All Forum Posts by: Lindsay Davis

@Dustin Rabon,

Congrats on getting started with your first deal—that’s really exciting stuff!

I see that you’ve listed Birmingham as your location. I’ve had a good amount of success doing buy-and-holds in the Magic City for about 15 years. Happy to share what I know if you have any specific questions!

@Ethan Koyle,

You’ve got pretty interesting sources of financing at your disposal. On the home equity front, Rafael Gonzalez is right—you can take a second-position mortgage, like a home equity loan or a home equity line of credit, without having to refinance your first mortgage.

That said, any second-position loan you take out will still be priced at prevailing interest rates, so just a heads up.

The 401(k) loan could be an interesting option, since you’re ultimately borrowing from yourself. One thing to note here is opportunity cost: by borrowing against your 401(k), you’re forfeiting investment opportunities in the market that could potentially yield returns in excess of the interest you’re paying yourself.

In my opinion, however, the biggest risk of borrowing from your 401(k) is the risk of defaulting, either because your deal went wrong—or simply because of clerical error. If you default, the entire unpaid balance of the loan will be considered a distribution, and you’ll pay income taxes plus an early withdrawal penalty.

As for which is better…I think you’d have more luck asking your CFP or CPA. This is just some food for thought!

@Priscilla C.,

I saw @Terra Padgett pitch Birmingham and Huntsville as potential out-of-state markets. I wanted to piggyback off that and mention Tuscaloosa, since most investors outside of Alabama aren’t familiar with it.

This college town (population: 113,000) is home to the University of Alabama’s flagship campus, and is situated about 50 miles southwest of downtown Birmingham.

It’s a pretty interesting market. The city had a track record of long-term growth going on thanks to rising student enrollment at UA, and that means rising demand for medium- and long-term rentals around campus for students and staff. Happy to answer more specific questions if you have any!

@Lawrence Mitchell,

No need to apologize—you’re asking great questions and I’m happy to help! We’ve personally found success with single-families and duplexes across suburbs in western Birmingham—so think neighborhoods like Adamsville, Forestdale, Sylvan Springs, Pleasant Grove, Bessemer, and so on.

As for house hacking itself, I think it’s a good way to get started if you’re strapped for cash and want to lighten your carrying costs a bit. You’ll probably find it difficult to generate positive cash flow with a house hack, though, since you’re owner-occupying a portion of the property.

If you’re super aggressive about maximizing rental revenue, I imagine you could buy a duplex, fully rent out one unit, and then live in the other unit while taking on roommates. At this point, you’d probably be living for free, and may even have some cash flow to boot.

Let me know if you’d like any more details—happy to share what I know!

@Seth Masters,

Welcome to BiggerPockets! It’s tough to find a deal that works in San Diego, so looking out-of-state—as you’re hoping to do—may be the right call.

I’m based in Birmingham, so feel free to use me as a resource if you have any questions about Sunbelt markets. Rent-to-price ratios are generally more favorable in flyover states, so cash flow could be easier to achieve in a Sunbelt market, if that’s what you’re after.

@Lawrence Mitchell,

Great question. I know that you can filter exclusively for multifamily listings on both Redfin and Zillow. If you go to the “Filter” tab on either site and scroll down to “Home Type”, you should be able to uncheck condos and select “Multifamily”. Let me know if this works!

P.S. I also find the "Max HOA" and "Year Built" filters pretty useful, especially since mandatory HOA dues and deferred maintenance can both significantly dent in cash flow.

@Shaylynn O'Leary,

Thanks for sharing information about your background.

While I don’t have much intel on the locations you listed, I was curious to know if you were open to considering similar markets in the Sunbelt.

I saw @Justice Bowers mentioned Birmingham, and I wanted to piggyback on that and bring your attention to other markets in Alabama.

You mention that while cash flow isn’t a priority, you’re looking for a more affordable market. I imagine that high-growth, high-appreciation markets like Tuscaloosa and Huntsville could be worth looking into.

And really, the state as a whole could be a solid place to invest: it’s got some of the lowest (~0.40%) property taxes in the country, and its laws are pretty landlord-friendly.

@John Helms,

Exciting stuff—congrats on getting started, and great to see that you’re in Birmingham!

As for your question, you can definitely make a reasonable offer below asking price—with "reasonable" being around 5% to 10% off asking. But like @Ryan Harrell and @Min Zhang said, be prepared for a counteroffer or an outright rejection.

As a rule of thumb, if I were you, I’d ask myself: if I had to pay full asking price for the property, would I still want to do the deal?

@David Overcash,

Welcome to BiggerPockets, and congrats on getting started!

Great to hear that Huntsville’s your top pick. Like @Ericka Parrott mentioned, Alabama as a whole is pretty landlord-friendly, and Huntsville (Madison County) features some of the lowest property taxes in the country (roughly ~0.44% of the property value annually), so you’re in a good spot.

One thing I haven’t seen mentioned around here yet is the fact that areas outside Huntsville proper could really be worth looking into.

Suburbs like Decatur and Athens (about 30 miles southwest of downtown Huntsville) and Meridianville (10 miles north of downtown) could benefit from the same demographic and economic tailwinds as the city of Huntsville itself—and yet homes there are about 20% to 30% cheaper than those within the city limits.

Anyway, just wanted to put this on your radar to start. Let me know if you have any other questions!

@Nate Williams,

I'm probably preaching to the choir here, but BRRRR isn't just an investing strategy—it's an all-encompassing lifestyle.

Given your young family (and your wife’s pleas), I imagine an approach that leans heavily on rehabs to create value would be difficult to maintain, especially as your portfolio begins to expand.

You do mention that you have $40,000 in cash, but also say that you want a bit of a cash buffer. Have you considered a slightly more hands-off strategy—-for example, something like turnkey rentals?

If you’re worried about high down payment costs, there are plenty of deals right here in Birmingham (or elsewhere in Alabama) where you can acquire a rent-ready, turnkey single-family property for between $120,000 and $200,000 or so. That means about $30,000 to $50,000 plus closing costs for 20% down, which is roughly where your budget’s at.

Any thoughts?