Real Estate investors looking for cash flow and appreciation are flocking to Alabama to build rental portfolios. The Yellowhammer State is a current favorite of real estate investors due to many factors including affordable property values, a friendly tax environment and a diverse group of markets! Easy Street Capital is proud to be a leading provider of rental loans for real estate investors looking to build rental portfolios in Alabama!
Types of Investment Property Loans for Alabama Real Estate Investors
When it comes to real estate investing in Alabama, there are many markets and types of investment property loans to choose from. For investors that like to get their hands dirty, renovating older properties, hard money renovation loans are a perfect choice! These loans allow you to buy a property quickly and finance your rehab costs as well! Once you are done, you can either “flip” the property for a quick return or pursue the BRRRR Strategy by renting it and refinancing into a long-term, low-rate DSCR loan!
Long-term DSCR Loans are also great for investing in turnkey rental properties. Turnkey refers to properties that are rent-ready and require no renovations. These could be used as long-term, medium-term or short-term rentals. Most DSCR Loans are fixed rate for thirty years, locking you into a fixed interest rate for the long-term. While, if historical patterns continue, rents and appreciation increase steadily each year. Bottom line, debt costs stay the same while cash flow increases! This can lead to financial freedom and long-term wealth.
Alabama: Landlord-Friendly State
One of the main reasons real estate investors that utilize rental loans like Alabama is that its a landlord-friendly state. Owners of rental properties, such as typical DSCR Loan borrower, are secure investing in the state. Unlike some other states, Alabama does not have any form of rent control. This means rental property owners are free to set rents at whatever level the market will bear. This can be an advantage for landlords who are looking to maximize their profits.
Additionally, Alabama has a relatively fast eviction process, with landlords able to obtain possession of their property in as little as three weeks after filing for eviction. Alabama’s security deposit laws are also relatively lenient. There are no limits on how much landlords can charge for a security deposit. Finally, Alabama allows landlords to charge late fees for unpaid rent, with no limit on how much can be charged.
Where To Invest In Real Estate In Alabama
Alabama is a favorite market for real estate investors because of its diverse options. There are three medium-sized cities with populations between 200,000 and 215,000. These secondary markets of Huntsville, Birmingham and Montgomery are popular for real estate investors that like the greater affordability and lesser competition than most larger primary markets. Tuscaloosa is a college town with approximately 100,000 people, making it both an attractive market for student housing investors as well as investors with rental properties serving permanent residents. Gulf Shores, while boasting a fairly small population, is an extremely popular beach vacation on the Gulf of Mexico. It attracts visitors from all over the South, making it a great market for short-term rental and vacation rental investors.
Huntsville
Huntsville is the largest city in Alabama, with a population of approximately 215,000 people, with approximately 407,000 in the greater metro area. It is a favorite for real estate investors due to its long track record of population and employment growth. Huntsville is home to many high-tech and defense industry employers, including NASA, the U.S. Army, and many private aerospace and defense companies. This has helped to create a strong job market with a high concentration of high-paying jobs. Its estimated that the Huntsville metro area has seen a rapid growth of over 100,000 people between 2012 and 2024!
The pro-business environment is attractive to all sorts of businesses, including real estate ones. The city offers a range of incentives and support for businesses, including low taxes, streamlined permitting processes, and access to a highly educated workforce. This has led to a strong real estate market pushing up rents and property values along with population.
With its booming business attracts lots of business travelers, Huntsville also includes a variety of tourist attractions. These include the U.S. Space and Rocket Center, the Huntsville Botanical Garden, and the Huntsville Museum of Art. Despite the high demand for short-term housing in Huntsville, there is a relative lack of hotel rooms in the area. This can create an opportunity for real estate investors to fill the gap by offering short-term rental properties.
Birmingham
Birmingham is the second largest city in the state of Alabama, with a population of over 200,000 people. The city has a diversified economy with a strong focus on healthcare, education, and finance. It is home to several major employers, including Regions Financial Corporation, Protective Life Corporation, and the University of Alabama at Birmingham. These major companies provide a solid employment base for renters. The city is also home to several universities, including Samford University and Birmingham-Southern College. These attract a large number of students and young professionals who need rental properties.
Birmingham’s strong economy and diverse population make it an attractive market for real estate investors. The city’s growing job market and population growth create a steady demand for rental properties, with opportunities for long-term leases, medium-term rentals, and short-term rentals. The city is also a popular destination for tourism. Top attractions include the Birmingham Museum of Art, the Birmingham Civil Rights Institute, and the Birmingham Botanical Gardens. The city’s southern charm, rich history, and vibrant culture make it a popular destination for visitors. This provides a robust market for short-term rentals.
Overall, Birmingham’s strong economy and diverse attractions make it a great market for real estate investors looking to invest in single-family and multifamily properties.
Montgomery
Montgomery, located in central Alabama, is the capital of Alabama and the third-largest city in the state. The city has a diverse economy, with healthcare, government, and education leading industries.
Real estate investors can find affordable investment opportunities in Montgomery, with the median sales price for a single-family home in December 2023 of $167,000 according to Redfin. By utilizing DSCR Loans with as little as 20% down, a rental property investor can generally buy an average single family rental for only approximately $33,000 down. This makes Montgomery a good market for rental property investors just getting started.
Montgomery is also an attractive market for investors in short-term rentals. The city is rich in history and culture, with many attractions related to the Civil Rights Movement. The Rosa Parks Museum and the National Memorial for Peace and Justice are just a few of the many historic landmarks in the city. These features a collection of artifacts, exhibits, and interactive displays that showcase the city’s rich history. Year-round tourism related to these demand drivers make it a great market for STR investors.
Montgomery also hosts several events throughout the year that draw large crowds of visitors. The Alabama National Fair is one of the largest events in the state and attracts people from all over the country. The fair features a variety of entertainment, including live music, carnival rides, and livestock exhibitions. The Montgomery Dragon Boat Festival is another popular event that celebrates the city’s culture and diversity. The festival features dragon boat races, food vendors, and live music, making it a great opportunity for investors to offer short-term rental properties to festival-goers.
AirDNA, a leading data provider for short-term rental market analysis, ranked Montgomery in its list of Best Places to Invest in US Vacation Rentals in 2023! As mentioned above, the cost of properties is low in Montgomery, perfect for investors with smaller budgets. The affordability of properties (as mentioned earlier) is a big draw. AirDNA gives a 2024 “investability” score of a whopping 100, one of the highest in the US. Even with the low property values, AirDNA projects an average annual revenue figure of $30,000 for Montgomery. A great “road trip” destination for families in the south, it’s a rock-solid vacation rental market.
Tuscaloosa
Tuscaloosa, located in western Alabama, is home to the University of Alabama, the flagship university in the state. But it’s not just a college town. Tuscaloosa has a population of over 100,000, making it the fifth-largest city in the state. It’s also home to several cultural attractions, including the Paul W. Bryant Museum and the Tuscaloosa Museum of Art.
Tuscaloosa is a great market for real estate investors who specialize in niche strategies, such as short-term rentals or student housing. The University of Alabama, home of the “Crimson Tide,” boasts an enrollment of over 38,000 students. While investment properties aimed at students can be a risky strategy, if done right, they can provide very lucrative returns. Savvy investors select properties well-located near campus and that rent to reliable students. Student housing rentals can earn returns well beyond normal long-term rentals.
Tuscaloosa is also an underrated favorite among short-term rental investors looking to capitalize on specific events that draw in visitors. The University of Alabama Crimson Tide are typically a very strong team in football, basketball, and other sports, and attract lots of visitors for games over the course of their respective seasons. In addition, the city hosts a variety of events such as the Tuscaloosa Regional Air Show, the Druid City Arts Festival, and the Kentuck Festival of the Arts. This provides year-round demand drivers outside of sports.
Overall, Tuscaloosa’s diverse attractions and growing population make it an attractive market for real estate investors. Especially those looking to specialize in student housing or short-term rentals.
Gulf Shores
Gulf Shores, located in southern Alabama, is a charming coastal city known for its bountiful beaches. The city’s motto is “Small Town, Big Beach.” Visitors come from throughout the South, drivable from Georgia to Louisiana, for weekend getaways and longer vacations. A favorite spot for spring break and summer vacations, short term rental investment properties can demand big rates in these seasons. The city also hosts various events, including the Hangout Music Festival and the National Shrimp Festival. These bring in even more visitors and more elevated potential rental income.
According to AirDNA, a leading data provider for investors in short-term rentals, Gulf Shores is a good market for 2024. It has a rating of 90/100 on “investability”, making it one of the best places to invest in vacation rental properties. Investors can expect average monthly revenue of $6,475, peaking in July! Investors who use DSCR loans from a forward-thinking lender like Easy Street Capital, which qualifies the income of the property using AirDNA projections, can likely earn a high cash flow.
Ready to Get Started?
Ready to invest in real estate in Alabama? Easy Street Capital is the leading provider of rental loans for Alabama real estate investors. From hard money rehabs to long-term or short-term rental properties, we have solutions for every investor!
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