11
February
2017

10 Best Turnkey Areas / Zip Codes For Properties in the Birmingham Metro Area

  • Center Point/Roebuck Area – 35215 – This is a fantastic area where you canget a lot of bang for your buck. There is currently high rental demand in this area, and properties priced accurately generally move off the market quickly from a leasing standpoint. There are also still some good deals out there in the area, and depending on whether you use a turnkey provider or do the renovation yourself, you can expect somewhere between 8.0%-10% ROI (with a Turnkey provider) all the way to 11-14% (if you go at it alone and know what you are doing). Recently this market has become a little saturated with many new entrants – primarily local investors but also some national players like Sayco and Havenbrook. In my opinion, long term capital appreciation looks good in the area as well as the fact that there are an increasing number of owner occupant comparable sales that are bringing the average sales price in the area up. Disclaimer: there is NO way to know which area will be good from a capital appreciation standpoint 5 or 10 years down the road. These are just assumptions based off the data that we have.
  • Hueytown – 35023 – (Also Parts of Bessemer 35022) – This is another great area to get a good return for a reasonable price. Hueytown boast a slightly higher owner occupant to tenant resident rate, so you will find better comparable sales in the area, and thus sometimes a higher price of acquisition in this area. You should be able to still get 8-11% return in this area if you find the right deal. If you have to pay a little higher price, this may be offset somewhat by the huge impact this area has to grow with the new additions to the Mercedes Plant in Vance Alabama. Hueytown is conveniently located between Birmingham proper and Vance, so people wanting to live closer to the city often find their home in Hueytown verses the VERY rural Vance. Mercedes-Benz will have the capacity to manufacture 300,000 cars per year in 2015 (up from 185,000 in 2013)! The cool thing is they have no plans of slowing down. It’s also worth mentioning the last 5 out of 6 leases we’ve signed with tenants in that area are working for Mercedes.
  • Grayson Valley/Chalkville/Roebuck/Center Point – 35235 – This zip code grabs several areas, but is primarily located in the Clay Chalkville school zone. This zip code snuggles right beside the 35215, but in this area, you can usually expect to get a small premium in rent verses 35215. In the southern part of the zip code (Roebuck area), you are close to Saint Vincent Hospital West where you get a lot of good qualified tenants. In the northern part of the zip code, you have the Clay Chalkville school zone that generally has a higher rating than comparable schools in Center Point and Roebuck. There are a good number of tenants looking to get their kids into the Clay Chalkville school zone, so if you buy here, that is definitely something you should take into consideration because there are parts of the 35235 that are not zoned for Clay Chalkville.
  • Pleasant Grove – 35127 – This area is very comparable to the Hueytown area (above), but it covers a slightly less dense geographical territory. We really like this area due to the Mercedes growth mentioned above, but it’s also an area where there is a higher owner occupant rate. This is great for resell value and long term capital growth, but sometimes this can cause the property to sit vacant for a little longer between move-out and re-lease. Fewer tenants in the market = longer time to re-lease.
  • Pinson/Clay/Trussville – 35126, 35235, & 35173 – This area is a little more rural, but you need to remember you are investing in Alabama, and people like spots away from the city. There are also a lot of tenants in this area, so your time to re-lease after move-out is not bad. This zip code usually boast a better school zone (Pinson Valley), so there are quite a few people looking to relocate to this area. Even though it’s a little further out, the I-59S commute into work is one of the easier travel routes in rush hour traffic (when compared to going north or south on I-65 or traveling on the dreaded HWY-280).
  • Fultondale & Gardendale – 35068 & 35071 – This is a high owner occupant area that was highly affected by the foreclosure crisis and has already come back a good bit. You might be hard pressed to find the same ROI deals in this area, and it may be beneficial to settle for 7-9% ROI because I believe the capital appreciation play is really good in these areas. The school systems in these two areas are a good bit better than the other school systems mentioned, and there is very little land left to build in these areas. Combine that with its close proximity to the city center, and I think your long term ROI may be better here than in any of the other areas. If capital preservation is a BIG factor for you, hunt for deals here. They can still be found on occasion.
  • Leeds & Moody – 35094, 35004 – These are two great areas east of the city center that are filled with locals that wouldn’t want to live anywhere else. There is a good amount of rental demand, but there aren’t a whole lot of rental houses available. This makes the Leeds/Moody a great one if you can find a house for the right price. Again, this area proves a little hard to find a rental property with a low enough price tag to make the return numbers desirable; however, if you find one, grab it because it should be a good performer for the long run.
  • Forestdale, Adamsville, & Graysville – 35214, 35005, 35073 – This area is mixed with positive and a few negative features. If you get in the right neighborhood, you can have the same awesome benefit that Hueytown and Bessemer have in that it’s closer to Vance and the Mercedes-Benz jobs; however, there are some pretty rough parts of 35214 that can be as bad if not worse than some of the major C property areas. The key in this area is location, location, location. If you find the right house in the right neighborhood, you will have tenants around the block trying to rent it from you. In Adamsville and Graysville, you’ll have to drive a while to get there, but there are a lot of area residents excited to rent a house in a more rural setting. These areas can be a great fit for those tenants.
  • Over The Mountain – 35216, 35226, 35236, 35244, 35216, 35243, 35209, 35219, 35259, 35223, 35213, 35242 – These areas are some of the most desirable places to live in all of Birmingham. Hoover, Vestavia Hills, Homewood, Mountain Brook, and Oak Mountain are just a few of the places of the places where you would be extremely lucky to find a moderately priced rental property. You can expect to get a much lower cap rate, but this could be offset by long term capital appreciation. You’ll also find solid rental demand in these areas because they are close to popular city hot spots, have great school systems, and also have incredible rental and owner occupant demand. Buyer beware – these type areas are also prone to speculation. In our model we teach “cash flow, cash flow, cash flow”, so naturally we aren’t able to buy a lot in these areas. This is also more of a Class A Area.
  • Pelham & Alabaster – Two great primarily owner occupant areas that are a little far from the city center but still very desirable for a lot of Birmingham residents. Due to the large owner occupant population, you’ll again find it hard to find a good Class B Property cash flow for a deal, but they do exist. There’s slightly less rental demand in these areas due to their horrible commute, but these are still very desirable areas, and you’ll find more Class A areas here than Class B. The capital appreciation on these properties should prove very steady in the long run.

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