Thoughts on Huntsville, Alabama?

[Zane K.]

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!

[AJ Wong]

Unfamiliar with Huntsville but heard great things about the Alabama coast and have several friends investing in the region..a healthy first step will be connecting with an investor focused and friendly lender. .check in with @Joseph Chiofalo he's my go to investor lender for 20+ years. 

[Melanie P.]

You will do better at this investing close to where you live and being hands on. 

That said, I wish you only the very best if you're determined to stay this course.

[Joseph Chiofalo]

Hi Zane, 

Many of our investor buyers have purchased in the Huntsville area. The metropolitan area is expected to experience a steady growth trajectory. 

Were you targeting single family homes or multi-unit properties?

[Derrick G McIntire]

Hi Zane, I'm a Realtor and Property Manager in Huntsville AL who specializes in working with investors! Feel free to reach out! 

[Zane K.]

Quote from @Melanie P.:

You will do better at this investing close to where you live and being hands on. 

That said, I wish you only the very best if you're determined to stay this course.

I live in California. I will not be able to purchase a property anywhere close to where I live. 

Thank you for the reply. 

[Zane K.]

Quote from @Joseph Chiofalo:

Hi Zane, 

Many of our investor buyers have purchased in the Huntsville area. The metropolitan area is expected to experience a steady growth trajectory. 

Were you targeting single family homes or multi-unit properties?

I am open to both single family and multi family homes. If I can find a turnkey multi family property in my price range that would be best case scenario. 

[Zane K.]

Quote from @AJ Wong:

Unfamiliar with Huntsville but heard great things about the Alabama coast and have several friends investing in the region..a healthy first step will be connecting with an investor focused and friendly lender. .check in with @Joseph Chiofalo he's my go to investor lender for 20+ years. 

Thank you for your reply and the recommendation. 

[River Sava]

Hey Zane - 

I am from Huntsville originally and it has grown significantly over the last couple of years. It might be tricky investing out of state, but Huntsville is a fantastic spot for mid and long-term rentals if you are open to those strategies. You have the tech/biotech and aerospace industries bringing in a lot of jobs, the university, and the city's population is steadily growing. It is also an affordable place to live, espeically comared to CA, with a a strong demand for rental properties. Happy to connect and chat further if you have any questions. 

[Zane K.]

Quote from @River Sava:

Hey Zane - 

I am from Huntsville originally and it has grown significantly over the last couple of years. It might be tricky investing out of state, but Huntsville is a fantastic spot for mid and long-term rentals if you are open to those strategies. You have the tech/biotech and aerospace industries bringing in a lot of jobs, the university, and the city's population is steadily growing. It is also an affordable place to live, espeically comared to CA, with a a strong demand for rental properties. Happy to connect and chat further if you have any questions. 

Hi River, 

I just sent you a message. Thank you! 

[John Mason]

If you go here and put that address what does it show as market value and history?

[Zane K.]

Quote from @John Mason:

If you go here and put that address what does it show as market value and history?

 Appreciation is a bonus to me. Not my main focus. 

[John Mason]

Long term wealth is always on appreciation not cash flow but to each his own

[Zane K.]

Quote from @John Mason:

Long term wealth is always on appreciation not cash flow but to each his own

 There are many places that appreciate that I would not invest my money. I am not discounting appreciation but my goal for now is cash flow. 

Thanks for the comment. 

[Steven Gesis]

@Zane K. Sounds like you are experienced and Huntsville has been growing rapidly -

[Zane K.]

Quote from @Steven Gesis:

@Zane K. Sounds like you are experienced and Huntsville has been growing rapidly -

I definitely have a lot to learn. Thank you for the reply. 

[Caleb Bryant]

@Zane K. I've been investing and wholesaling here for ~7 years, it's a great spot in my opinion. We tend to buy stuff in the 200-275k ARV range but pick them up needing rehab under market value. The rents are decent but you'll have to watch your debt closely to make sure it cash flows well. Stay disciplined with acquisitions and don't buy something that doesn't hit your cash flow numbers, I see some of the investors buying here get discouraged when they don't find something right away and purchase something that isn't a great investment. Feel free to reach out if you want to chat sometime

[Michael Behr]

I live here. I bought my first rental and put my primary for rent. It is not cash flowing. I looked for 6 months. It will be hard to find 2500 a month. The high end areas bring 2k+ but will continue to rise. Cash flow is tough from my little experience in this area. You can find thing that need work then good luck finding a contractor to do the work at a reasonable price I would try Athens its growing at rapid pace also

Good luck in your journey.

[Nina Penuela]

Hey @Zane K. we are a property management company located in AL, although Huntsville is a great market, I highly recommend considering Florence, Alabama, for your investment. Florence offers competitive advantages, including lower initial costs and strong rental yields, making it a fantastic option for cash flow and potential appreciation.

Let me know if you’d like more information or have any questions and we can connect! 

Best of luck!

[Denise Evans]

I agree about Huntsville and also Madison. Prices are getting really high. You might want to explore Athens or Decatur, still within commuting distance to Huntsville government jobs, but real estate prices not so high.  Florence is a University town, plus a strong military retiree component.  It is a beautiful area. Just across the bridge, in Colbert County, is more modest housing, also. That would be Sheffield, Tuscumbia and Muscle Shoals.

[Harsha G.]

Hi Zane, I’m also in California and have been investing in Huntsville for a few years. I think cash flow is hard with current property prices, so it’s mostly an appreciation play for me. Are you looking to do any rehab?

[Zane K.]

Quote from @Harsha G.:

Hi Zane, I’m also in California and have been investing in Huntsville for a few years. I think cash flow is hard with current property prices, so it’s mostly an appreciation play for me. Are you looking to do any rehab?

Hi Harsha, thank you for the reply. I am not looking to do any rehab. This will be my first investment property and I would like it to be turnkey for now. 

[Michael S.]

I will give you the simple answer - you are unlikely to cash flow whatsoever on a turnkey property in Huntsville or Madison right now unless it is in a C/D neighborhood, and/or you plan on putting more than 30% down.  

We just sold a turnkey for $200k.  It should rent for around 1500/month.  The investor that bought it from us paid cash.  So they will cash flow - but that's because they effectively put 100% down.

We have two more turnkeys listed on the MLS right now for under 250k in good areas. But unless someone puts down at least 30% on the purchase, they won't cash flow.

[Denise Evans]

Always do after-tax cash flow analyses. Especially with cost segregation and bonus depreciation, it can make a HUGE difference in your calculations.

[Nikki Yankowski]

Hey Zane, 

I work for a production builder. Feel free to run the numbers but last I checked a 3 bed, 2 bath new build around $252,000 will cash flow right away once rented. With 15-20% down would make the payment ~$1300 and right now section 8, the monthly rent for zip 35759 is $2421. 


 

[Michael S.]

@Nikki Yankowski

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.