- Investors can buy rentals in Birmingham for under $100,000 and get capitalization rates at about 9 to 18 percent.
- Companies such as Spartan Value Investors take the worry out of owning rental properties.
- There are mainly two types of investors that are driving the business growth: retirees and millennials.
Investment banker Kenneth H. was tired of Wall Street.
After working in finance for a New York City bank for nearly a decade, he moved to San Diego, where he plotted his next career move. A few Orange County firefighter friends suggested he invest in rental properties in Alabama.
They introduced him to turn-key real estate investing. He said the firefighters were purchasing rental properties in Birmingham, Alabama.
He was intrigued.
“Playing the stock market is a tricky thing,” said Kenneth, who didn’t want his last name published. “Turn-key rental units really sounded good to me. But I wanted to go with the best firm. I didn’t want to worry about broken toilets and other issues. But it turned out to be great. So I took a trip to Alabama.”
Kenneth’s firefighter friends introduced him to Clayton Mobley, CEO of Spartan Invest, a turn-key real estate company in Birmingham that buys, renovates, leases and resells properties to both move-in-ready buyers and investors.
“When Clayton (Mobley) sent over his marketing material on rental properties in Birmingham, they looked like my spreadsheets,” Kenneth said. He has rentals in Birmingham and Jacksonville, Florida. “It comes down to the right people. They were committed to the business, and they had skin in the game.”
Last year, Kenneth flew to Birmingham to check out properties and meet Mobley and his team.
“They drove me around,” Kenneth said in describing his market tour of Birmingham. “We had lunch. I got to touch the properties. I met some tenants. It was really fun. The experience for me was great.”
Kenneth was so impressed with Mobley and his team that he bought three rental properties in the city.
“This was a perfect fit,” said Kenneth. “Building a relationship with Clayton (Mobley) was an important thing for me. Clayton understands that property management is the core of his business. And that was important to me too.”
Mobley said investors can buy Birmingham rental property for under $100,000 and get capitalization rates at about 9 percent to 18 percent. He said there are hundreds of older homes in need of renovation that can be purchased at a low cost.
“Typically, we pay $50,000 to acquire a property, we put $30,000 in renovations, and we sell it for $95,000,” Mobley said. His company is a full-service investment firm specializing in real estate investment and residential rental properties. “Our value proposition is quality: quality renovations and quality management.”
Mobley started his company in 2009 after leaving a six-figure corporate job in Tuscaloosa, Alabama. Then, he started bidding on properties at the Birmingham courthouse steps, fixing them up and flipping them to mostly to homebuyers. For four years, Spartan grew steadily; then the market turned.
“We started Spartan Value Investors in 2012,” he said, referring to his turn-key rental management company. “The market was going that way. It was an easy transition.”
He said Spartan Value Investors manages over 220 residential properties in the Birmingham area, in addition to 50 properties the company owns and manages. It purchases properties at the Birmingham courthouse steps and renovates each property, sells them to investors and then provides ongoing property management for investors around the country.
“Our customers wanted a product that was low maintenance,” said Mobley, who buys and sells approximately 150 properties a year. “We put new tin roofs on 91 percent of our properties.
“We put new HVAC units on 85 percent of our houses. Over 95 percent of our houses have granite countertops. Everything that we do is to achieve the best return on investment for the investor. If the investor is successful, we are successful. If they’re not, we’re not. It’s an easy correlation. But it’s the biggest driver of our success.”
Mobley said there are largely two types of investors that are driving a lot of his business growth: retirees and millennials.
“When I started, I thought our rental business would be driven by retirement folks,” he said. “But surprisingly a lot of our business is from millennials. They are tired of market fluctuations, and they don’t trust Wall Street.”
Mobley said many local investors are buying Birmingham rentals, but most of his business is from out-of-state investors. He represents investors from 27 states, including New York, Ohio, Tennessee, North Dakota, South Dakota, California, Nevada and Utah.
He said he buys rental homes in several Birmingham neighborhoods, including Adamsville, Center Point, Forestdale, Fultondale, Gardendale, Grayson Valley, Hueytown, Irondale and Pleasant Grove.
Octavio Nuiry is the managing editor of RealtyTrac.