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 to 9 to 18 percent.
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. Let’s look at Clever’s picks for the five best 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 $86,500, 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, so keep that in mind; it’s possible the housing crisis is still slowly unfolding here.
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 8.4% over the past year, and projected to increase by 4.5% over the next year.
There’s still plenty of room for growth in this market, though. Consider that the median home value in Mobile is $121,100, while the median price for homes listed in Mobile is $163,000. 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.
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 $259,000.
Home prices went up 4.5% over the past year, with per-square-foot prices going from $85 to $92 over that same timespan. 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 4.3% over the past year, and forecast to continue to increase by 3.2% over the next year.
However, the median home value is still quite low, at $87,100 (just a hair 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 5.5% in the next year. With a median home value of $149,500, 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.
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 Partner Agents are top performers in their local markets, and come from top brands and brokerages. Contact us today for a no-obligation consultation and start building your investment portfolio immediately!