We have a special show today because we’re going to do another market spotlight. Today, we’re going to talk about why you should invest in Alabama. In fact, there are actually three great markets to consider in Alabama.
To discuss why you should invest in Alabama and these markets, I wanted to bring on one of my local market providers. He is a great guy, very knowledgeable. His name is Jared. Him and I were down at the IMN event in Florida a couple of months ago. He was on one of the panels, as was I on a separate panel.
I really enjoyed listening to him talk because he is such a knowledgeable person. He’s very detailed, analytical; he really digs into the markets and market timing and trends and the economics and fundamentals. He understands why a market makes sense from many levels.
I could literally listen to him all day long. Then I thought, “We work together, and we have a property in Huntsville, Montgomery and Birmingham in Alabama. Why don’t we just do a podcast episode and talk about these markets and why they make sense? Then you can take it from there.”
If you missed our last episode, be sure to listen to Home Inspections: What You Need to Know.
Enjoy the show!
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Why Should You Invest in Alabama? (Huntsville, Montgomery and Birmingham)
Jared, welcome to the show.
Thanks, Marco. Thanks for having me. I’m glad to be here. I want to thank your listeners for taking some time to learn a little bit about demographics and what makes markets tick, why some markets are so much better to invest in than others. We’re glad that they can take some time to listen. Thanks for having me on your show today.
It’s great having you on because you’re a smart, and you know a lot of information. You’re very knowledgeable about these markets and others too. When it comes to these tri–cities in the State of Alabama I thought we could just lift up the hood and look down and see what’s there. A lot of people don’t know about these markets or don’t hear much about them. They’re not sexy markets. Let’s talk about those today. Before we get into that, share some of your background because you have a very interesting background. If you don’t mind, include your story about when you were training other consultants and coaching clients such as Rich Dad coaches and others, because I thought that was a fascinating story.
What was so funny, about ten years ago, I was looking for Robert Kiyosaki; many of you have probably read Rich Dad Poor Dad. I love his concepts, I love his books, I love the things that he teaches. When people paid $12,000 to $20,000 to talk to a coach for half an hour a week, you really expect that that coach is going to be 100% on top of the latest trends on exactly where market cycles are and be able to help protect you from investing at the top of the market and stop you from doing that, making sure that you’re getting out at maybe 80% of the watermark so that when the market starts to go down, you’re already at cash and you could buy when the market’s down because that’s when you really make money. Warren Buffett talks a lot about that and that’s why Warren Buffet spent so much money getting into the single-family housing space six or seven years ago. All the hedge funds that you and I go to at the IMN conferences, they looked at that and went into the markets at the right time.
One time, I was sitting on the coaching floor and all these coaches that I used to train for Robert, I would listen to him and it would be California in 2007, people would say, “You can make money in any market. Go get a real estate agent who specializes in Fannie Mae or Freddie Mac or HUD Home Foreclosures and get with them and go buy some foreclosed properties and you’ll make great money.”
The problem was, foreclosures had got up to you, even in your blue-collar working class neighborhoods, they were $500,000, $600,000. Then by the time you put $100,000 rehab into them, you were in them for $600,000 or $700,000 hoping that you can make $100,000, but the market had gone up 25% for five straight years, so it’s 125% appreciation. That just wasn’t sustainable because the median home cost was so much more than the median income of what the families could afford. That’s what people don’t understand. If you want to know whether a market’s going to go down, the number one thing you’ve got to look at is whether income is keeping pace with the housing prices.
Which is affordability.
Yeah. I built some affordability ratios. We began to analyze 278 markets across the country. As I started building it, I found amazing trends that would help me to be able to tell clients, “This market is at the bottom,” based on about 78 criteria that I built into a spreadsheet. Analyzing all these different cities, we could tell which markets were the top cashflow markets, when to get in, when to get out and which markets were still primed for great growth and really high cashflows and great returns.
One day I was talking to a guy who ends up calling me and he says, “I live in California. I want to invest in California.” I said, “I don’t think that’s wise. Instead, think you need to go to Kansas City.” This was in 2007. I said, “I can get you 1970s houses that are 2,400 square feet, four-bedroom, two-bath for $45,000, put $10,000, $15,000 into them and you’re in them for $60,000 and they rent for $950 to $1,000 a month. Your returns are going to be 25% cash-on-cash return and you have $15,000, $20,000 equity. The down payment on $60,000 at the time was $15,000. You put down $15,000 and make $4,000 a year, which was a 28% return.
He got so mad at me and said, “I’m calling Robert Kiyosaki and he’s going to hear about this because his book says you can make money in any market. I’m going to call him and you’re going to be fired.” It was so funny because I waited for three or four next days when our next scheduled appointment was. He emailed me and said, “Just to let you know, I did email him and I’m waiting to hear back.” Then on our scheduled call, I asked him, his name was Chad. I said, “Chad, what did Robert have to say?” He said, “He said, you’re right and I should listen to you.” It was funny because it used to be true, you could make money in any market, but now things have appreciated so much, it’s changed.
We’ve actually gone through five migrations in the United States. The fifth migration was people now move for jobs. It’s not for land grabs or free land like they used to do in Nebraska or Oklahoma. There’s no more homesteading. People aren’t moving from the coastal areas to the central areas with the Gold Rush. People are moving where the jobs go. Population growth is going from Rust Belt states where baby boomers are flooding areas that are sunny and warm. You have that. Then you have people moving for jobs. You’ve got to understand those cycles.
Jobs are at the heart of it. We have three markets here in Alabama: Huntsville, Montgomery, Birmingham. Let’s just take a closer look at these. It’s important to better understand these markets and why they’re attractive for investors. Let’s talk about the local economy, the housing market, and maybe the rental market in each of these markets.
We’ll start at the top, at Huntsville and then just move our way south just because it’ll be easy. One of the things I want to point out is, I’m not from Alabama. I was born in Huntsville because my dad was stationed at Redstone Arsenal in the ‘70s, since he was working Nike MX Missiles, I did just happen to be born there. I spent four years in Germany and then spent most of my life in Georgia. We’re in Alabama not because we’re from Alabama; we moved there and opened up teams there because we felt that it had two of the top ten best markets in the country right now.
Starting in Huntsville, Huntsville is the Pentagon of the south. You’ve got Raytheon, Lockheed Martin, Boeing. Practically, anybody who’s in the defense industry has a presence in Huntsville. The Internet was developed out of Huntsville; most of the rockets and missile guidance systems. When Wernher von Braun came to Huntsville in 1960s to help form the Marshall Flight Center for NASA and to help with building rockets, it just exploded the city. Redstone Arsenal was built there; that employs 31,000 military personnel. Because of the R&D that happens around Huntsville related to the military into NASA, it has more PhDs per capita than any other city in the country. It’s the second largest Research and Development Park in the work at the Cummings Research Parks. Remington Arms just opened up a new plant last year. There are strong manufacturing sectors. Polaris just opened up an ATV plant there last year. The FBI just announced this year that they’re moving 4,000 professional jobs to Huntsville. That’s going to boost. Usually, we get about five new jobs for each professional jobs, that could have an impact of 20,000 jobs in Huntsville.
It’s a town of about half a million people. The population is growing, the future job growth is huge, the unemployment is very low, there are new roads everywhere, there’s new schools that have been built, two new high schools just in the last couple of years. It’s just a really great booming area. The education levels are very high. The median income for a family is $76,000. That compares favorably with the Bay Area of California. One of the areas that we invest in is Madison, which is one of the nicer zip codes and nicer suburbs of Huntsville, about ten minutes out. We’ve got a zip code there that’s $105,000 median income. One of the correlations there that people don’t understand is when you have high education and you have high income, you tend to have very low crime. That’s really a positive thing.
Huntsville has been ranked by Forbes as one of top places to retire in the United States. It draws a lot of baby boomers. You’re an one hour and a half south of Nashville, Tennessee, which has a booming economy that’s exploding. You’re an hour and a half north of Birmingham, which is 1.2 million people just to the south of you. That’s where our property management is located, it’s in Birmingham. We have central property management that handles Birmingham, Huntsville and Montgomery. Montgomery is an hour and a half south of Birmingham. We love Huntsville. There are several universities. There’s Alabama A&M University. Then there’s the University of Alabama at Huntsville, which is a huge engineering school. Finally, there’s Oakwood University, which is a Seventh Day Adventist based university. There are three universities there and just a great economy. We love it.
You can get C+ working class neighborhood rental homes that will throw off a 10% cap rate, 9.5% to 10% cap rate if you paid cash or you’re looking somewhere in the 18% to 20% cash-on-cash returns if you finance them. That’s going to get you usually around a 1,200 square foot to 1,400 square foot house for $85,000, $90,000. Sometimes we can even get some stuff in the $78,000, $79,000 range. They’ll rent for $800 to $950 a month. We’re hitting the 1% rule in most of our Alabama markets, which is really getting increasingly hard to do in most markets.
What’s on the other end of that spectrum for neighborhoods, on the higher end or the better end? Are you an A, A- type neighborhoods or is that a tough thing to find?
We do everybody from C+ to A-. When I talk about C+, I’m talking about fairly strong, good neighborhoods, good pride of ownership that’s just blue-collar working class. We’re not talking urban ghetto or high crime. We’re just talking about your solid, blue-collar working class neighborhoods. That’s what we do at the bottom. We don’t like to do anything below C+.
In your B- and B, you’re going to be $95,000 to $110,000. When you get into about $110,000, you’re going to get maybe $950 to $1,000 a month rent. Then we get into the B+ in South Huntsville and the Grissom School District is rated at 10. I can get houses there real close to the Redstone Arsenal. Those are retailed for about $110,000, $120,000. School district is rated at 10 with very high incomes, very good professionals. There are a lot of really good renters there because you’ll get a lot of people who get stationed in Huntsville or moved to Huntsville for five years, but they’re from Silicon Valley. They’ll come from California with no intent of spending their career and relocating their families for a long-term to Huntsville so they like to rent for the two or three years they’re there so that they can then just move back to Silicon Valley.
Unless there’s anything else you want to add about Huntsville, let’s move on to Montgomery.
I think with Huntsville, I would just add that in our A- stuff, you can get houses in the $150,000 range that are rented for about $1,350. The returns aren’t quite as strong, but the future appreciation is really good because the job growth there is so strong. I like that. There is also a Toyota plant in Huntsville. One of the things that people don’t understand about Alabama is it’s a right to work state so they’re getting a lot of manufacturing jobs that are moving from the Rust Belt states. While Michigan was sorely struggling four, five years ago and losing a lot of automobile manufacturing jobs, Alabama was gaining. It is now the second largest producer of automobiles in the United States. There’s the Toyota plant in Huntsville.
Now, we’re going to move down to Birmingham, and there’s a Mercedes plant in Birmingham. Birmingham has a quarter of the State’s population. There are 1.2 million people there. It’s not the capital, a lot of people think it is. It’s actually just the biggest city. It used to be called the Pittsburgh of the South because it was the second largest producer of steel in the United States. A lot of that has gone away.
However, they still are the world’s leader in steel pipe. There’s still a lot of steel manufacturing, there’s a lot of automobile manufacturing, and there’s four Fortune 100 companies headquartered there. Graybar is there, Regents Bank is there and they’ve got a couple of others. Big banking industry, there’s a lot of architectural, a lot of steel, a lot of logistics. It’s got a pretty diverse economy and a pretty big downtown area that’s really experienced a lot of revitalization.
Another thing to mention about Alabama, which is huge, is the tenant-landlord laws are amazingly stacked towards the landlord. It’s one of the best states in the country if you have to go through an eviction. How would you describe it?
Honestly, we don’t even have to go through an eviction most of the time because the tenants are so aware that the decks are stacked against them.
If you go to court, the judge basically says, “Did you pay the rent? I don’t want to hear anything about, ‘There’s mold under my kitchen sink or the refrigerator didn’t work.’ The only question I’m going to ask is did you pay the rent?” You’re going to answer yes or no. If you didn’t pay the rent, then the question is going to be, do you have the money right now? If the answer to that is no, then the question is, does the landlord want you out? Yes or no. You’re out. Once you get into court, which can take anywhere between two weeks and a month, depending on when you file your eviction, they’re out a week later. It’s immediate. You can get somebody out anywhere between three weeks and probably 40 days.
Most of the time, with our tenants, if we ever have a problem, we generally just say, “If you’ll just go ahead and move out by such and such date, we won’t file the eviction. You don’t want to have this on your credit. It’s going to really hurt it and make it hard for you to move anywhere else. If you’ll just be out by this Friday and have everything, room swept and clean, we’re going to have the paperwork filled out. You can see here, we have it filled out, but we won’t file on you if you’re out.” That avoids us having that cost.
Those laws are a huge advantage as a landlord because it gives you the leverage. It allows you to keep your tenant in line. You said it best, it doesn’t happen very often, but should it happen, we all know where the cards are stacked and in whose favor. It’s a good thing.
It is, especially when the tenants know that. Marco, you are in a lot of great markets, you do so much analytics, you know the very best markets in the country and you’re in some really strong markets, markets that we like also. One of the things that I will say about Alabama that makes it a diamond in the rough that people don’t quite recognize is that it’s 49th in property taxes. The only state that I think has lower property taxes is Hawaii where their prices are so ridiculously high that they have to have it low. In Alabama, you’re number 49 in property taxes. Most of our properties are anywhere between $400 and $800 a year in tax burden. That really makes it to where you cashflow a lot more. You just get a lot more cashflow because the taxes are not as much of a burden on your cashflow.
That’s one-tenth to one-twentieth of the taxes we pay here in California. Very small. Let’s talk about Montgomery. Let’s do an overview like you just did for Huntsville with Montgomery here.
The one thing I would say about Birmingham, in Birmingham we like to be in the suburbs. It’s important to us to be 10, 20 minutes outside of the urban core. You do have a little bit more crime in the urban core, downtown in Birmingham. We found that if you get out into suburbs, you can do very well and get some nice houses and have some really good returns.
Moving down to Montgomery, when we moved down to Montgomery, the Montgomery area includes, Prattville and Millbrook. We really like the Montgomery area. It’s the state capital. There’s a lot of government jobs, a lot of legal jobs and writing legislation. It’s got some aerospace there. There’s the University of Auburn at Montgomery. It’s just a big student body there. There are, I think, three or four universities there. Faulkner is a big private university that’s highly regarded, but there are three or four universities right in Montgomery. A lot of state jobs. You’ve got two major Air Force spaces there with Gunter and Maxwell Air Force Space. One of the things that I like this is where the work college is and also the Chaplin school is located there. They teach a lot of pilots there.
You get a lot of military officers. They’re all there for one to three years. Most of them are going to rent. It gives you a highly paid, highly disciplined tenant base that usually keep the properties in really nice shape because of their military training and background. If somebody’s enlisted and they don’t pay their rent, you just go down to the first sergeant. If they don’t pay their rent, they actually get thrown in the brig. They’ll get something in their military records. Having military tenants is just a spectacular thing, very dependable. If you ever had to garnish the wages, it’s not like they can avoid paying. We love the military tenants with Maxwell and Gunter Air Force space there in Montgomery.
Scotch food is there, you’ve got a big huge rim plant for manufacturing condensing units. It’s just a great place. There’s a lot of tourism, a lot of civil war history. They’ve got a really cool river that runs right through the downtown with river boats. They’ve really revitalized the downtown. A lot of the historic buildings have been revitalized and stuff like that. Martin Luther King’s Dexter Avenue Church that he preached at is there. There’s a lot of civil rights history and a lot of civil war history. They just put in a great Minor League Baseball Park downtown that’s a cool environment.
Still, you can get deals in Montgomery like you wouldn’t believe. There are plentiful resources there, a lot of inventory that we can get. You can get 1,400 to 1,500 square foot house that rents for $850, in the $85,000 ballpark range. Even your A- properties will get up to about $130,000, $140,000. It’s just some really strong properties. A lot of times they’re on half acres, a quarter acre, half acre lots. They’re nice lots, good wide streets and just a very stable tenant base.
There’s a lot of rental demand in Huntsville. We find that the properties fill very quickly. Our property managers are filling properties, on average, in seventeen days. They offer a one-year rent guarantee so that if the tenant moves out within the first twelve months, they replace the tenant with no charge. You’re probably familiar with Renters Warehouse. Very sharp company, they’re the biggest in the country. Last year, out of 18,000 doors, they only had one out of every nine tenants move out. They’re keeping the tenants for two and three years on average, which means that your tenant turnover and your vacancy is a lot lower and it makes it for a lot more profitable investment. We love working with Renters Warehouse. It’s just been a really nice thing to work with.
We’ve had them on the show. They’re great. They’re fantastic. We’re still talking about Montgomery here. I want to ask you a question about all three markets here. Would you consider or describe these markets as cash flow markets or growth markets or a hybrid of those two?
It’s a little bit different by each market. Let me cover each of the markets. Birmingham actually has pretty much made a full recovery. Prices are higher than they were back in 2007 before the last crash. They’re about 10% to 15% higher than they were. They’ve made pretty much a full recovery. You can still pick up some deals and glean some really good deals in the suburbs if you’re careful.
Huntsville is a growth market. You can get some good appreciation. You can do flips occasionally in Huntsville. We’ll sell a B+ or an A- property, we sold one that rented for $1,350 a month. It was a four-bedroom, three-bath house. It was just a really great property. We sold it for about $156,000. It was worth about $175,000, $180,000. Our client ended up with about $20,000 equity when they got that, $20,000, $25,000 equity. You can get some growth there. You can even do some flipping in Huntsville. Things are flying off the market there.
Montgomery is still rebounding. Montgomery we see as a market that is extremely high cash flow. Huntsville can cash flow pretty well, but Montgomery cashflow is even better, but it has a lot of upside potential because it hasn’t really started to recover. The recovery will be a little bit slower, and you’ll be able to access properties in Montgomery for a longer period, but there’s a lot of upside potential. That’s one thing we love about Huntsville and Montgomery; still a lot of upside of potential.
Huntsville saw a huge jump. We’ve seen clients that have experienced 17% appreciation in the last year in Huntsville. I’ve really been excited about the growth that they’ve had with the properties they’ve purchased, but there’s still a lot more upside to go in Huntsville as they recover. Montgomery is just barely starting to recover. You can get in at a pretty rock bottom price in Montgomery and write it up. That’s one of the things we really like about this market.
Montgomery offers the highest growth potential and from a cash flow or better yet a cash–on–cash perspective, you’re saying Huntsville offers the better return from a cash–on–cash perspective?
The cash-on-cash returns will be a little higher in Montgomery, but you’re going to have more long-term appreciation. I think Huntsville has more room to go up in the recovery, where Huntsville’s already recovered a little bit and Birmingham’s pretty much made a full recovery. I’m saying, you’re going to get more appreciation and more equity accumulation in Huntsville probably. Montgomery, what you’ll see is recovery. You’ll see houses that were worth $120,000 if you can get them today for $80,000. They may be worth $100,000 in three or four years. In five or six years, they might get back to the $120,000 they were worth before. Whereas Huntsville might be there in two years. It might hit full recovery in a year or two.
But after they recover, I think you’ll see very little appreciation in Montgomery, maybe a 1% or something. In contrast, Huntsville might, in some of the better areas, in your B+ and A- neighborhoods, you might see 5% or 6% appreciation. It’s going to perform better. In fact, they anticipate that Huntsville is supposed to outpace the growth and be bigger than Birmingham within 25 years. It’s expected to have a meteoric rise. It’s really booming.
I think Birmingham is the only market we didn’t do an overview on. Do you want to touch on that?
We talked a little bit about the macroeconomics in Birmingham and what employers were there. We probably didn’t get into talking about the individual housing and offerings there. We’re buying in the center point, Pinson, Alabaster, mainly the southern suburbs in Shelby County and in the northern parts of Jefferson County, which is where Birmingham is headquartered. We like to buy about 10 to 20 minutes from downtown. We try to avoid the 1920s and ‘30s intercity type stuff and buy a lot more of the 1960s and ‘80s multilevel homes. You get really good rents in Birmingham. You can hit $1,000, $1,100 for a lot of these properties.
There’s high Section 8 demand. For us, we only do about 10% of our properties at Section 8. Some people love Section 8 because it’s automatic deposit. It’s guaranteed like clockwork. We find that if you have really good property management, you can still screen and do background checks and make sure that you’re getting good quality tenants.
If you’re going to get Section 8 tenants, you’ve got to talk to the two or three previous landlords. You’ve got to do the background checks, the credit checks, the employment verification. Our experience has been that sometimes they can be a little harder on the properties. If they’d been on the program for quite a while, then you can talk to the previous landlords, then they couldn’t have damaged the properties too much because they would’ve lost their voucher. That’s the very important caveat if you’re going to accept Section 8 tenants. We’ve had great experiences with it, but like I said, we’re very careful on our due diligence and it’s only about 10% of our portfolio.
Birmingham, because it’s had so much of a regain of equity and it had such a full recovery, we’re picking up two or three a month there and we’re also doing some flips. We can get some nice stuff in the Hoover market, Vestavia. If you can find some foreclosures there, you can buy some nice B+, A- properties and get yourself maybe a 6.5% or 7% cap rate to hit maybe a 12% cash-on-cash return in an A- or B+ neighborhood. You’ll still hit somewhere in the 16% to 18% cash-on-cash return, maybe like 8.5% cap rate in the C+ and B- type product.
Just briefly, let’s just talk about the scope of work that goes into these properties. You don’t need to be extremely detailed, but just give us an overview of what you guys look for. What’s done to mechanicals, cosmetics, and the extent of the rehab? Just so people have an idea of what they’re looking at.
The first thing that’s different with us than most people is we have a $10 million hedge fund. Everything we buy, we renovate it to our standards knowing that we’re going to put it on the market and give you first shot at it. If you want to buy it, the turnkey asset, you can take it. If you don’t buy it, we’re just going to refinance it into our fund, and we’re going to keep it to hold for cashflow ourselves. We put our money where our mouth is and we’re investing in buying the same assets that you’re buying. The only difference is, we’ll give you first shot and our average rehab is about $28,000. We’re putting a pretty heavy level of rehab into these. We have 28 crews that work for us full-time because we’re producing anywhere between 20 and 40 properties per month. We’ve got a lot of inventory for you, which gives you a lot of selection.
Generally, what’s going to happen is, we’re going to go in, our contractors are doing their due diligence, they’re going to give us a huge list of repairs. If the roof is a 20-year roof with a 20-year shingle and it’s got 10 years left, we’re not going to replace the roof because it has half its life left and if there’s 10 years left, the last thing you want to do is have us go put a $5,000 roof on and charge you $5,000 more when the roof had 10 years left on it. Usually, if a roof has less than three or four years, we’re just going to go ahead and replace the roof and give you new roof because even it has three or four years left on it, it’s cheaper for you to have it financed in than to have to pay for a whole new roof in three years. Generally, our furnaces and condensing units get replaced if they are older than twelve to fifteen years. Hot water heaters, if they’re older than eight years, we usually replace the hot water heaters.
We’re going to test everything. We’re going to inspect it, and we’re going to make sure that it is running smoothly. For example, we’re going to replace all the P-traps under the sinks. We’re going to fix any plumbing issues that we can find. We’ll test all the plumbing and run water through it the best we can. That’s sometimes where we’re going to find some of the problems. It’s sometimes hard if you’re not running thousands of gallons per month through to catch every little plumbing thing.
Generally, we’re going to refinish hardwood floors. We get carpet at great prices. One of the things that’s great is I find that generally, your clients, if they were doing these properties and doing the rehab themselves, I don’t think they could get them done and be in them any cheaper than if they did it themselves and did all the work and took all the risks because we’ve got a nationally managed account with Home Depot. We get on average up to 30% discounts on most of our materials.
Then our labor pricing, you just can’t touch it because we provide so much full-time employment to all these crews. We’re putting in brand new carpet, brand new pad, three-tone paint so your ceilings are going to be white; your trim and your doors are going to be white. We use a dolphin fin gray, which is real popular right now. It doesn’t show scuffs and so it makes your turn costs cheaper when a tenant moves out. A lot of times, we’re going to do touch up paint instead of having to repaint the whole house. All brand new appliances with warranties on them. We get GE Appliances at 3% above Home Depot cost.
There’s really a lot that goes into it. The systems are really looked at. Even if we don’t replace the roofs, if they’re in great shape, we’ll get on the roof and seal all the boots and stuff like that and put in attic fans if they’re needed to just make sure that the life is prolonged. They’re really nice. All new hinges on the doors, all new door handles, the kitchen cabinets get all new handles and hinges and get painted. Most of the time, we have our brand new countertops in the kitchens. We really make them nice.
The goal is, you want to have the nicest rental product. We can usually get about $100 more than the Zillow’s estimate for rent because we’ve renovated so much nicer than most of our competition. You want to do that because if the market ever turns, if yours are much nicer, you’re going to fill the tenant instead of somebody else. If you can charge a little higher rent, sometimes you get a higher quality tenant, and they’ll stay longer because if it feels like a brand new house versus a slumlord. You’re going to get a more attractive tenant that’ll stay longer and take better care of your property because they like nice things.
You have really nice looking product when we do have your inventory, and that’s up on your website. You can go through the photos and you can see that everything looks just amazing. It looks like a brand new property. That’s very attractive not just as an investor looking to purchase a property where it looks like it’s brand new and there’s no deferred maintenance — any tenant that’s looking at that property and comparing it to others, are also going to put a lot more weight on the properties that look new, smell new, feel new and are in great condition. That’s why you can get the premium. Plus you guys have the economy of scales so when it comes to labor and buying product, it’s easy enough to build more into that rehab than it would be for someone else who’s just doing one or two flips a year.
The other thing too is we warranty it. You got a one year warranty, anything that we’ve done, if it was in our scope, we’re going to give you the full scope. We’ll give you the before and after pictures. We’ll give you about 30 professional photos, so you always have those to market the property when the tenants move out. We’re going to give you the rehab scope of everything that was done, and if we did the work from one year of when the property was completed, you’ve got everything warrantied and we’ll take care of it in the first year. That’s really nice.
Outside of that, if there’s ever any maintenance, if something happens, our property manager does not charge any markup on any maintenance calls. A lot of property managers will nickel and dime you to death on repairs. They charge zero markups on any repairs, and they use our renovation crews that rehabbed the properties so you get the same economy of scale for any maintenance that we get.
We can talk a lot more about these markets. There’s so much there, but this is a great overview. Ultimately, anybody who’s interested in these three markets can talk to their investment counselor here, and we can get into more detail. We can also patch them in with you and share upcoming inventory, not just what’s on our website. Jared, is there anything I didn’t ask you that maybe I should have?
You’re really good with questions; you know exactly what to ask. I think the only thing I would probably add is we’re extremely experienced. We’ve done a couple of thousand properties. I think because we’ve done stuff with the guys from Flipping Vegas and Flip This House and sold to the Rich Dad Poor Dad coaches, they even come and buy from us now. One of the things that’s great with us is we’ve done 1031 exchanges. If people want to buy one property, that’s fine, but we’ve helped people buy 27 properties at a time. If people need a large volume because they’re filling a 1031 exchange, and they have a deadline they’re up against, we own enough assets that we can easily satisfy the exchange requirements and help them get the identification period done in a very easy manner that’s not stressful.
We also have the ability to help people get into apartment complexes. We do those from time to time as well. There’s virtually no facet that we can’t accomplish. We also provide free education and training that we can help people with and answer questions. We’re glad to just coach and help train and teach right along with the investment counselors that are working with you.
That’s good to know because we had two last minute 1031 exchange clients just recently. We had to scramble to find the right product that was available for them in order to meet that 45–day deadline and then reach the 180–day closing.
One thing too, Marco, that’s really nice, is because our property management is Renters Warehouse and they handle all of three of the markets, so you’re dealing with one property management, one property management portal for all three of these markets. Because Renters Warehouse is in many of the other markets that you already have providers in, one thing that’s nice is if they love Renters Warehouse, they can potentially even use them across the country if they’re diversifying in markets. I think that’s a good potential strategic advantage down the road.
Renters Warehouse is in some of the markets that we’re in. You could put everything under one roof as you grow your portfolio. That’s good. Good point. Jared, I appreciate your time. Great information. Of course, there’s so much more, but we don’t need to have people’s eyes glaze over from too much detail. This has been a good overview as to why looking at Alabama and investing in Alabama makes a lot of sense. There are a lot of good points. If anyone has questions, they should just call our office, talk to their investment counselor and we can provide you some more information and talk more specifics about markets, neighborhoods, properties available, etc. We’ll probably, in six to twelve months, have you back and we can compare how the markets have changed from today to that point in time and update our website accordingly. Jared, it’s been great having you on today. I appreciate your time.
Thank you, Marco. I appreciate your expertise and the great job you do for your clients.
Thank you very much.
There you have it, some great information about why you should invest in Alabama, more specifically the three markets that we’re in now. We’ve been in Birmingham for a number of years and have had tremendous success. Our clients are very happy with their properties and the property management there. We’ve had zero complaints about anything in terms of Birmingham and the properties over the last few years. Now, we have two more markets in the mix. We have Huntsville, and we love Huntsville for many reasons. It’s a 90–mile drive north of Birmingham on Interstate 65. It has a metro population somewhere between 400,000-500,000 people. It’s noticeably smaller than Birmingham, but with the aerospace, defense and technology sectors there, we find an environment well–worth any investor’s attention. Huntsville has been instrumental in space development and technology since the 1950s, the city’s nicknamed the Rocket City because of that. It has a lot of charm and beauty. It’s just a great city, there’s a lot of growth potential, but it is a strong cashflow market so it makes a very good addition to the mix of markets that we have right now.
Of course, you know about Birmingham, we’ve been in Birmingham. It’s the largest city in Alabama. It’s experiencing dramatic growth and a renaissance, a beautiful downtown core, massive new manufacturing plants and plenty of new jobs. Birmingham is also nicknamed the magic city because it has a diverse and stable economy and a broad array of cultural attractions, along with a rich history. Forbes magazine gushed about this market saying, “After years of investing in revitalization efforts, turning old warehouses into offices, opening new parks, building a Minor League Baseball stadium, Birmingham is finally seeing the big payoff.” There are several factors that make Birmingham, Alabama a strong real estate investment market.
Take a serious look at that one and of course, there’s Montgomery, which is the third market in Alabama that we’re in. It too has a population between 400,000 and 500,000 people, making it the second largest city in the state. It is also the capital of Alabama. The good thing about Montgomery, as Jared talked about, it has a lot going on for it, good cashflow, it is in the middle of its recovery compared to its peak back around 2007, 2008, but it has a vast economic, diverse foundations. The Montgomery market is the home to the state in regional governments, a major military installation, the US Air Force Air University is there, has an extensive service industry, wholesale and retail trade market. There’s a lot going on there as well. Remember, it’s all about jobs. If you have jobs, job growth, you’ll have population growth, you’ll have stability, people can afford to pay their mortgage or your rent. That’s what we look for.
Anyway, take a look at those markets and see if you want to invest in Alabama. Whether you’re out there on your own or you’re working with us, take a good look and then talk to our investment counselors about them as well. If you have any questions about those markets or if you have questions in general, just send those to me at Ask Marco; click the Ask Marco button at the top of the PassiveRealEstateInvesting.com website. I will be sure to address those either directly or on the air.
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