All Forum Posts by: Michael S.

@Elan Adler - great post.  I like that you pointed out all the positives and negatives for a fair balanced post that will help other investors evaluate future options.

I have been posting for a while on how hard the North Alabama market has become, and this post shows a good example of it. We bought only one residential property in North Alabama for a flip in 2024 - that's it. It's been so bad here, that I bought an STR in Indiana with another business partner in 2024 because there are minimal opportunities here - unless you have the ability and budget to extensively source off market properties here.

A few comments from my perspective (and after reading @Dan H. comments):

I agree with Dan, and view this as a negative cash flow property as well, given that more than 20% down was necessary to make it work with what I suspect is a non-commercial 30 year note given the interest rate.  Essentially it was necessary to "buy" cash flow with a higher down payment.  But that's typical with new builds here.

I think Elan was smart to list at 1800/month, but I do not agree it was under market - the fact that his rented quickly and there are others sitting for more than 100+ days tells you that 1800/month is exactly market value.

"Low insurance" is concerning to me, as Athens gets a LOT of high wind / weather / tornado activity for unknown reasons - they just got hit again last weekend.  I would caution on having a high deductible / inadequate coverage policy with a property in Athens.

Dan, a comment you made that I don't concur with is the cap ex on a new build of 300/month, unless it was a low quality builder (I have no idea who the builder on this property is).  We bought a new build years ago (and sold it 3 years later when the market turned up) and our TOTAL cap ex was $550 over the 3 years.  The house had a warranty the first year that covered anything that came up, and we only had one issue with HVAC over those 3 years.  So my limited experience with a new build did not yield cap ex expenses with what you are proposing.  Maybe we got lucky in that department, or maybe it was just a quality built property.

Happy New Year and best of luck in 2025.

@Treza Edwards 

"I am reading the Rental Property Investing book and implementing the method that focuses on cash flow and that strategy states you need to have $300 cash flow per month, per property. I am not sure if I can put zero for capital expenditures, since it is new construction."

There is no such absolute rule or mandate for REI - it is up to you on your comfort level with your cash flow versus total investment versus appreciation potential.

If I followed that rule, I would have missed out on a LOT of great opportunities over the years.

We bought a house in Jones Valley in 2017 with negative cash flow - why?  Because not only did I think the house would appreciate, I thought the rent potential on the property was huge.  

Obviously, everyone who bought in 2017 did well on appreciation.

On the rent side, it was negative cash flow when it rented for 1150/month in 2017.  It now rents for 1850/month.  Glad I didn't follow the guideline that book quoted above. 

Good luck with your REI.

@Elizabeth Ross - make sure you are familiar with South Bend - houses for under 100k in South Bend can typically be in pretty rough neighborhoods, so be sure to do your due diligence.  We are closing on our first South Bend rental property next week, as our local market opportunities have become non-existant unfortunately.  

@Nhu Pham - South Bend

@Matt Huber - if you bought in 2021 in Harvest, you should have seen some decent appreciation - however, if you bought these as turnkeys, that may explain some of the lack of appreciation you are experiencing.  

Yes, the market here right now has been really tough, and trying to sell your properties to other investors with section 8 tenants will likely be fairly problematic at this current time. Given your low interest rates, your best move may be to sit tight for a while until the market here improves.  

@Jonathan Greene- good topic.  To add to the above posts, one thing that amazes me on this forum is the number of people who feel the need to give advice on markets that they have no idea on or no experience in.

For example, the number of people who feel the need to chime in about the Huntsville/Madison/North Alabama market who have absolutely no clue about it.  

"Huntsville is great for cash flow" posted by some dude in Alaska for example - I mean, seriously?  First of all, that is absolutely incorrect right now.  Second, why does someone in Alaska feel the need to comment on a city in North Alabama they have no clue about?   

Here's some real examples (with changed names / locations of the posters) to illustrate my point:

"Oh, I lived there 10 years ago" - Fred in Topeka;   yup, irrelevant to the current real estate market.

"I don't own any properties, but Huntsville is a great place to invest in" - Bob in Fresno;  how in the world would you know this?

"You should focus on duplexes in Huntsville for a house hack" - Jane in Montana;  great, except there are an incredibly few duplexes in Huntsville

"Hazel Green is an easy commute from Huntsville and shouldn't affect your rental prospects" - Joe in Chicago.  The commute may be small for a big city, but it's forever for the locals here.  Again, wrong advice.

Don't know the city, don't live there, don't have any properties there?  Then don't comment on the post with misinformation!

@Gash Nookala - if your property is not in the Hampton Cove area of Owens Cross Roads, you honestly are not in an ideal location for a rental.  If you want to provide your property's address, I can give you some additional feedback.  Rental market here is very slow right now as well.  

I doubt there would be much demand for an STR outside of Huntsville or Madison city limits - maybe in Athens or Guntersville, but those are 45 minutes away from Huntsville and a totally different market.

John, not sure if you are familiar with the current STR situation in Huntsville, but the city has shut down STRs that are not zoned correctly and also not permitted. Probably best to look elsewhere accordingly, as the availability of properly zoned STRs is quite limited.

@Shannon Allaire - the market here has been bizarre in 2024, especially Q3 and Q4.  I've spoken with multiple real estate agents, property managers, and investors who have all noticed the same thing. 

-Rentals are very labile - some rent in less than a week for more than expected, others take two months or more despite being listed for less than they were previously rented for two years ago

-There is no cash flow in A or B for new purchases unless you want to put down 30% or more, or find a unicorn deal.

-Wholesale deals are all over the place - we've seen some great deals, some ARVs that are ridiculous, and some that are priced more than it would fetch on the MLS

-C neighborhoods are going anywhere from 70 sq ft to almost 200 sq ft in variable conditions.  

-We all selling more than buying because we picked up multiple flip deals but have encountered minimal LTR opportunities to buy in 2024.

-It's been so crazy that I'm under contract for an OOS property in Indiana now with another business partner - never thought I'd see the day where I'd have to look outside of Huntsville for deals