioned, because of the shorter terms and rate issues, BUT your income is high enough (and my guess is so are your savings) that this may not be an issue, and may actually result in you having a tenant-bought (ok 70% bought) MFR relatively quickly.

Now, all that being said, I do think your money could go further in other markets where prices are lower. But you can always expand your portfolio into other markets down the line when you're looking for more diversification.

I think the bottom line is that it truly depends on what is available to you in the areas you deem best. Again, don't go for a C class MFR just because its what you can afford and it's more doors - stick to B/B+ regardless of whether its SFR or MFR. Sounds like the first step is finding a solid agent (or two) in your area that can help you scout properties and get a better idea of what is actually feasible. A little more boots-on-the-ground work will give you a better idea of which option actually (not hypothetically) fits your goals best.

Good luck!

@Rick Singh

Full disclaimer: I don't work or own anything in that market, so I'm speaking in generalizations here. I'm a turnkey provider in AL and we only do SFR, but that being said I am an experienced investor who has researched both types of assets extensively (in Birmingham there just aren't as many good MFR because prop prices are low enough that most people can afford to rent/own their own house, rather than an apt). My natural bias is always toward B/B+ SFR as tenants tend to stay longer and see them as homes, rather than pit stops. Cash flow can still be good without giving up all appreciation potential etc. That being said:

@Rick Singh it sounds like (just my take on the tone of your post) you are looking for something to be pretty hands-off, rather than being a landlord for a 10-12 unit building or a bunch of SFR. If you are wanting to solely invest in SD for the time being, you've somewhat taken geographical diversification off the table (although micro diversification across areas in SD is still possible). That means, all other things being equal, it behooves you to have more doors to minimize the impact of vacancy. The numbers would need to check out, of course, and I wouldn't recommend getting into a low-tier MFR just for the number of doors - a smaller number of solid B/B+ cash flow SFR would be the better bet if you have to choose between that and a C or D class MFR. So to some degree it depends on what is available to you in your price range. SD is a big market, so my guess is you'll have your pick.

With the amount you have to invest and my assumptions about your goals - and despite my pre-stated bias -my gut would say MFR. If you're going to be getting a PM anyway, and would, of course, want them to contract with your company for maintenance, I think you'd likely be able to get good properties in SD with enough rent per door to make your take-home greater than if you went SFR. One of the issues many people have with MFR is that maintenance and move out costs tend to be higher, as tenants are often rougher with apts - esp if they see them as a temporary placeholder for the home they will 'eventually own'. BUT, since your own company would be handling those issues, you're essentially paying yourself, which is a benefit most MFR investors don't have. That being said, the same would be true if you invested in SFR.

@Jaz Patel, @Brian Garrett has given you the simplest answer, but remember that each of those requires a lot of legwork up front, and each has its own learning curve. I'm a turnkey provider, and I still wouldn't tell someone that turnkey is a totally passive investment. Yes, after you cut the check the provider should pretty much do everything - tenant selection, marketing, maintenance, bookkeeping, etc - but up until that point, there is TONS of homework to do. From deciding which assets class (A B C D, single family houses or apartments/condos) you want, to market location, and most importantly, which team to work with. I always advise investors just starting with any turnkey team to take a trip to see the provider, tour the market, see their handiwork first-hand, and look folks in the eye - and that's definitely work. There's a lot of research and vetting (and math) that goes into selecting the right turnkey investment, and the same can be said for the other types of investments Brian listed. 

So the answer Brian gave is definitely correct, but I just never want any new investor to jump into an investment thinking it's totally hands-free. No one is responsible for your investment but you, in the end, so you have put the work in up front, even on 'passive' investments.

Best of luck!

@Jordan Moorhead I think the point of this post is being lost somewhat. Simply by the numbers - population, size - it would be almost impossible for Birmingham to actually supplant the Bay Area. The 'Silicon Valley' tag is the Forbes author's twist, but I think is clearly a bit of hyperbole designed to grab reader attention, something more and more difficult to do, especially for a piece of this length. I doubt anyone reading this article or thinking critically for any amount of time would believe that Birmingham is poised to overthrow the Bay Area, or Austin, any time soon. 

However, what the author was trying to draw attention to - and what my post was meant to highlight - is that Birmingham is changing, quickly. Arguing the probability of a city of 212k can immediately replace a city of 1 million + (Austin is about 1mil, Bay Area is 7) as a leader in any industry is certainly not the point of this post. Rather, I think it is important to showcase the work that is being done to bring this southern city into the modern day. Our Mayor's focus on tech education, on fostering interest and innovation in future generations, and on helping businesses and entrepreneurs in the local tech industry work with other local businesses and leadership to grow the community proactively are all worthy of note.

This post was not meant to be a sales pitch for Birmingham as the new tech hub of the world, that would be ludicrous. Anyone that reads my posts knows I'm not one for the hard sell,  but I think credit where credit is due, and I know the BP community is always interested in information about on-the-ground changes in popular RE markets.

Thanks to you and @Caleb Heimsoth , as always, for your input! If you read the article then my work here is done ;)

All the best,

Clayton

@Caleb Heimsoth that's a point the article makes - even the last generation of 'new silicon valleys' (Austin, Denver) are starting to price themselves out of new talent. Every market that's already a 'tech destination' has a head start, by definition, but past is just prologue - what will come after remains to be seen, so it's good to keep an eye on how things are changing.

PS, I literally just finished a post with a great article Forbes ran on the tech scene in Bham, so take a look if you're thinking of investing here. https://www.biggerpockets.com/forums/311/topics/62...

Hi @Harrison Melton , welcome to BP! I'll send you a PM with the name of an agent we recommend here in Birmingham. Of course, we're biased to the turnkey model, but for those who have decided they'd prefer to build their own OOS team, we're always happy to point them in the direction of someone we know is a solid professional.

Best of luck!

I may be a little late posting this to the forums, but I wanted to put a (slightly delayed) spotlight on this awesome article that Forbes published in August.

Inside Birmingham's Bid to Become the Southern Silicon Valley

Birmingham has long had a reputation, along with much of the South, for being a bit behind, a bit outdated, a bit backward. Of course, for those of us that live here, nothing could be further from the truth. As this article highlights, there are some big, modern, exciting things happening in the Magic City, and our ambitious new Mayor is focused on bringing Birmingham - and its reputation - into the 21st century. 

Our tech scene may not yet truly rival that of the Bay Area, but the California markets are quickly pricing themselves out of some promising young talent - talent that has started looking east for lower overheads and a more dynamic, inclusive, culture. Birmingham has proven to be a big destination for young professionals with degrees - a group that  starts more businesses at a younger age than previous generations. That's the kind of wave we want to see heading for Birmingham, and business, political, and community leadership are working together to make sure this new generation of innovators finds a home in our revitalized community.

Whether you think CA will remain the Tech Hub indefinitely or not, this piece does a great job of highlighting some of the future-focused businesses and programs being built in Birmingham. We at Spartan are excited about our city's ongoing Rennaissance - both personally and professionally - and I wanted to make sure the community here on BP got a glimpse of what's really going on south of the Mason Dixon.

@Kera Covani What are your vacancy and maintenance / capex figures based on? Those are low estimates, so just wanting to verify whether those 3% assumptions are based on actual historical data for this property or some estimate provided by a third party, your own baseline assumptions, etc. Esp for capex and maintenance, 3% could end up being low if this isn't a brand new property. How old are the big items? And remember, multis mean more of those than SFR - more kitchens, more bathrooms, more traffic on floors / often higher tenant turnover (not always of course) - just noting that capex can get away from you quickly if all big items aren't new or nearly new, so budgeting 3% may be low. You'll know the details better than I do, just some food for thought.

Best of luck!

@Or Y. I love that system! Sounds like you've already got a good plan in place. I agree, moving into more cash flow props is a good idea if your current investments are appreciation plays - all investing is a gamble, so it's could to play both red and black ;)