Section 8 in Mobile Alabama

[Allan Mugu]

Anyone have experience in renting to Section 8 tenants in Mobile Alabama? I've heard you can purchase properties in $20K - $40K range and rent for about $800. Cashflow sounds good but don't know if it's worth the hassle especially if you are an out of state investor.

[Denise Evans]

@Brian Garlington, it is a matter of personal preference if the tenants pay for water and power. Whichever the landlord prefers. Most landlords here prefer for tenant to pay (for obvious reasons) PLUS there is a statute that says if the power has been disconnected for seven consecutive days, the landlord may consider the premises abandoned and re-enter without the need for an eviction lawsuit.  Local municipalities used to hit landlords with unpaid tenant water bills, and make landlord pay bill before water would be connected for new tenants.  A statute was passed recently that made that illegal.

You can buy on the 1% rule, easily, as that rule is defined generally. I would not get hung up on the 2% rule. Those are available, but if you stick to that, you overlook a lot of opportunities. Many investors buy on a GRM of 100, which works out to monthly rent = 1% of purchase price, and they do very well with that. In fact, one of my friends is a real estate multi, multi millionaire with SFR, apartments, retirement communities and office buildings, and the GRM of 100 is the ONLY investment analysis he has ever used.

Alabama is a landlord friendly state. Real estate taxes are the 3rd lowest in the nation. Income taxes are very low. Cost of living is low, which means repairs and maintenance are low. Rents are fairly high and stable in most markets. Your NOI will be larger in Alabama than in most other markets.