If you are looking for a comprehensive guide to start flipping houses in the state of Alabama, you’ve come to the right place.
One of the best ways to begin investing in real estate is to flip houses. It might be a profitable business venture. However, since it is a high-risk investment, you need to consider a lot of variables.
But don’t worry, I’m here to assist you with your research and decisions. The market research, appraisal, and procedure for flipping houses in Alabama are all broken down in this ultimate guide.
Flipping Houses in Alabama
The housing market in Alabama is one of the hottest in the country. It’s a once-in-a-lifetime income opportunity for house flippers. Despite the low housing market valuation, investors who pick the right properties and flip houses in Alabama earn a substantial profit.
Every investment, including real estate, is highly specific to its location, and investing in houses in Alabama is no exception. Paying attention to current market happenings and knowing how to respond quickly will assist you in determining whether you have made a profit or loss. You should always work with a local specialist real estate agent to understand the trends in these local markets and find investment possibilities. Their comprehensive understanding of the ins and outs of these particular property markets can assist you at every turn.
Analyzing the Alabama Housing Market in 2022
Alabama is the 7th most affordable housing market in the US. Alabama’s average house value is $200,497 as of April 2022, which is significantly less than the national average home value of $344,000. Furthermore, house values in Alabama climbed by a little more than 7.26 percent in 2021, and are expected to rise by a stunning 18.8% in 2022. These prices, on the other hand, vary even within the state, indicating how regional and localized property markets are.
This property market trend in Alabama has drawn real estate investors from all across the country. The demand for homes in Alabama currently outweighs the supply. This has resulted in a strong seller’s market in Alabama’s housing market. It’s easy to understand why investors are flocking to Alabama’s real estate market. Two of the key reasons for development are the expanding population and the better employment and education sectors. Alabama has a high school graduation rate of 85.8% and a median family income of $49,000.
In addition, Alabama’s extremely low housing costs make the market more accessible to first-time real estate investors. You’ll need less money to get started, which implies there will be more newbies in the future and therefore greater competition.
How to know if the house in Alabama is a good investment?
After you’ve learned about Alabama’s housing market and economy in general, you’ll probably want to look into a more specific area and neighborhood to find possible homes. Keep in mind that not every local real estate market has the same kinds of investment opportunities.
In general, a variety of factors go into assessing whether or not a property is a good investment. While you’re just starting out, avoid local marketplaces with a lot of inventory and postings that have been active for a long time. On average, houses in Birmingham sell after 39days on the market. If the property in the region is still operational after 39–50 days, this indicates that it is a no-go.
If the price of a property in Alabama is less than the local market average, it’s another sign that it’s a good investment. Looking for houses that are significantly less costly than past sales in the region is one of the simplest ways to detect potential value. Remember that the less expensive homes will require significantly more changes than the more expensive ones.
How much should I pay for a house in Alabama?
It’s usually a good idea to stick to the 70% rule when deciding how much to spend on a home in Alabama. According to this rule, you should never spend more than 70% of the house’s after-repair value, less repair and renovation expenses. Let’s say you buy a house in Alabama for $200,000 and want to spend $20,000 on repairs and remodeling. Keep in mind that upgrades raise the property’s market value.
According to the 70 percent guideline, you must sell your house at a minimum of $314,000 to make a decent return on your investment.
It’s critical to keep in mind that the 70% rule is discretionary. It’s only an estimate of the house’s genuine worth. This rule aims to create a profit margin that is substantial enough to pay all other costs while flipping houses in Alabama while still leaving you with a good profit margin.
Do you need a real estate license to flip houses in Alabama?
To flip houses in Alabama, you don’t need a real estate license. Having said that, acquiring both a realtor and a contractor license is typically a smart idea if you want to start flipping houses in Alabama full-time.
If you don’t want to deal with the challenges of getting a realtor or contractor license in Alabama, that’s OK. In this instance, I strongly advise you to use a seasoned realtor and contractor with whom you can establish a positive working relationship.
Finally, if you are new to Alabama, finding a trustworthy contractor or repairman may be challenging. Furthermore, zoning restrictions and standards vary by city, and market trends shift often. Working with a trustworthy agent or contractor might help you foresee problems.
How to start flipping houses in Alabama and make a profit?
You’re ready to begin your home flipping journey in Alabama once you’ve done comprehensive research on the Alabama property market and are confident that the house is a solid investment. Follow these six steps to begin flipping houses in Alabama and benefit handsomely from this type of real estate investing.
1. Create a Budget and Secure Financing
The first thing you should consider when flipping properties in Alabama is your financial situation. It’s typically a good idea to perform the arithmetic before looking at potential qualities.
If you have cash on hand, you should already know how much money you have. By paying cash for your Alabama house flips, you may avoid financing charges, mortgage payments, and any other closing costs or fees. As a result, if you have cash while flipping houses in Alabama, you should always use it.
Using a loan or other types of financing to purchase and renovate a home might drastically reduce your potential profits. If you took out a $200,000 loan to buy a property in Alabama, you’ll keep making mortgage payments until the house is sold. Even a ten percent down payment on a house may cost $20,000 to buy. In addition to the $20,000 for repairs and enhancements, you’ll need to invest an additional $10,000.
Repairs and enhancements, unfortunately, take time. As a result, you may wind up paying your mortgage for a longer period of time, perhaps losing a large profit margin. Furthermore, after accounting for property taxes, building permits, utilities, marketing costs, closing fees, home insurance, realtor commissions, and other costs connected with flipping houses in Alabama, you may not be able to make any money at all.
As a consequence, having cash may help you save money on all of these things while also allowing you to keep as much of your earnings as possible.
But don’t be concerned if you don’t have any cash. There are still a few alternative ways to support your house-flipping business on a shoestring budget.
2. Research the Cities and Neighborhoods
After you’ve found the homes that are listed below market value and taken into consideration other factors such as active days on the market, you can assess the neighborhood’s attractiveness. When it comes to flipping houses in Alabama, the quality of the neighborhood is crucial. Other quantitative variables, such as the quality of education, entertainment, parks and recreation, and the neighborhood’s shopping experience, should be examined in addition to the listing and sales price.
Existing housing stock in Alabama’s older villages, as well as a rapidly growing urban region, might benefit from rehabilitation and repair. Flipping properties may be a lucrative business in Alabama. You must, however, learn to recognize the appropriate options.
Here is a list of the 4 best cities to flip houses in Alabama for 2022.
Flipping Houses in Birmingham, AL
Birmingham is the biggest city in the state of Alabama. This city is composed of 92 neighborhoods and offers multiple affordable duplexes, townhouses, and affordable multi-family homes. As of April 2022, the median listing home price in Birmingham is just $170,000, trending down 10.5% year-over-year. The median listing price for a house in Birmingham per square foot is $114. Furthermore, the median home sold price was $210,000.
The sale-to-list price ratio in Birmingham, AL is 100%. This confirms a strong seller’s market. Moreover, on average, a house in Birmingham, AL takes around 39 days to get sold.
The city offers 85 public schools rated good or higher by GreatSchools and 45 private and charter schools. Birmingham also offers hundreds of grocery stores, restaurants, and cafes. There is also a plethora of beautiful parks and gyms for a healthier lifestyle.
Out of the 92 neighborhoods in Birmingham, Highland Park is the most expensive one, with a median home price of $700,000. On the other hand, Ensley Highlands is the most affordable neighborhood, with a median listing home price of just around $65,000. There are also some other great neighborhoods, like Forest Park, Crestwood South, and Spring Lake.
Flipping Houses in Montgomery, AL
Montgomery is the capital city of Alabama. It is composed of 18 neighborhoods and offers multiple affordable duplexes, townhouses, and affordable multi-family homes. As of April 2022, the median listing home price in Montgomery is $160,000, trending flat year-over-year. The median listing home price per square foot is $93.
The city offers 75 public schools rated good or higher by GreatSchools and 35 private and charter schools. Montgomery also offers hundreds of grocery stores, restaurants, and cafes. There is also a plethora of beautiful parks and gyms for a healthier lifestyle.
Of the 18 neighborhoods in Montgomery, Hampstead is the most expensive one, with a median home price of $462,000. Conversely, Cypress Creek is the most affordable neighborhood, with a median listing home price of just around $40,000. There are also some other great neighborhoods like Old Cloverdale, The Garden District, and Capitol Heights.
Flipping Houses in Huntsville, AL
Huntsville is a city in Alabama that consists of 9 neighborhoods and offers multiple affordable duplexes, townhouses, and affordable multi-family homes. As of April 2022, the median home listing price in Huntsville is $315,000, trending up 16.7% year-over-year. The median listing price for homes per square foot is $152. The median sold price for homes was $409,800. The sale to list price ratio is 100%, which confirms a strong seller’s market.
On average, houses in Huntsville sell after 75 days on the market. The city offers 54 public schools rated good or higher by GreatSchools and 39 private and charter schools. Huntsville also offers hundreds of grocery stores, restaurants, and cafes. There is also a plethora of beautiful parks and gyms for a healthier lifestyle.
Of the 9 neighborhoods in Huntsville, McMullen Cove is the most expensive, with a median home price of $834,500. On the other hand, the Merrimack District is the most affordable neighborhood, with a median listing home price of just around $175,000. There are also some other great neighborhoods like The Lake Forest, Downtown Hunstville, and the Lincoln Mill District.
Flipping Houses in Mobile, AL
Mobile is the capital city of Alabama and is composed of 82 neighborhoods. It offers multiple affordable duplexes, triplexes, and affordable multi-family homes. As of April 2022, the median listing price for houses in Mobile is $210,000, trending up 16.8% year-over-year. The median listing home price per square foot is $122.
On average, houses in Mobile sell after 38 days on the market. The city offers 87 public schools rated good or higher by GreatSchools and 39 private and charter schools. Mobile also offers hundreds of grocery stores, restaurants, and cafes. There are also a plethora of beautiful parks and gyms for a healthier lifestyle.
Out of the 82 neighborhoods in Mobile, College Park is the most expensive one, with a median home price of $369,400. On the other hand, Toulminville is the most affordable neighborhood, with a median listing home price of just around $66,000. There are also some other great neighborhoods, like Milk House, Berkleigh, and Carlen.
3. Assemble your team
You’ll need a team of individuals to make each flip a success, whether you’re flipping houses full-time or part-time in Alabama. A real estate lawyer, a lender, a real estate agent, a general contractor, a few laborers, and an accountant will almost probably be required.
Working with a trusted team rather than a new specialist for each task is also great if you want to make house flipping a regular element of your investing plan.
4. Select and Purchase your Alabama House
It’s finally time to buy your property in Alabama after you’ve sorted out your finances and determined whether or not it’s a smart investment. Another thing to bear in mind when buying a property is that properties that require more maintenance and upkeep are frequently less expensive to acquire. As a result, reselling them will take longer.
On the other hand, houses in good shape that do not require considerable repairs and renovations are much more expensive. You will save a lot of money in the long run and will not have to worry about house improvements if you spend more money up front.
As a result, while buying a home in Alabama, strive to strike a compromise between these concerns. Choose a home that best fits your abilities, money, and timeline.
5. Repair and Renovate the House
Consider how much money will be required for repairs and upgrades, as well as how long they will take. Determine which upgrades will add the most value and whether or not they will appeal to potential buyers. Adding air conditioning and energy-efficient modifications to a home may quickly increase its value for homeowners who want to escape the hot and humid Alabama summers and chilly Alabama winters.
Furthermore, power washing the outside of the house, painting the inside, fixing a leaking faucet, reglazing and caulking bathtubs, and cleaning the floors are all small but vital jobs that will help your property sell faster.
6. Resell the Renovated Alabama House for a Profit
It’s time to re-list the property after you’ve finished fixing and restoring it. You have two options for reselling your home in Alabama. The first choice is to sell as a for-sale-by-owner (FSBO), while the second is to sell through a real estate agency.
Saving money on commissions is one of the numerous advantages of selling your home without the help of a real estate agent. Even if you sell your Alabama property on your own, you must pay the buyer’s agent a commission (3 percent ). You’ll need to be ready to bargain like a pro and fill out all of the paperwork correctly if you want to sell your property yourself.
If you don’t want to deal with the hassle of selling the home yourself, you may always hire a professional real estate agent. The process of preparing contracts, discussing them, signing them, and closing them will all be expedited. However, you will be required to pay them a 3% fee for their services.
How much money do house flippers make in Alabama?
In the United States, the average revenue per flip is $60,000, while in Alabama, it’s just approximately $47,000. As a result, Alabama’s average revenue per flip is $13,000 lower than the national average. It makes sense, right? Affordable housing and a rising standard of living draw a large number of real estate investors to this state. As a result, there is greater competition and, as a result, reduced revenue per flip.
It’s also vital to note that the revenue per flip is not the same as the net profit. You’ll also need money set aside for repairs and restorations. Depending on the present status of the property, a broad variety of repairs may be required, but if you invest $20,000 on repairs, the home will be worth it. After deducting all additional fees and levies, you’ll have a net profit of $10,000 to $15,000 to work with.
As a result, it’s reasonable to anticipate that flipping a single property in Alabama will net you at least $10,000. In addition, the average real estate investor flips 4-5 houses each year. That indicates that flipping properties in Alabama might earn you roughly $50,000 per year.
Overall, flipping houses in Alabama is a great way to get started in real estate investment. Even though Alabama is not one of the most profitable states to flip houses, it is still a rapidly developing state. As a result, the Yellowhammer state has a lot to offer to investors who are willing to invest long-term. In addition, finding profitable flips in Alabama requires a combination of your talents, knowledge, and luck. Once you’ve located a good deal on a house in Alabama, be sure to execute a well-thought-out strategy, refurbish the property accordingly, and sell it to a high-end buyer.