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Hazel Green- too far for commuters?
Hey y'all, I'm an out-of-state investor working with a realtor on my first investment property. I had initially sent her several listings in Madison proper, but apparently all 3 were already under contract. She mentioned the market for resale properties is super-hot in Madison right now, and she suggested I check out a certain planned community nearby. I just checked Google Maps, and apparently the development is in Hazel Green, just off the 431. I see that makes it about 30 minutes from (for example) Redstone Arsenal, which I know is a major employer. It's only about 19 min from the big new Facebook Data Center, which doesn't sound too bad to me. That said, I'm not a local and I'm not sure what commute time most locals are used to. Would these commute times make my rental unattractive to a local renter?
Also, would y'all agree with my realtor that a new construction home is a viable path forward, considering the competitiveness of the local market? I do like the idea of buying a home where everything is still under warranty, although the idea of buying something that doesn't exist yet gives me some pause.
@Richie Thomas most builders won’t sell to investors and cash flow would be minimal if at all for new builds.
@Richie Thomas @Jessie Kristie There are some builders who will sell to investors and my recent experience has been a $400/$500 actual gross positive monthly cash flow. Of course, your numbers for management fees, CAPEX, etc.. will reduce the gross number. but it should still be positive (CAPEX on a new build should be very low). The area in Hazel Green/Meridianville is close enough to all of the major employers in the county and the schools rate pretty good too. The advantage of using a new build, when available, is a first-come-first-served environment instead of the multiple offer pay over list market in resale product.
Quote from @Richie Thomas:Richie,
Hey y'all, I'm an out-of-state investor working with a realtor on my first investment property. I had initially sent her several listings in Madison proper, but apparently all 3 were already under contract. She mentioned the market for resale properties is super-hot in Madison right now, and she suggested I check out a certain planned community nearby. I just checked Google Maps, and apparently the development is in Hazel Green, just off the 431. I see that makes it about 30 minutes from (for example) Redstone Arsenal, which I know is a major employer. It's only about 19 min from the big new Facebook Data Center, which doesn't sound too bad to me. That said, I'm not a local and I'm not sure what commute time most locals are used to. Would these commute times make my rental unattractive to a local renter?
Also, would y'all agree with my realtor that a new construction home is a viable path forward, considering the competitiveness of the local market? I do like the idea of buying a home where everything is still under warranty, although the idea of buying something that doesn't exist yet gives me some pause.
The drive to Huntsville and even Redstone Arsenal is relatively easy and most are along major highways that feed into the Arsenal. I know people that live in Fayetteville, TN and make the drive for example. The Hazel Green area definitely has a lot of building especially by the high school on 231/431 that is diagonal to the Walmart SuperCenter.
Hope this helps.
Jeff
Thanks @Steve Stinson. I'm budgeting 10% each for property manager and vacancies, and 5% each for CapEx and repairs. We've confirmed with the builder that they'll sell to investors if they go through my realtor, since they have a personal relationship. My realtor/PM says $0.95 to $1.05 per sq. ft. is a reasonable monthly rent for a 4 BR/2 BA property in that area, which (according to the BiggerPockets calculator estimate I did) is enough to cover the monthly payment plus the above costs I mentioned.
I anticipate putting down my deposit and earnest money in the next few days. Excited to be going from 0 to 1 on my real estate career. Here's to (hopefully) many more to come!
@Jeff Henderson thanks for the context, it's reassuring to know that people commute from as far away as TN. :-)
@Richie Thomas - just curious, have you ever stepped foot in Hazel Green? I ask because it is not Huntsville/Madison whatsoever; it is quite rural. Yes, it has grown in the past decade, but growth is relative. I figure before you put money down, you want some honest feedback.
Commute - for Huntsville proper, the straight ride down 431 is fairly easy and not too congested. However, anyone commuting to west Huntsville/Madison/Toyota plant is not going to live in Hazel Green, as it will be a long commute in rush hour. Now, compared to San Francisco, it's incredibly easy; but comparatively in North Alabama, it is not.
New builds - IF, and I stress the word IF, there is ever a correction in North Alabama real estate, Hazel Green and Meridianville will not be able to support the current entry price point of new construction there, and could be underwater; just my opinion of course. That said, I honestly don't see a correction coming; but stranger things have happened.
Rent - it could be challenging to rent anything in Hazel Green for over 1600/month, when you can get a solid 4 bedroom in Madison or Huntsville for 1600 to 2000 right now.
On the positive side, a new build truly should have minimal cap ex for the first 5 to 10 years (depending on which builder you are using of course...)
Best of luck in your decision - I would be curious to see if you can find any local investors who are actively buying new builds in Hazel Green right now. If they are not, that's a red flag.
$2000 will be hard to get there because for that much money you can get closer to the city or in Madison.
I learned within the first year managing properties in all the surrounding areas that I was very mistaken. Not only is it not too much of a commute for most renters, it is actually a preference by a sizeable portion of the rental pool. What I thought was too rural, to many is exactly what attracts them to there.
Just yesterday I was speaking with a potential tenant who was saying he needed a place but did not what to be within city limits. Some like the lower regulations. Some like the country/laid back feel. And others want a big yard for the family and to not be 15 feet away from the house right next to you.
Now, that's all fine information. But what does it mean when it comes to rent? I've learned the following for this area:
1. Demand is indeed lower outside of the city like in Hazel Green
2. The Supply in Hazel Green is very low
3. Which means that point 1 & 2 make rent prices significantly higher than I expected them to be in a rural area.
4. The Rental Pool that does want to be there is willing to pay to get into the low supply that is available.
In summary, I have found that my initial thought was wrong about Hazel Green. It provides a lower cost of entry than a property in the city but not at the expense of much lower rent. I find it very comprable to the investments my clients are making in the city when it comes to Cap rate, etc.
Great question and good luck to you with growing your portfolio.
@Michael S. great insights, thanks. I visited Huntsville and Madison last year on a real estate scouting trip, but didn't make it as far as Hazel Green. It seems like buyers are snapping up properties in this development. How many of those are investors, I can't say. But your point is well-taken.
@Matthew McDermott thanks for adding your input. Glad to hear that your experience with the cap rate in the suburbs was comparable to that of the city proper. What's your take on the path of progress as Huntsville and Madison start to become pricier? Is new construction following any one path in particular, or spreading out in all directions?
Quote from @Richie Thomas:You bet man. Path of progess, it seems to be going in each direction. I don't see it going a ton south of the Tennessee river right below South Huntsville. I also don't feel it much going farther east past hampton cove and Owens Crossroads, although those are 2 good areas. I think New Hope and Hazel Green seem to be quite promiseful. A lot is happening in building up Harvest and Athens although I think it will take longer in Athens because there is still a lot of space before then. My favorite submarket of HSV is Decatur. My office is in HSV but I personally live in Decatur. The costs are lower but the commute is easy making it the perfect sister city to HSV and thus I believe powerful from an investment stance. Any growth in HSV directly takes Decatur with it.
@Matthew McDermott thanks for adding your input. Glad to hear that your experience with the cap rate in the suburbs was comparable to that of the city proper. What's your take on the path of progress as Huntsville and Madison start to become pricier? Is new construction following any one path in particular, or spreading out in all directions?
@Vatsal Patel hey thanks for posting. Yeah I noticed the school ratings as well, and I was pleasantly surprised!
@Matthew McDermott thanks again. I hadn't considered Decatur up to this point, but I will. I went to Big Bob Gibson's BBQ last time I was in town. Investing in Decatur would give me an excuse to go back!
Quote from @Richie Thomas:
@Matthew McDermott thanks again. I hadn't considered Decatur up to this point, but I will. I went to Big Bob Gibson's BBQ last time I was in town. Investing in Decatur would give me an excuse to go back!
Awesome. That's a must in Decatur. I'll show you some more next time you come :)
Great dialogue - we don't get too many lively discussions for the Huntsville area threads - ha ha.
So I see a lot of posts in favor of Hazel Green - everyone has their own REI strategy, which is what makes REI a unique adventure for each of us.
That said, who here actually owns rental units in Hazel Green? Rather than speculative talk, I'm curious to hear about actual performance. What are you getting for rent? What size house? I'm curious to hear some real data. I think it's great that people are doing well in this location.
@Matthew McDermott - approximately what percent of your properties under management are actually in Hazel Green proper? Is demand for Hazel Green actually higher than Harvest, Owens Cross Roads, or New Market? I'm curious to know what you're seeing from the tenant request side.
Hello All, Interested to hear from the local real estate professionals comparing Hazel Green to Toney. Thank you.
Hey gang, big update from my end- just had my offer accepted on a 4-BR SFH in Madison proper! It was an MLS listing and it did go over asking price, but honestly not as much as I was led to believe it might. My realtor said it's common for listings to go $30-50k over list price, I got the property for $18k over asking. Not a brand-new build but age-wise it's not even a teenager yet. :-)
@Michael S.I took your advice to heart when deciding whether to purchase in Hazel Green. And (hopefully) this property will be less sensitive to market corrections, as you mentioned. Maybe I'll look again at Hazel Green in the future since it seemed like a lot of people felt there was upside there, but you asked some tough-but-fair questions that I'm also curious to hear the answers to. All in all, I feel like Madison is a good fit for me to get my foot in the door, build my local team, and get to know the local market better.
Agree with @Michael S. great discussion indeed! And congrats @Richie Thomas on your accepted offer in Madison! It might not cash flow in year 1 but I am sure it will in year 3-4-or 5 plus the opportunity of appreciation is way better than suburbs.
I have also heard/seen similar sentiments as @Matthew McDermott mentioned where in some folks prefer the quiet life and the rural living of some of these suburbs. I do have one recent property in toney that got rented pretty quickly and I have one in New Market which has been quite steady for the past 3 years with almost 0 vacancies.
@Richie Thomas - congratulations. Excellent news. @Gorden Lopes is absolutely right - your appreciation potential is much higher in Madison proper than Hazel Green, and you'll have a larger pool of renters interested in your house. I personally think you made a wise decision - we have multiple rentals in 35758, and have no regrets about any of those purchases.
@Edwin L. - I personally like Toney and New Market for investments more so than Hazel Green. We have put several offers on New Market properties, and almost bought one in Toney as well. I have yet to put an offer on a Hazel Green property. I am still curious to get feedback from current Hazel Green investors, as I would certainly re-examine that region if the data and feedback was impressive. We'll see.
@Michael S. a follow-up question for you- what's your take on the Athens / 35613 area? I'm seeing some new builds happening there and I'm wondering how much appreciation upside people are forecasting in that area. Is it similar to Hazel Green / Meridianville in terms of how far & how rural it is?
Quote from @Richie Thomas:
@Michael S. a follow-up question for you- what's your take on the Athens / 35613 area? I'm seeing some new builds happening there and I'm wondering how much appreciation upside people are forecasting in that area. Is it similar to Hazel Green / Meridianville in terms of how far & how rural it is?
Richie,
Full disclosure, I do not own property in Athens but think it is a booming area. The recent addition of the Toyota-Mazda Plant ($1B investment) , Target Distribution Center, Polaris, etc... are all within driving distance of Athens. Plus its an easy commute to Huntsville and Decatur as well.
@Richie Thomas - Athens and Meridianville/Hazel Green, in my opinion, are not similar at all.
Athens has much more potential for growth and appreciation - as @Jeff Henderson said, the job growth near Athens is tremendous, and there is a lot of folks who work in Huntsville/Madison who commute from Athens due to the amount of house/land they can get there compared to the metro areas otherwise.
I would not hesitate to invest in Athens if the numbers look good; new builds in Athens, to me, carry less risk for price correction than Hazel Green as well.
Plenty of people commute from Hazel Green, I've personally done several deals there. Most of the outskirt cities in the MSA all work, you just need to double check that a good manager will drive out there.
On the topic of the Data Center:
To shed a little information without revealing too much: I would beware putting too many of your eggs in that colossal data center basket. On the bright side I would expect continued construction out there for a number of years. They have capability to continue building and success to back it up. That's great for the areas of Toney, Harvest, Meridianville, and perhaps Hazel Green to an extent. I believe around 1k people work out there full time, so a lot of people, but nothing crazy. Something to keep in mind is that the overwhelming majority of the individuals that work out there are skilled tradesmen who could go to a different jobsite at any time for various reasons. A lot of them are union labor. Union or not, many consider places like Decatur, Muscle Shoals, and even Birmingham or Nashville home. Most people who I know that are purchasing homes in that area are field supervision and office people...a smaller chunk of the pie. Once a data center building is fully commissioned, there are not a lot of employees working inside of it.
To summarize: This is bringing in prospective buyers and renters currently and won't stop in the near future, but that could come to a grinding stop at some point in the long term. I'm just saying, be careful buying a property just because "the data center is nearby".
Some above asked about Hazel Green rentals. I have a 3/2, 1500sq/ft, two car garage that rents for $1400/month. I’ll take that on a $100k property.