All Forum Posts by: Michael S.

@Samuel Coronado - cash flow on new builds here right now is fairly non-existant without putting more than 20% down.  I could see folks doing new builds if they have 1031 money they need to place somewhere and they are putting 30%+ down however.

Way too much sunshine in this thread about the current market conditions here in Huntsville and Madison right now. Unless you are sourcing properties yourself off-market, REI became much more challenging in 2023, and downright brutal since the start of 2024 here.

@Samuel Coronado - the challenge is that there will likely be a very small number of renters looking for a house that size, as well as that can afford a rent amount that high who won't just buy otherwise.  Is your house in 35758?  At over 4000 sq ft, I'm surprised you won't be able to list for a much higher number to net a decent profit, but without knowing more specifics on the house and location, I am speculating here.  Let us know how it turns out.  

@Cosmo DePinto

You've received several responses and pieces of advice, but no one has directly answered your question (until now):

-Has anyone had an any recent success using BRRRR in Huntsville? 

VERY unlikely unless you either source an off-market property yourself or you find a unicorn deal (our last semi-BRRRR was a B-neighborhood property we sourced from an out of town wholesaler in late 2023, but couldn't get all our capital back out on refi).

-Or even cash flowing on a property RECENTLY ?

Zero in 2024 in Huntsville - which is precisely why we bought zero LTRs in 2024 locally (bought one out of state, and bought a local flip property and one small local commercial property - slowest year since I started REI in 2017).

@Kerry Hermann - the posts by @Michael Ewers and @Samuel Coronado were solid advice (I don't know Nita Cook whom Sam referenced, so that's the only part of his post I can not comment on).

I second what Michael said about the market here - it was fantastic from 2017 (when I started) through 2022 - then it really started to crater in 2023 (although we still found some deals), and the bottom completely dropped out in 2024 (found one small commercial deal and one residential flip deal in 2024 - that's it).  We didn't acquire a single buy and hold residential LTR the entire year of 2024 in Alabama.  It's so bad that my last purchase was in Indiana, which was my first OOS investment, and likely will continue to look there if the market doesn't improve here.  

Sam mentioned markets in North Alabama that may work much better right now than Huntsville and Madison, so I would definitely explore them.  I don't have properties outside of Huntsville and Madison here with the exception of one in Guntersville.  

Good luck. 

@Dan H. 

"Question: have you ever filled out a spreadsheet of cost and lifespan of each product of a property? I will predict you have not."

You are absolutely correct - I have never done this exercise.  We do not necessarily plan to keep each of our properties indefinitely, which makes this exercise not as relevant for some of our ventures. 

We never planned to keep our new build for 30 years, which is why we would have never used your cap ex valuation.  Our plan was to rent it for 3-7 years, and then sell it, before a roof, HVAC, plumbing, or even much flooring was in need of replacement.  We sold it after 3 years as the appreciation was so significant, it would have been foolish to hold it longer and roll the dice.  

But I do appreciate you taking the time to explain your thought process. And your calculation makes sense for a property that you plan to keep forever so to speak.

@Denise Lang - would NOT recommend my local market right now unless you can source it off-market.  Numbers don't work in Huntsville or Madison proper right now.  I just bought in Indiana last month given how bad the numbers are here right now.  

@Minh Nguyen - what do those percentages represent?

@Gloria C. - there is no absolute answer to your question.  The data @Devin Conley posted is pretty solid from my experience (I do not know Devin nor how he sourced the data, just going by my own investing experience).  

If you want better cash flow, 35805, 35810, 35816, and 35811 are likely the choices.  But this comes with pockets of C/D neighborhoods, and higher potential for headaches;  in addition, appreciation in these zips has probably maxed out for a while.

@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.