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Updated 6 months ago on . Most recent reply
Thoughts on Huntsville, Alabama?
Hi Everyone,
I am looking to purchase out of state rental properties. I would like to stick to my max purchase price of $250k. My goal is cashflow with appreciation being a bonus.
I am would love to hear your experience with long term rentals in Huntsville around this purchase price.
Any insight to this market would be greatly appreciated!
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![Michael S.'s profile image](https://bpimg.biggerpockets.com/no_overlay/uploads/social_user/user_avatar/1066442/1646412247-avatar-michaels1057.jpg?twic=v1/output=image/crop=607x607@85x53/cover=128x128&v=2)
Interesting. Let's explore the example you gave a little further for educational purposes.
So let's say the purchase price is indeed $252k.
20% down, 30 year fixed rate loan at 7.5%
Monthly payment would be $1,410
Property Taxes would be at least $2000/yr given that it is not homesteaded - so at least 165/month
Insurance will be around 80 to 100/month - we'll say 80/month
So we are now at 1655/month before vacancy and capital expenses.
You quote renting to a Section 8 tenant - I'd add $2400 in cap ex per year then. That's another $200/month.
Now we are at 1855/month.
One month vacancy per year. That will cost at least 2179/year without including utilities. So at least another 180/month.
Now we are at 2035/month.
You quote $2421 on Section 8 rent - that seems really high to me for Section 8 based on my research, but let's go with it anyway for this example.
10% to property mgmt - another 242/month.
So let's see what the net looks like:
2421 rent - 242 (prop mgmt) - 2035 (expenses as outlined above) = (+) 144 / month.
So, Nikki proved me wrong - you can find a positive cash flow property with 20% down assuming the rent amount of $2421.
As such, this could be a possible play for a new investor who is looking for solely hands off turnkey.
Now, that said, let's give the contrary view, and why I wouldn't personally do that deal:
-Limited appreciation potential for at least 3 years on this property based on location and demand, and no opportunity for forced appreciation
-Risk with Section 8 on cap ex
-I look for cash neutral on 15 to 20 year notes
-positive cash flow of 144/month does not excite me, especially since I prefer appreciation potential
-I avoid rentals that require more than $2000/month in rent to work given lack of demand at that price point in North Alabama
Again, I ran this example just for educational purposes. Do your own due diligence and don't take my viewpoint for your own investment strategy.