Best areas to invest in Birmingham, AL

The most frequent question I get from investors is, "Where should I invest in Birmingham, AL?"  

This is an obvious question that nearly every investor asks.

I've been buying, managing, selling and investing in Birmingham, AL properties for the last 15 years and I've bought in a ton of areas I would love to own again and a ton of areas there is no way I would ever own again.

• The first thing you need to understand about Birmingham is that it was built in eras.  

There was a building wave in the 1920's, the 1940/1950's, the 1970's and then again in the 1990's.

My first bit of advice is to pick an area where you feel comfortable with the "vintage" (new cool way of saying age in our industry) of the home.

I typically never invest in homes built before 1950 - particularly if you are going to hold them for long periods of time.

Homes built prior to 1950 in Birmingham do not have modern features like closets, ceilings at a reasonable height and electrical boxes setup for today's living.

Around the late 1950's and into the 1960's homes were built with more modern amenities.  

• The next item you need to understand is that Birmingham has a definitive moderate income streak that runs from the northeast part of the metro area in a line to the southwest.

If you plan to focus on low to moderate income housing you will want to focus in these areas.  A few of those zip codes that come to mind are 35206, 35211, 35215, 35208, 35218, and 35228.  If you choose to map these zip codes then you will see what I mean.

These are the areas with the highest rental value relative to dollar spent.  They are also the areas with the highest credit risk tenants and generally the highest vintage of home.

If you are interested in investing in a higher income area, the "Over the Mountain" area is a traditionally more affluent area of town.  This refers to Red Mountain (if you are from out west you will call it a hill) which divides the city of Birmingham from the suburbs of Homewood (35209), Mountain Brook (35213), and Vestavia (35216).

These areas are where you will find a ton of renovating to resale.  The vintage home doesn't matter, though most of Mt Brook and Homewood were built in the 1940s and 1950s and Vestavia was built in the 1960s.  As you can imagine, like many affluent areas of the country, these homes are not the original home and in some cases are getting mowed down to build new.

• Birmingham is driven economically by two industries - healthcare and banking. 

The University of Alabama at Birmingham (UAB) is a local teaching hospital that is by far the largest economic driver in the city. 

They own most of the downtown real estate and continue to expand.  It is a destination hospital for the state.  Doctors, nurses, hospital execs, techs, everything needed to support a fully functioning teaching hospital are all very prevalent here.

Banking has also played a huge roll in the modern Birmingham.

At one point Birmingham was home to 3 or 4 of the largest banks in the country.  Today, Regions Bank is the last national bank to make its home here.

However, even after the mergers and acquisitions of the 2000s, Birmingham is still a hot banking market.  Many banking execs chose to stay in Birmingham rather than to migrate to home offices of Well Fargo and other bank aggregators.

You will find many local and regional banks here like ServisFirst, Oakworth Capital, and CommerceOne (a new bank startup).

So finally, I'm going to get into the actual question you asked . . . Where should I invest in Birmingham, Alabama?

And I'm going to answer this with some questions for you.

• Are you going to renovate the home and resale it or rent it out to a tenant?
• If you decide to rent, are you comfortable with a more "risky" credit profile tenant or would you prefer only those with A1 credit?
• How quickly would you like to turn your money?  Very fast or long term hold?
• What's your exit strategy?

Once you've answered these questions, I'd highly suggest you make a trip here to see the city.  The BIGGEST mistake I've seen investors make is to not make a trip here and rely solely on someone selling them over the phone.

There is nothing that will take the place of you putting your eyes on local vendors and the local inventory of homes.

I'm excited that you are exploring investing in Birmingham.  I wish you much success!