All Forum Posts by: Lindsay Davis

@Conor Kelly,

Though I’m not Canadian, I am an active investor in Montgomery, so I can share a few details.

The first thing you’ll likely notice is that properties in Montgomery are pretty affordable, even when compared to other markets in Alabama. Cash flow-oriented investors would do well in this market, since Montgomery’s rent-to-price ratios are very favorable—for instance, we’re seeing $150,000 properties in B/B+ neighborhoods fetch monthly gross rents of $1,200 to $1,300.

By the way, if you're looking for financing, a debt service coverage ratio (DSCR) loan could be a good option for you since you're an international investor. They're easier to qualify for and will allow you to bypass personal income/asset tests.

Let me know if you have any specific questions about Montgomery—I’d be happy to help.

@Account Closed,

I read both your original post and your replies to folks on your thread. What I’ve gathered is:

1. Austin’s out because it’s too expensive and nothing will cash flow

2. The Midwest is out because it’s too cold

3. Florida is out because of hurricanes

In that case, what about parts of the Sunbelt that are inland? Places like Alabama or Tennessee seem to check all your boxes, at least on a preliminary basis: plenty of deals will cash flow, the weather’s warm, and the risk of hurricanes is low.

For instance, I’m in Birmingham, and you can purchase a rent-ready single-family home in a B/B+ neighborhoods here for about $100,000 to $130,000. You can likely fetch rents in the $1,000 to $1,200 range, so cash flow—even on a significantly levered deal—is highly achievable.

@Meir Koplovitch,

Welcome to Birmingham—and to BiggerPockets! I run a turnkey provider and built new construction single-family homes in the area. Feel free to reach out with any questions!

@Austin Berlick,

There are essentially two ways to outsource the grunt work of “landlording”—unfortunately, both will eat into your margins.

The first is to hire a professional property management company—this will cost you between 5% and 15% of rents, plus surcharges for out-of-scope services. They’ll handle the entire leasing process (i.e. property marketing, tenant screening, placement, lease execution and renewal, turnover etc.) for you, plus everything else. This means maintenance, evictions, repairs, and so on are all taken care of.

The other option is to hire a leasing agent—this will cost between 50% and 100% of a month’s rent. Your leasing agent will take care of everything you’re doing now. After the tenant moves into your home, things become your responsibility.

As a more immediate remedy, try to do away with those trial leases. See if you can screen tenants more comprehensively and then offer them a long-term lease right off the bat.

P.S. Some property management companies offer a 0% property management fee in the first year as a way to attract clients. You could potentially sign up for a free trial and re-evaluate at the end of the year to see if it’s something you’re still into.

Appreciate the mention, @Engelo Rumora!

@Jake Benny, like @Chris Clothier said, these names are a good starting point. Do some digging yourself and have conversations with several companies to see which one’s the best fit for you. Some pointers:

1. Fee structures vary. Turnkey providers typically charge a percentage of gross rents plus a markup on maintenance calls. Be sure to ask about this.
2. Most turnkey providers specialize in one or more geographic areas and property/neighborhood types. Make sure their speciality aligns with what you’re after.
3. Ask about their track record. Good turnkey providers should be able to minimize vacancy periods and reduce turnover costs. Ask for data on these items.
4. Turnkey providers sell you a property out of their inventory—inquire about the guarantees or warranties that are offered. In what ways is the turnkey provider (in its capacity as a renovator or builder) accountable to you? Is this in conflict with the turnkey provider’s role as a property manager?
5. Ask about what’s included—and what’s not. For example, will your turnkey provider help you get your rental approved for Section 8? Are evictions covered? How much does each service cost?

Best of luck—it’s exciting to get started!

@Akash Bhot,

Congrats on getting started!

My honest opinion is that trying to BRRRR your first deal—especially if you're investing out-of-state—is going to be tough. Even if you find trustworthy contractors, you're still going to have to play the role of project manager and site supervisor, neither of which can be done remotely.

For a first deal, I’d recommend finding a rent-ready or near rent-ready property (one that just needs minor touch-ups). Unless you find a property manager, you’ll still have to handle the property marketing and leasing process yourself, but it’ll be more manageable.

@Andres Pepping,

Alabama could be a good fit if you’re after low property tax rates—the statewide average rate as a percentage of home value is about 0.4%. (By contrast, it’s 2.0%+ in Illinois.)

Plenty of markets also feature affordably-priced properties—the average home price in Birmingham is about $175,000, while in Montgomery it’s roughly $150,000.

As for things to be mindful of, definitely find yourself an excellent set of boots on the ground. If you’re interested in Section 8 rentals, hiring a trustworthy property management company that has experience navigating the voucher program’s bureaucratic approval and compliance to-dos is arguably the single most important thing you can do once you get a deal under contract.

@Chi Sastry,

I think Tennessee is generally a good state to buy in, though I will note that the 10 markets you listed are very different in terms of demographics, average rents, home prices, yields, and so on.

Of this list, I’m most familiar with Chattanooga so I’ll offer a few details. We’re seeing B/B+ single-family homes go for about $300,000 to $350,000 across the city. If affordability is your main goal, areas like Hixon and Middle Valley (the 37343 zip code) or Harrison (the 37341 area) have homes at the $200,000 mark. Both suburbs are about 10 to 15 miles northwest of downtown Chattanooga, so you’re not too far from civilization.

If you have specific questions about Chattanooga or the surrounding areas, let me know—I’d love to help!

@Zane K.,

To piggyback off what @Michael S. said, you’ll find it pretty difficult to find a decent property in Huntsville proper on a $250,000 budget.

Don’t worry, though—in nearby suburbs, your budget will work fine. Meridianville (10 north of downtown Huntsville), Decatur (25 miles southwest of town), or Athens (30 miles west of town) will have plenty of B/B+ properties under $250,000.

Given that cash flow is your primary goal, these areas outside of Huntsville may be a better fit for you anyway—rent-to-price ratios are definitely more favorable outside the city limits than within them.

Still, Meridianville, Athens, and Decatur remain close enough to Huntsville to share in the area’s growth which, in my opinion, bodes well for long-term appreciation.

@Antonio Di Cristo,

Tennessee as a whole is a great place to get started, though you’ll find that Nashville, Chattanooga, Memphis, Knoxville, and so on are pretty different markets. Not sure what your budget is, but if you’re looking for an affordable place to get started in and don’t mind a little cash flow, Chattanooga may be worth a look—I definitely second what @Tim Ryan is saying about the city.

If you’re willing to venture into nearby states, there are plenty of similarly affordable markets in Alabama, Georgia, and the rest of the Sunbelt as well.