All Forum Posts by: Michael S.

I have not looked specifically at which property you are referring to - but if you are referring to Crestview Dr by Jordan Lane and University Drive...that's a rough area by Huntsville standards that you won't be able to really appreciate simply driving by it.  To be frank, I know several property managers here who wouldn't manage properties there - too little rent income for them for the amount of trouble that can occur.  Make sure you have a strong local team if you take the plunge there.  

@Melissa Nash has posted very good insight into the Alabama market on multiple threads recently.  To put my own spin on it:

Huntsville - the growth of North Alabama (Huntsville and Madison) has really been significant.  However, it is not just anticipated growth driving the hot market;  it is supply and demand right now.  There is virtually zero opportunities for investors right now in most A neighborhoods and in some B neighborhoods for even net zero cash flow.  Interestingly, I have recently seen some extrapolating of what is an "A" neighborhood here in Huntsville, as people are trying to justify higher prices in supposedly "A" neighbors.  Bottom line - very few opportunities here right now, but your appreciation potential here is much higher than anywhere else currently in Alabama IF the growth continues - if the growth does not continue, appreciation plays could be dicey at best.  1% rule does not exist for A neighborhoods here.

Birmingham - you must do your homework in this city and really know your location, or you can get in trouble quick in some areas with problem tenants and D neighborhoods.  I don't know the city well enough, so I have not invested here as such.

Montgomery - solely focus on cash flow with any property here (1% rule is likely very realistic here).  Would not assume any appreciation here - the population may decline over the next decade unlike the more northern parts of Alabama.

Form an LLC. Do not even think of starting to invest with a business partner, especially friend or family, without a real LLC that you both sit down with a lawyer and hammer out the legal terms of. That way, if the friendship goes bad in the future, you and/or your friend are protected from the other one trying to screw you out of your assets (to a significant degree at least).

Also, if they have 800k to invest, they have plenty of money to sue you with later if the business dealings, or friendship, goes bad in the future.  

@Connor Mckelvey - first issue I see here is you are doing a partnership without an LLC formation. Bad idea, regardless of whether it is family or not. While a lot of investors on here do not have LLCs, they also do not have business partners on the deal, or they have one partner on a deal where everything is an absolute 50/50 split. The fact that you are contributing different amounts of capital yet splitting the deed 50/50 is not routine, and would be better with an LLC clearly defining all the terms of the partnership.

Also, if you had an LLC, your brother's $3000 is no longer a gift, but a capital contribution to the LLC, and it would be a non-issue. However, the loan would have to be issued to the LLC only, not to one individual only.

Also, @Jay Hinrichs is spot on. If your reserves are not enough to make up an extra $3000 on the deal, you could be done if the roof needs replacement or the HVAC dies. You really should have a minimum of $10k liquid for your REI at all times (or more depending on the number of properties you own).

@Dave DeMarinis is absolutely right.  1% rule for Huntsville would be typically C/D class only, with a lot of potential for problems along the way with those type of tenants and lower appreciation potential.    

A/B properties here are going to be around 0.75%, but some with high appreciation potential and the majority with a lower degree of tenant risk.   Hence why the majority of our property acquisitions are A/B.    

@Melissa Nash - appreciate your insight.  Very interesting.  Since we typically invest in the 100k to 180k range, we have not had the appraisal issue at all, hence my curiosity. 

@John White - that must have been some snake

@Melissa Nash - just curious, you mentioned "appraisals are having a hard time keeping up" - is this your first hand experience?  I have not heard of this being an issue whatsoever for other Huntsville investors presently, so I am curious to hear your experience in this regard.  

As far as overpriced, this may be true - the problem is that quality inventory is ridiculously low right now in A/B neighborhoods that is under 2000 sq ft.  

Huntsville, Birmingham, Montgomery, and Mobile are all very different cities.  The crime rate for the state in general is irrelevant when you are evaluating each individual location.   

Now, that being said, you can find crime in any of these cities if you plan on investing in C/D neighborhoods.  

@Shannon D. - As others noted, city of Madison properties are very desirable - currently, there is little inventory, and the best properties are in multiple offer situations within 48 hours of listing.  I could not comment on Athens, as I have never looked for investment properties in this area simply due to distance and my property manager not covering that area.  If you want to get a Madison property, you need someone on the ground here who can check out the listing for you within 24 to 48 hours of list, and you have to be prepared to write an offer immediately with funds ready to go.   

I agree with @John White.  We also have zero properties in 35810, and are unlikely to consider any options in this zip code in the future.  I agree with the C+ to D assessment.

If you proceed with purchasing a property here, you should do it solely based on cash flow.  Appreciation is not something I would bank on - in fact, should the economy here ever notably worsen in the future, you could potentially take a loss in this zip code.