Birmingham is home to the best residential real estate investment market in Alabama.
The 35218 zip code in Birmingham presents the greatest opportunity for the best real estate investments among the 3,240 individual real estate markets in Alabama we evaluated. We looked at property values, population trends, and six other metrics for each market. We used that data to calculate each market's InvestScore.
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Data sources
Most of the data in this article comes from the Zillow Home Value Index and the U.S. Census American Community Survey.
We update our data when the original sources update their data, usually monthly. Sometimes we'll update data more frequently.
Clever also performs regular quality checks to identify outdated data, broken data connections, and other data issues that may arise.
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5 best places to invest in Alabama
| Rank | City | InvestScore | Affordability | Property value appreciation |
|---|---|---|---|---|
| 1 | Birmingham | 100 | 2.4 | 53% |
| 2 | Chickasaw | 94.3 | 2.2 | 39% |
| 3 | Montgomery | 93.4 | 1.1 | 30% |
| 4 | Hamilton | 87.7 | 2.6 | 30% |
| 5 | Russellville | 86.2 | 3.0 | 36% |
🚨 This article is for informational purposes only. It isn't intended to convey financial or legal advice. We recommend you talk to a real estate agent or real estate attorney when buying a home in Alabama.
1. Birmingham
We've identified the 35218 zip code in Birmingham as Alabama's best real estate investment market. Here's why.
🔎 Key data about Birmingham (35218)
| Data point | Value | Rank in state (of 3,240 markets) |
|---|---|---|
| InvestScore | 100 | Highest |
| Typical property value | $74,246[1] | 13th lowest |
| Five-year appreciation | 53%[2] | highest |
| Household income | $30,739[3] | 261st highest |
| Affordability ratio | 2.4 | 32nd most affordable |
| Five-year population growth | 5.3%[4] | 24th highest |
| Unemployment rate | 2.2%[5] | 4th lowest |
| Property taxes | $507[6] | 60th lowest |
| Educational attainment | 7.7%[7] | 196th highest |
Birmingham (zip code 35218) is the best residential real estate investment market in Alabama. It has the highest property value appreciation among markets we evaluated, with a 53% appreciation of the typical property over the last five years.
Birmingham is the 32nd most affordable market among the 3,240 Alabama markets we evaluated, with an affordability ratio of 2.4.
2. Chickasaw
The 36611 zip code in Chickasaw is the runner-up spot for the best real estate investments in Alabama.
🔎 Key data about Chickasaw (36611)
| Data point | Value | Rank in state (of 3,240 markets) |
|---|---|---|
| InvestScore | 94.3 | 2nd highest |
| Typical property value | $102,218[1] | 23rd lowest |
| Five-year appreciation | 39%[2] | 14th highest |
| Household income | $46,559[3] | 217th highest |
| Affordability ratio | 2.2 | 20th most affordable |
| Five-year population growth | -0.5%[4] | 162nd highest |
| Unemployment rate | 2.8%[5] | 8th lowest |
| Property taxes | $367[6] | 22nd lowest |
| Educational attainment | 13%[7] | 173rd highest |
The 36611 zip code in Chickasaw features a typical property value of $102,218, the 23rd lowest in the state.
Property values have appreciated 39% over the past five years, the 14th highest increase among evaluated markets in the state. Chickasaw homes have an affordability ratio of 2.2, the 20th most affordable in the state.
3. Montgomery
The 36110 zip code in Montgomery comes in at No. 3 in our ranking of the best residential real estate investment markets in Alabama.
🔎 Key data about Montgomery (36110)
| Data point | Value | Rank in state (of 3,240 markets) |
|---|---|---|
| InvestScore | 93.4 | 3rd highest |
| Typical property value | $52,449[1] | 3rd lowest |
| Five-year appreciation | 30%[2] | 116th highest |
| Household income | $47,315[3] | 214th highest |
| Affordability ratio | 1.1 | 3rd most affordable |
| Five-year population growth | 3.5%[4] | 56th highest |
| Unemployment rate | 2.3%[5] | 5th lowest |
| Property taxes | $241[6] | 3rd lowest |
| Educational attainment | 12%[7] | 182nd highest |
With a typical property value of $52,449, Montgomery's 36110 zip code features the 3rd lowest property values in the state.
Montgomery homes have an affordability ratio of 1.1, the 3rd most affordable among the markets we evaluated.
4. Hamilton
The 35570 zip code in Hamilton ranks No. 4 among Alabama's residential real estate investment markets.
🔎 Key data about Hamilton (35570)
| Data point | Value | Rank in state (of 3,240 markets) |
|---|---|---|
| InvestScore | 87.7 | 4th highest |
| Typical property value | $165,134[1] | 78th lowest |
| Five-year appreciation | 30%[2] | 108th highest |
| Household income | $63,639[3] | 108th highest |
| Affordability ratio | 2.6 | 41st most affordable |
| Five-year population growth | 4.9%[4] | 32nd highest |
| Unemployment rate | 1.9%[5] | 2nd lowest |
| Property taxes | $331[6] | 11th lowest |
| Educational attainment | 15%[7] | 163rd highest |
Property values in Hamilton's 35570 zip code have seen the 108th highest increase among evaluated markets in the state, with an appreciation of 30% over the past five years.
Hamilton's affordability ratio of 2.6 makes it the 41st most affordable among the 3,240 markets we evaluated.
5. Russellville
The 35654 zip code in Russellville rounds out our top five residential real estate investment markets in Alabama.
🔎 Key data about Russellville (35654)
| Data point | Value | Rank in state (of 3,240 markets) |
|---|---|---|
| InvestScore | 86.2 | 5th highest |
| Typical property value | $180,681[1] | 94th lowest |
| Five-year appreciation | 36%[2] | 34th highest |
| Household income | $60,674[3] | 34th highest |
| Affordability ratio | 3.0 | 88th most affordable |
| Five-year population growth | 4.2%[4] | 46th highest |
| Unemployment rate | 1.9%[5] | lowest |
| Property taxes | $437[6] | 37th lowest |
| Educational attainment | 12%[7] | 183rd highest |
Property values in Russellville's 35654 zip code rose 36% over the last five years, ranking the city 34th highest among evaluated markets in Alabama.
Russellville homes have an affordability ratio of 3.0, the 88th most affordable among the markets we evaluated.
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Frequently asked questions
See our article Steps to Buying Your First Rental Property to learn the basics of real estate investing for beginners.
You'll learn the importance of setting goals, picking the right market, and more.
Cash investors often use what's called the 70% rule, which suggests they should pay around 70% of a house's after-repair value minus the cost of renovations.
By buying for about 70% of the after-repair value, they're positioning themselves to pay for repairs and other costs, and to lock in a profit.
The 70% rule isn’t a hard-and-fast formula, but a quick guideline investors use to evaluate potential deals.
Investing in residential real estate can be one of the best passive real estate investments in Alabama.
Residential real estate offers accessible passive income and the potential to compound your original investment.
Renting out residential units is the top way to invest in real estate. House hacking also offers a great opportunity for passive real estate investment income.
How we rank residential real estate markets in Alabama
To determine the best real estate investments in Alabama we evaluated 3,240 markets on eight metrics, and then assigned an InvestScore based on a proprietary weighting framework. Each market corresponds to a specific zip code in Alabama.
What is InvestScore?
InvestScore is a score on a scale of 0 (worst in state) to 100 (best in state) that estimates the residential real estate investment potential of a given market. It takes into account a suite of key data points for each city.
- Typical property value: This measures the typical home value in this zip code, according to the Zillow Home Value Index. It reflects the typical value for homes in the 35th to 65th percentile range, including all homes, with the numbers smoothed and seasonally adjusted. We prefer lower property values, which indicate both more room for growth and a greater ease of purchase.
- Property value appreciation: This measures how much property values have increased in the area over the past five years, according to the Zillow Home Value Index. We prefer a higher appreciation, as it indicates better returns on housing. However, past performance isn't indicative of future results.
- Median household income: This is the inflation-adjusted median household income in the zip code, according to U.S. Census American Community Survey data. We prefer a higher household income, as it indicates local residents have more income to spend on housing.
- Affordability ratio: This is the ratio of the typical home value to the median household income in the area. A lower ratio is better because it means more households can afford a home, which indicates higher demand.
- Population growth: This is how much the area's population has grown over the past five years, according to U.S. Census estimates. Higher is better, as it indicates residents are moving into the area at a rapid clip.
- Unemployment rate: This is the unemployment rate in the area, according to U.S. Census data. We prefer a lower rate, as it indicates the availability of steady employment in the area, meaning residents will find it much easier to afford homes.
- Property tax: This is the median real estate property tax paid in the area, according to U.S. Census estimates.
- Educational attainment: This is the percentage of residents in the area that have obtained a bachelor's degree or better, according to U.S. Census estimates. We prefer a higher rate because it indicates local residents who have higher earning potential and thus should be able to afford homes.
