SHARE is always on the lookout for new opportunities in lucrative markets on behalf of our investors. That is why after thorough market analyses and research, we have decided to expand our portfolio beyond Texas, Georgia, and Tennessee, to Alabama. While there are many investment advantages in this state, this article highlights 4 of our main reasons for the expansion.
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A Booming Economy
If you visit our other Spotlight Series articles, you’ll notice a recurring pattern of what constitutes a strong investment destination. Arguably, the most consistently important factor to consider is the local labor market. The presence of major companies (Birmingham is home to two Fortune 500 companies - Regions Financial and Vulcan Materials) and a steady stream of job opportunities are key factors in spurring population growth in Birmingham. They are also what sustains rental demand and rental growth - as more people relocate to the area in search of employment, the demand for rental properties will continue its rise, making it an ideal environment for real estate investors.
Birmingham, otherwise known as The Magic City, was once an industrial center dominated by iron and steel. The city now has a diverse and thriving economy driven by several major and essential industries, including healthcare, education, finance, technology, and manufacturing.
Arguably the most notable local institution, the University of Alabama Hospital, employs over 23,000 essential workers and continues to attract some of the country’s top talent in healthcare and education. Dubbed the best hospital in Alabama, the healthcare institution has consistently ranked among the best in the nation across 8 healthcare categories (gynecology, rheumatology, rehabilitation, ear, nose and throat, cancer, cardiology, geriatrics, and pulmonology/lung surgery).
Cost Of Living
One of the biggest draws of Birmingham is its affordability and low cost of living. Compared to other major metros such as New York, the cost of living (including rent) in Birmingham is 41.3% lower. Compared to the country, consumer prices in Birmingham are approximately 2% lower than the national average.
The value of your dollar in Alabama goes a long way here, as the state income tax is capped at 5%, so you get to keep more of what you earn while operating in this state. And for property taxes, Alabama boasts one of the lowest in the nation, at 3.33%. Comparatively, the national median property tax rate is 10.35%.
Affordable Real Estate
Generally, there is a correlation between the lower cost of living in a city and real estate prices. When the cost of living is lower in an area, it often translates to more affordable housing options and lower real estate prices.*
According to the Zillow Home Value Index, the average price of a single-family home in Birmingham is $99,340 (as of July 2023). Comparatively, Bankrate notes the national average single-family home in the U.S. is $410,000 (as of June 2023). With many more affordable property options, there are lower barriers to entry for new and seasoned investors, mortgage qualification and payments are more feasible, there are higher cap-rate opportunities and a lot more properties with potential for capital appreciation with long-term holds. One of our most popular articles addresses whether now is still a good time to buy real estate - to that we answer:
If it’s a good deal today, it’ll be a great deal tomorrow.
According to Zillow and Zumper, Birmingham home values have increased by 75% over the last five years, while median rents for 3-bedroom homes have grown by 41%. Property values here continue to appreciate faster than most other top-performing real estate markets in the U.S.
Check out SHARE’s latest 3-bedroom property release in Birmingham that can be yours with a price tag of $65,000.
*This correlation is not absolute and can vary depending on various factors such as economic dynamics, supply and demand, local market conditions, regional variations, and socio-political factors can all influence real estate prices independently of the cost of living.
Landlord-Friendly Laws
Investors should always be concerned about the regulatory environment when entering a new real estate market, which is a big reason why SHARE decided to expand our portfolio to Alabama.
1. Eviction procedures are streamlined so landlords can reclaim their property(ies) swiftly when tenants violate lease agreements.
2. There’s no statutory limit on security deposits in Alabama. This provides property owners with greater financial security in case of potential property damage, or unpaid rent.
3. There is an absence of rent control, and owners can increase rent without notice*. Landlords in Alabama can achieve higher profitability because of this, as they are able to set rental prices based on market demand without any imposed limits.
To summarize, Birmingham, Alabama, has proven itself to be a smart real estate market for investors. Its resilient labor market boasts a lower-than-average unemployment rate, the growing population consists of young professionals and diverse talent looking to rent, the real estate remains affordable with upside for growth, the cost of living is low, and the tax and landlord laws are favorable to property investors. If you’re interested in learning more about the deals we can source for you here, schedule a call with our Client Success Team today.
*Note: The Fair Housing Act in Alabama states that landlords cannot raise rent as a discriminatory measure.
