MARKET BREAKDOWN
REGIONAL SPOTLIGHT: BIRMINGHAM
Birmingham, Alabama THE “MAGIC CITY” HOLDS SPECIAL ALLURE FOR INVESTORS IN 2017.
by Ryan VanSickle
BIRMINGHAM, ALABAMA has been known as “The Magic City” for over a century. Today, one of the most “magi- cal” things about the city for real estate investors is the high volume of unique opportunities that the metro area and surrounding region represent. Home to the most institutional investment mon- ey in real estate for multiple quarters since 2010, Birmingham flies largely under the “headline media” radar when it comes to its housing market. Howev- er, not only are both rental and own-
er-occupied homes extremely afford- able in this metro area, but individual investors can take advantage of the city’s increasingly effective community- and master planning “chops” and an inves- tor-friendly infrastructure that further broadens options and potential. Birmingham may not be a secret much longer, however. In early 2017, Forbes listed the city as first on a list of “America’s Most Affordable Cities,” while ATTOM Data Solutions (formerly RealtyTrac) named it one of 25 “Hidden
Gem Single Family Rental Markets.” The city is also receiving attention thanks to the extremely strong rental market both for single- and multifamily properties. Thanks to strong employment trends that keep unemployment hovering around a nationally competitive 4.5 percent (the national average has held right around the same since the start of 2017) but that also favors citizens who tend to be long-term renters rather than owners, with the U.S. Department of Housing and Urban Development (HUD) estimating
that roughly half the population rents rather than owns, Birmingham is the ideal location for passive investors hoping to purchase turnkey rental real estate. Although in recent months Birmingham has received some unwanted attention in the national media after a national study alleged that about half of its current renting population is “cost-burdened” thanks to rents that are rising while me- dian renter income declines, a number of new multifamily developments are “going vertical” to address this issue while inves-
tors interested in single-family residential (SFR) rentals have a number of innovative investment options thanks to the metro area’s land bank. Although Birmingham is presently of particular interest to investors hoping to own cash-flowing turnkey rentals with its top-five-ranked zip code for the “highest potential rental returns in 2017” from ATTOM Data (a whopping 78.4 percent possible), the city also has its share of wholesalers and flippers who are going strong. At the beginning of this
year, ATTOM noted that the home-flip- ping rate for the metro Magic City was 7.4 percent. Only eight cities with a population of 1 million or more had a higher home-flip rate. Interestingly but perhaps not particularly surprisingly, although Alabama as a whole does not have heavy private equity activity in real estate or other sectors, Birmingham itself does have a small but active private equity investment sector that participates in the local real estate market as well as in other business ventures.
44 | think realty magazine july :: august 2017
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