All Forum Posts by: Jason Cory

Zillow has sold prices if you can't find it on the MLS resource but it won't run a CMA. As a former Appraiser I can't suggest ever trusting a CMA though.

Houses don't have cap rates. They have gross rent multipliers. What you're stating at 11.8% is the return on investment not cap rate. A 12% return is trash on a house. Easier terms, it's the 1% rule everyone on BP pushes because it lines the pockets of the Turnkey provider but actually make terrible investments. You should flip a B neighborhood house not rent it. Renting in an owner occupied area immediately brings down the value because people that have the money to buy don't want to live on the street with tenants because they don't cut their grass or care for the property the way an owner does so they go to the neighborhood where it isn't this way, which in turn, makes the owner on the street selling reduce the price to get it sold. 

Principle of Substitution - Walmart & Target have the exact same item. One store has it on sale. Where do you buy the item? 

Same in Real Estate. That's why the buyer went to the other street & why the seller on your street had to put it on sale to get it sold.

Never rent in owner occupied areas. 

These units are on a main road. Many in these areas don't want to live on a main road for different reasons than why you & I wouldn't want to live on a main road. 

Ensley is going through a gentrification process right now so you're on the right track. 

Google "Crossplex" & "Crossplex Village"

I have a house on my website for sale that's 2 blocks from the Crossplex & Police Station. 

Whatever you choose to buy within close proximity of the crossplex will appreciate in the coming years, value & rent.

Stay south of 3rd Avenue investing in Ensley. North of 3rd Avenue is where the riff raff lives.

 Here are a couple of links

https://en.m.wikipedia.org/wiki/Highest_and_best_u...

https://lasrealestate.com/investing-for-cash-flow/

 From reading what you have written so far I am seeing a common mistake investors make. You want decent neighborhoods where you are going to live. You, like many investors, aren't separating investing criteria & where you live criteria. They function with completely different standards.

You want to protect your family where you live.

You want to make as much money as possible where you invest.

If you want to flip you buy in the suburbs because owner occupants, agent resales, is what drives demand. 

If you want to rent you buy inner city for cheap because rent is what drives demand. 

Google the highest & best use tests. There are 4 tests. Regardless of how you invest make sure it passes all 4 tests. 

Suburbs pass all 4 for flips.

Inner city passes all 4 for rentals.

Don't buy if it doesn't pass all 4 tests for what you plan on doing with it. 

 Sounds good. I'll contact you Monday. It's always a good idea to get started in your backyard while you're learning though. 

Btw, I rented a house yesterday in one of these areas for $858 being $25k all in, i.e. a 41% gross ROI. It's one of the areas you stated as buying for $25-28k then putting work into it for only $600-$650. By your example it appears you're leaving money on the table with your model.

 I used to appraise so I am trained on how to analyze markets along with value. Just because you make money in an area or have a preference doesn't change demographics, crime stats, demand, or supply. They are all factors that play into the overall assessment of a market. How many vacant houses are in Mountain Brook? How many are in Ensley?

I can respect that you disagree but the assessment is correct for Birmingham. I invest in these areas. As was true when I appraised you can tell the truth & still get the loan approved and/or tell the truth & still invest/sell properties in the bad areas of Birmingham. I do it all the time. 

Birmingham is far from dying. It's growing with cranes everywhere for new development. 

I'm not sure about the brain drain because it was published when Amazon was looking for an additional HQ that engineers are hired faster here than any other city. 

Birmingham is a good market for long term rental properties as long as you buy in the right areas. Inner city has the most upside given the prices & demand is driven by tenants not owners. You will lose money eventually if you attempt to invest in the suburbs for renting. They don't cash flow enough to sustain the investment. Any vacancy or negative fluctuation in the economy/market & you start losing money. Inner city isn't affected by fluctuations like suburbs are because they receive more assistance so they are more stable investments even though 99% of people on BP are going to disagree only because of demographics. They cost less & cash flow more. It's easy math.

Stay away from centerpoint. It's going in the toilet because too many tenants have taken over what was once a predominantly owner occupied area. 

I live in 35205 you mentioned. It's the historical area of Birmingham. Properties will be old, most on the historical registry, cap rates will be 4-8%, & prices high. 

35204 will be lower prices & somewhat of a forgotten area of Birmingham. It's a run down area without any gentrification visible or planned in the near future.

35208 is a similar area as 35204 but it is more appealing to the eyes & gentrification has started. There is a large recreational athletics facility called the crossplex in 35208. A crossplex village is under construction with hotels, shops, etc for it. Even getting a Starbucks in the village.  

Birmingham doesn't have gangs & such. It has good & bad pockets. I have a vacant house in 35208 that I leave the door open & it doesn't get vandalized.  

A lot of what you hear about so called bad areas, war zones, is just hype. This is where you make the most money investing to rent. 

3 bedroom houses should rent for a minimum of $750 anywhere in the city of Birmingham so there's no sense in spending $100k+ to get a $1,000 tenant. That's spending twice as much for an extra $250 that you don't get because your loan payment absorbs the extra rent spending twice as much. 

Here's a post about the different sub-markets in Birmingham. 

https://www.biggerpockets.com/forums/48/topics/549...