Why we love Huntsville, Alabama for turnkey rentals.
Just a 90 mile drive on the I-65 heading north from Birmingham will get you at Huntsville Alabama. Having a population of about 431,800, Huntsville is smaller than Birmingham, however it is rich in high paying employment with a large concentration of companies in the Aerospace, Technology and Defense sectors. With a growing working population, Huntsville is the perfect environment which has the attention of real estate investors. The city also known as “Rocket City” has played a vital role in the development of space technology since the 1950’s. The beauty and charm of Huntsville makes it a city of comfort and hospitality.
USA today touted Huntsville as “one of the top communities leading the economic recovery,” while Money magazine named it “one of the nation’s most affordable cities.” The cost of living is 6.2% below the national average. Job and population growth have been steady of the past few years. The unemployment rate of 5.9% is also well below the national average. Economic diversity is a key factor in the stability of the Huntsville.
The top employer is the military with over 31,000 jobs at Redstone Arsenal. The local hospital systems and NASA Marshall Space Flight Center are the next largest employers. Approximately 50 of the fortune 500 companies, from GE to Lockheed Martin, Level 3 Communications, AT&T and Verizon have a presence in the Huntsville area. Toyota has a manufacturing plant where by 2015 their total investment will exceed $850 million. In 2013, this facility produced a record 540,000 engines. Finally, Huntsville boasts the nation’s second largest research park in the nation and 4th largest in the world. Cummings Research Park is a leading model for transforming research into business success. There is a vibrant mixture of fortune 500, local and international high-tech companies. Cummings Research Park is the center of attention for research and technology.
Alabama is ranked 24th in the USA for tax burden states, which is a good thing for investors:
This is one of the reasons why Huntsville contains 46 Fortune 500 Companies including: General Electric, AT&T, Verizon, IBM, Boeing, Wells Fargo, Target, Comcast, UPS, Cisco etc.
Like most of Alabama, Huntsville enjoys lower tax rates to help with ROI. Renters take up about 38% of the market. With the steady job market and population, this allows investors with quality homes to attract solid, long term tenants. The average home age is 34.1 and the average home price is approximately $125,000. With distressed homes selling at a 44% discount, this is a great environment for flipping or a buy and hold strategy.
History and Culture
Huntsville was established in 1809 and in 1811 became the first incorporated town in Alabama. Rich in Civil War history, Huntsville was initially opposed to secession from the Union. Eight Civil War generals were born in or near Huntsville and were divided equally among North and South. Huntsville was spared the burning of many southern cities as it had a strong Union Army presence.Munitions facilities were developed during World War II and Redstone Arsenal became a driving force in the community after the war. In the 1950s and 60s, Huntsville played a key role in the development of the U.S. Space Program. The Space and Rocket Center is today a key tourist attraction that substantial revenue to the area. Over 1500 pieces of space memorabilia can be seen at there. Huntsville also has many parks, arts, and cultural facilities and has been named one of the top areas in the country for working retirement.
About Auxo Homes:
We do all the hard work. We connect you, the investor, with our best sourced properties and management companies to provide some of the coolest hands-off investing opportunities we know about. We have built a team over the years to create with turnkey rental properties—all the work (rehab, tenants, and management) all done for you, all you have to do is buy the property! Don’t worry, we help you through the due diligence. We can even help you get financing!
How you can make money with rental properties.
Rental properties provide passive income, meaning you have to manage them about 4 hours per month or less! Owning a turnkey rental property is no different than owning any other kind of rental property, except all of the work is done for you. You just collect your profit each month!
How Can Auxo Homes can help you?
We source the properties, renovate the properties, put great management in place and get a great tenant. During the purchase we hold your hand through the whole process. We have personally buy properties in the same markets and use the same people we connect you with, so we’ve ‘been there, done that’. You tell us! We are here for you, however you want us.
Why should you work with Auxo Homes?
The team members of Auxo Homes are passionate about real estate, & are all investors. It is important that we partner with other investors as we view it as a chef that eats their own cooking. We aren’t just some sales gig trying to get you to buy things, we really focus on your goals. Is passive turnkey investing right for you? Maybe not. If it isn’t, we won’t lie and say it is. We are more focused on the end game, which actually isn’t real estate, It’s lifestyle design. Meaning, we believe everyone should be able to live the life of their dreams. Passive income is the best way to do that because you don’t have to work for your money repeatedly, you make as in real estate you make money on the buy. Real estate investing has many advantages and happens to be one of the best vehicles for passive income, which is why we focus on it!
New study shows a third of all Illinois and Chicago homes are in mortgage trouble
A new study by housing data provider RealtyTrac shows Illinois and Chicago remain particularly hard hit by the nation’s real estate crisis, with as many as a third of all homes considered “deeply underwater”.
The U.S. Home Equity & Underwater Report for December 2013 showed Illinois was one of the highest states nationwide for residential properties considered deeply underwater, with 32 percent of all properties so designated. Only Nevada (38 percent) and Florida (34 percent) were higher.
Homes considered deeply underwater carry a loan-to-value (LTV) ratio of 125 percent or more. That means that if the homeowner were to sell a property at full value, the purchase price would not cover the full amount of the outstanding loan.
The study also found Chicago continues to suffer a glut of distressed homeowners and properties, with fully a third of all properties considered deeply underwater. According to RealtyTrac, more than 700,000 properties in the Chicago-Naperville-Joliet metro area had a LTV ratio of greater then 125 percent.
Within the city limits, some areas of Chicago struggle worse than others with housing issues, particularly foreclosures.
A 2013 study of the first half of the year by the Woodstock Institute shows a key section of the southwest side of the city contains a particularly strong concentration of foreclosures.
The Chicago City and Regional Foreclosure Activity report shows two adjacent wards on the Southwest Side—the 13th and the 18th—had the highest levels of properties with foreclosure filings in the first half of 2013.
Both showed 254 foreclosures for the period. The 13th Ward is represent by Ald. Marty Quinn, and the 18th by Ald. Lona Lane.
The 13th Ward also covers parts of the Illinois 22nd House District, which is represented by powerful Speaker Mike Madigan.
Across the nation, the housing crisis brought on by the 2008 collapse of real estate prices continues to slowly improve, although markets in much of the country remain depressed.
The RealtyTrac report found 9.3 million U.S. residential properties were deeply underwater in December, down from 10.7 million in September.
Yet Las Vegas, Orlando, Detroit, Tampa and Miami all had percentages of deeply underwater properties higher than Chicago.
The National Association of Realtors reported existing-home sales fell in November, although the organization said median prices continue to show strong year-over-year growth.
While buying single family rental properties has become the darling investment strategy of Wall Street, it may not always make sense for individual real estate investors — particularly in some markets already picked over by the large institutional investors. But there are still markets where the numbers work for the conservative, individual investor looking to purchase foreclosures and other homes as single family investment properties.
RealtyTrac developed a list of the 20 best markets nationwide for purchasing single family rentals by analyzing median sales prices and average rental rates for 3-bedroom homes and using that data to calculate capitalization “cap” rates and average cash flows.
Shifting With the Market
Good opportunities for single family rentals are available in nearly every market across the country, it just may be harder to find them in higher-priced markets like Orange County, Calif., where real estate investor Lin He is based.
“I bought a number of rentals in OC a couple of years back, but now I am getting some smoking deals in Los Angeles and the Inland Empire (Riverside and San Bernardino counties in Southern California),” he wrote in an email. “I just picked up a triplex and a single house on one lot in LA for $217k. Its gross rent is close to $6,000. That’s a heck better than 1 percent rule (see explanation of this rule in methodology below).”
Calculating Cash Flow and Cap Rates
Cash flow is simply the difference between the income produced by the property in the form of monthly rent and the costs associated with the property: mortgage payment, property taxes, insurance, repairs, etc. Positive cash flow is always the goal, and negative cash flow is best avoided. The cap rate is the percentage that the net annual income produced by the property (monthly cash flow multiplied by 12) represents of the original purchase price paid for the property.
For example a home purchased for $100,000 that generates $500 in positive net cash flow each month would have a 6 percent cap rate ($500 multiplied by 12 is $6000, which is then divided into the original $100,000 purchase price).
To calculate cap rate and cash flow, we assumed a 20 percent down payment and a 4 percent interest rate to come up with an estimated monthly mortgage payment. Based on feedback from real estate investors we subtracted an additional 40 percent out of the gross monthly rental proceeds for property taxes, insurance and repairs.
More on Methodology
We limited the list to metro areas with a population of at least 200,000 where the necessary price and rental data was available and then further restricted the list to markets where the average monthly gross rent of a 3-bedroom home was at least 1 percent or more of the median sales price in that market (using an old rule of thumb that many veteran real estate investors simply refer to as “the 1 percent rule”). We then sorted the list by the cap rate, highest to lowest and selected the top 20 on the list.
Property Particulars Important
While the 1 percent rule and the 40 percent rule mentioned above are useful to provide “general overall initial calculations,” veteran real estate investor Tony Alvarez cautioned that the particular characteristics of each property purchased must be taken into account to determine the true return on investment.
“You must address specifics of the properties being analyzed or compared such as, are the properties we are considering only single family residence, what is the age, quality of construction, level of past maintenance, physical location within a given neighborhood, will the owner be paying any portion of the utilities such as water, electric, gas, trash or Home Owner’s Association dues,” he wrote in an email.
Alvarez noted that in the more than 30 years he has been investing, he has owned and rented hundreds of units ranging from small single family residences to higher-end oceanfront condos in Santa Monica and large apartment buildings and commercial shopping centers.
“The bottom line is, the best rental property for an individual to buy is the one he or she both understands best and is able to manage most efficiently and effectively,” he said. “The rest is basically just conversation.”
Auxo Homes is an asset management of the company portfolio of emerging markets. The majority of his investments are made in single family rental properties.
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