Alabama is often overlooked as an investment market, but this Gulf Coast state has many lucrative real estate markets for the savvy investor. Here are Clever’s picks for the five best investment markets in the state of Alabama.
Alabama is often overlooked when people consider markets for real estate investment, but the quiet southern state is actually one of the most lucrative investment markets in the nation, if you know what you’re doing, with some investors seeing a capitalization rate of up 18%.
But like many states, there’s quite a substantial gap between the hottest and coldest markets in the states. So whether you’re looking for a rental investment or a quick flip, selecting the right market is as vital as knowing the best time to buy.
Read on to learn more about the best real estate investment markets in Alabama, and how to find the best investment opportunities.
5 Best Real Estate Investment Markets in Alabama
With a population of over 1.2 million, Birmingham contains over a quarter of the state’s entire population. There’s a strong manufacturing base there, and 4 Fortune 100 companies headquartered there, so the local economy is very strong. That’s driven an equally strong real estate market, with prices on a pronounced upswing through 2018 and 2019; median sales prices increased 7% year-over-year.
Median home prices are still quite a bit lower than the national average, coming in at $103,431, but the cost of living is also quite a bit lower than the national or even statewide average. Also keep in mind that Alabama has some of the lowest property tax rates of any state in the nation, and Birmingham has the second-lowest rates in the entire state.
Foreclosure and delinquent mortgage rates in Birmingham are significantly higher than the national averages, creating potential buying opportunities for savvy investors.
The Gulf Coast is becoming such a popular destination, that some people (okay, mostly real estate people, but still) are calling it the nation’s “Third Coast.”
Mobile sits right on the Gulf of Mexico, more or less right in between New Orleans and St. Petersburg. The fact that you probably don’t think of Mobile, Alabama when you think of “warm weather beachfront property” is exactly why it’s one of the best investment markets in the south. Unfortunately, it’s too late to get in on the ground floor; the market’s already climbing precipitously, with the home values increasing by 19.8% over the past year, and projected to increase further.
There’s still plenty of room for growth in this market, though. Consider that the median home value in Mobile is $175,447, far lower than the national median of $374,900. Rents there are also lower than the statewide average rent, which is especially promising considering that there are five colleges in the area, whose student bodies drive a strong, perpetual demand for rentals.
» READ: Top Real Estate Agents in Mobile
Alabama’s third-largest city is known as “Rocket City” because of NASA’s large presence there, and for that reason, among others, median home prices in Huntsville are relatively high for the state, and compared to the nationwide median, coming in at $273,648.
Home prices rose 27.4% over the past year. Huntsville’s population growth has outpaced the national average over the past five years, and its population is younger than the national average, both of which are great indicators for the market’s future.
In addition, there are a large number of military personnel in the city, thanks to nearby Redstone Arsenal (locals call Huntsville “the Pentagon of the South”), and there are 12(!) colleges within fifty miles of Huntsville. With a median rent of $1,000 and a consistently strong body of prospective renters, this is a great market to invest in.
The Alabama state capital has a hot housing market, with home values having increased 20% over the past year, and forecast to continue to increase further.
However, the median home value is still quite low, at $127,030 (over half as much as the statewide average), as is the local cost of living. Rents are on par with the rest of the state, though, largely thanks to the large local student population.
Tuscaloosa has been racking up the accolades the past few years, having been named the most livable city in America, as well as one of the top college towns in America, and one of the best places to launch a small business. So it probably comes as no surprise that it also has a healthy real estate market.
Over the past year, Tuscaloosa home values have increased by 8.6%, and are projected to rise a further 14.4% in the next year. With a median home value of $205,101, a very high average rent of $1,300, and the student populations of both the University of Alabama and Spillman College, Tuscaloosa has great potential as an investment market.
How to Find Cheap Alabama Properties
The best investment deals in Alabama are usually found with off-market properties, including foreclosures, pre-forecloses, short-sales, and abandoned or neglected properties. Here's how to find them.
1. Use real estate investment software
One of the biggest challenges of flipping homes or finding rental properties in Alabama is finding great deals. But real estate investing software and websites can really be useful.
The DealMachine app is one tool that can really help you.
DealMachine's real estate software helps Alabama investors find and research distressed homes and get in touch with motivated owners fast via batch skip tracing and direct mail campaigns.
Here's how it works: When you're driving around town and spot a home that looks like it could be a great deal, you pull up the home and owner's contact info. on your DealMachine app; you can call them or send direct mail (no post office visits required).
Download the DealMachine app to find undervalued Alabama properties as you drive. DealMachine offers a 7-day free trial and $15 in free credits that can be used towards marketing (like sending out direct mail to homeowners).
Other popular real estate software or websites for Alabama investors to consider include:
Flipster: Primarily targeting house flippers, this app helps user find motivated seller leads, while also providing valuable comparable property information to help you estimate a home's fair market value before making an offer.
Flipperforce: The Flipperforce app helps BRRRR method investors analyze home values to calculate the maximum purchase price to offer on a property before making a purchase.
Zillow foreclosure center: Zillow makes it easy to find foreclosed and bank-owned properties in your area. However, unlike off-market properties you'd find on DealMachine and other software, most of Zillow's properties are publicly listed - meaning you'll likely face stiff competition from other investors and home buyers.
2. Partner with an investor-friendly realtor
Using an investor-friendly real estate agent is the best way to ensure a favorable, easy home purchase.
Agents have expertise in Alabama's variety of markets, understand real estate laws and practices specific to the state, and can provide access to lesser-known neighborhoods and properties that just may be your dream investment.
Of course, the best way to choose between these markets, and find the property that’s the best fit for your unique investment needs, is to partner with an experienced Alabama real estate agent. A great local agent will be familiar with everything from the mood of individual sellers, to day-to-day fluctuations of the market, to the state’s unique disclosure requirements.
Clever's real estate agents can guide you through Alabama's real estate market and make your house hunting journey a breeze - and eligible buyers can get back 0.5% of their home's purchase price after closing, potentially saving you thousands on your home purchase.