Matthew Whitaker - Thursday, October 31, 2013
Perhaps you’ve heard of the huge private equity groups that are snatching up homes across America hundreds at a time. Being in the industry, I’ve heard stories from managers in Atlanta that are taking in 100 new properties in a single day. One management group has doubled in size in the last 18 months and other management groups have gone from zero to hundreds of homes.
However, in Birmingham, we have not seen these companies buying. What is that?
Birmingham simply is too small of a market to feed the beast. Birmingham’s metro area is about 1.2 million people. Compared to Atlanta that is about 1/5 the size. There simply are not enough homes for these huge groups with hundreds of millions of dollars to invest here.
Birmingham’s inventory is too old. I recently had a discussion with an Atlanta manager who described these groups model as, “They don’t want a house that was built before 1980.” While Birmingham obviously has some houses that meet this model, the majority of the inventory was built prior to 1980, and thus doesn’t meet their requirements.
Birmingham doesn’t have the “sex appeal.” Compared to traditionally hot markets like Las Vegas, Los Angeles, Dallas, and Atlanta, Birmingham doesn’t have the same kind of national appeal.
What does this mean for you as an investor in Birmingham?
Because huge real estate companies are making broad, sweeping decisions on a macro level, we, as local investors, have the opportunity to look at deals from a micro perspective and actually beat the returns of the huge, sophisticated groups.
In places like Atlanta and Las Vegas, these companies have run off the small investor who has a hope of owning 10 to 12 rentals, because they have bid up the prices on houses so high. In Birmingham, however, that opportunity is still very much a possibility.
Plus, with fewer big buyers, there is naturally less competition.
For these reasons and more, Birmingham is a great opportunity for the small-scale investor.