@Chris A. Thanks for the shout out. @Andrew Frishman to answer your questions:
1) While appreciation is definitely not the focus of turnkey (cash flow is king!) the Birmingham market has experienced modest but steady growth. In addition, the revamp of our downtown area and influx of millennial entrepreneurs has made the city a bit of a hotspot. The trends we're seeing on the ground bode well for future growth, but of course you can never guarantee appreciation. That's why we never try to use that as a selling point - it's the icing on the cake. However, RE in Bham retains its value over time and typically produces modest appreciation. We've also noticed that the average prices in some of the areas we do the most work in have been going up, possibly as a result of our high-end rehabs pushing up the comps for other properties on the market. We don't have hard data on that yet, but if we get some I'll definitely share.
2) We track all our performance metrics obsessively and update them daily. For the last several months, our occupancy rate has hovered right around the 96.5% mark for the previous 52-week rolling period, so a vacancy rate of 3.5%. Of course, we know that these things ebb and flow a little bit, so we always use a slightly inflated rate of 4% on our pro formas just to maintain a conservative estimate. However, our minimum lease term is 2 years, but our average is 3, so many of our tenants stay for quite a while. Our thorough rehab work, updated capex items, and sub-24-hour maintenance call out turnaround time keeps good tenants happy, so we don't anticipate our occupancy rate dipping in the foreseeable future.
The real estate demand in Bham is strong, and our population is getting younger (which bodes well for future growth as the millennial generations settles down and starts families). There is strong demand for both rentals and owner-occupied properties. Turnkey is a long-term investment, but the upside of investing in high quality SFR props in B/B+ areas is that you are more likely to be able to sell to an owner-occupant (who is more likely to pay market or more based on emotional attachment to an area or house). A C/D prop isn't selling to an OO , just other investors (who will always want a deal and haggle, just like you or I would). A props can absolutely sell to OOs, but unless you find an incredible deal, your PITI will eat up your cash flow, which makes it purely an appreciation play for 15-30 years . The B/B+ class is right in the sweet spot of cash flow (as the primary goal), moderate appreciation potential (icing), and exit flexibility (back-up plan), which is where we like to be. While life sometimes happens, people don't (or shouldn't) get into a turnkey investment expecting to pull out a year or two later, that defeats the purpose of this investment type. If you do have to sell early, however, a well maintained, updated property in a family-friendly neighborhood is much more likely than a higher or lower-tier prop to provide consistent, reliable, passive income, and then sell at market price or above.
Ok that's it from me! Don't want to bogart this thread any longer ;) Thanks, Chris, for keeping such a detailed log of your experience with us. You know where to find us if you need anything!
All the best,
Clayton
