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Best Places to Invest in Birmingham – Center Point, Roebuck, and Huffman Areas


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HIGHLIGHTS FROM THE PODCAST:

1:04 – Introduction
4:23 – Zillow secret for home buyers
12:46 – How to keep a tenant 5 years

Contact:
678-948-7151
[email protected]

FULL TRANSCRIPT OF THE PODCAST AUDIO:
Curt Smith:
Yeah, when you have a 1980s house, those cabinets are solid wood. Dunked up with grease and the hinges are rusted, but they are completely re habitable, and it’s a beautiful kitchen. I don’t even replace countertops. A lot of my 1980s houses still have that nice wood grain Formica countertop. And guess what? They rent the same.

Spencer Sutton:
All right, everybody, welcome back to another episode of the Atlanta Real Estate Investor Podcast. I am your host today, Spencer Sutton, and I’m glad to have back with us, Curt Smith. Curt, welcome back to the show.

Curt Smith:
Glad to be here. I’m excited to share a few little tidbits to help folks in 2021, the tough market that we’re in.

Spencer Sutton:
Yeah, I think this is going to be a great episode. It’s going to be probably shorter than our normal episode, but we were just talking after we got done recording the last episode with Curt, and he was like, “I love to help people find properties. I love to help people kind of think through where to be buying them.”

Spencer Sutton:
And so we thought, why not come on and do a short segment where, Curt you get to share some of this great insight, because we all know this is an extremely difficult market, right? So when you were telling your story about buying properties, you were starting out in 2011, totally different ballgame than what it is now.

Curt Smith:
Right. Right.

Spencer Sutton:
I mean, it is so very different. Like you said, it’s like a kid in a candy store. You could go online and buy houses off of Zillow and hud.com or whatever, but let’s talk about 2021, okay? This is super tight. We’ve got a lot of institutional investors out there, we’ve got rising prices, massive demand. So let’s talk about some of these things so that we can help investors find out where they need to be buying property or where they can find them and then how to do it.

Spencer Sutton:
So, why don’t you share some of your insight?

Curt Smith:
I’d be glad to. So let me start off by first saying, folks, I’m talking about rentals, buying a rental, not a flip.

Spencer Sutton:
Not fix and flip, right.

Curt Smith:
Right. So go to biggerpockets.com, I’m sure you know what that is, find my profile, Curt Smith. In the first paragraph of my profile, I have a file linked called “How To buy A Bulletproof Rental Portfolio”. The reason to read that is it helps you understand the importance of targeting who your target customer is, the renter. For us, it’s middle blue collar.

Curt Smith:
In Atlanta today, middle blue collar rental prices are $1,500 to $1,800 a month. How do you come up with that? Longer story, not going to spend the time. Each person, I like two income families, two incomes, two kids and a dog. All my houses have fenced back yards, because dogs represent inertia from moving, and I like families who stay for the schools.

Curt Smith:
So, it’s part of my recipe of moving folks in and they never move out. So, $1,500 to $1,800 for a three bedroom, two bath. I focus exclusively on two full bath houses. One and a half bath, you can’t get a parent into a half bath master with school-aged kids. Think of it. Everyone’s got to take a shower through that hall bathroom.

Spencer Sutton:
Right.

Curt Smith:
Forget three one and a half’s, certainly three ones. Those are different business models. The more experience you have, and the more time you spend in REAs, like the REA I’m a member in, Georgia REA, the more you learn that each of those house types is a different business. Three one will rent to different people than a three one and a half versus three two. So, I only bought three twos.

Curt Smith:
So $1,500 to $1,800, how to be parachuted into any city in the country and find out where to buy houses, because where is the first step, and what is before that even. That’s why I suggest reading this paper on why buy only three twos. I actually prefer smaller three twos, 1200 square feet, actually. I love a 1300 square foot, and Spencer you in Birmingham, there’s a ton of 1300 square foot three twos, three one and a half, because that’s what they built in 1975. Anyway, so-

Spencer Sutton:
They’re very efficient, very efficient houses.

Curt Smith:
A lot of space wasted today. Anyway, go to Zillow rentals and zoom in the area that you are interested with this larger area and put in house three bedroom, two bath, rent, $1500 to 1800. And look at the footprint of those rentals. You know what, that’s where you need to buy. Where is those … So the market’s telling you, you don’t have to worry about where to buy the house.

Curt Smith:
Once you choose your tenant type, then you choose the house that suits that tenant type and then find the rent that that tenant type can afford. It’s 1500 to 1800 today in Atlanta, based on local jobs, $15 an hour times, two times 40, they can afford a $1,500 a month, 1800 rent. So most cities will have a footprint, a shape of where those $1,500 to $1,800 when you narrow further, newer than 1970, but older than 85, and I can’t get into why I avoid houses 1990 and newer.

Curt Smith:
In short slab divisions aren’t good places to buy rentals. They may seem like it, but they actually aren’t home. They’re transitory. Owners transit through slab divisions and renters transit through slab divisions as well. So what makes a home is a neighborhood with all dissimilar types of houses, with dissimilar income and dissimilar ratios of renters versus owners. And so in 1975 to 85 is a great year range.

Curt Smith:
So put that into Zillow as well. And now you’ve got where they built those subdivisions, and guess what, when they were building those things out, they were in certain areas in each city. In Atlanta, along 20 on the east side Lithonia and so on, Stone Mountain and on the west side, till it goes, Douglasville looks at et cetera, are examples in they have lots of subdivisions with those year houses that have rents in those rent range.

Curt Smith:
There’s others, yes, but I don’t want a duplex. I don’t want a 1935 house. I only want 1975. I have bought as old as 65, 1965, but you’re risking galvanized pipe, fuse boxes tube wired to your outlets, et cetera. And so, 1975, you’re going to have copper or CPVC if they’ve done some upgrades, and you’re going to have a nice breaker box and usually 150 amps. So by choosing the oldest house to be 1975 ish, you’re avoiding some rehabbing costs, and at 85.

Curt Smith:
Now another thing that happens when you look at those houses and those neighborhoods in that rent range, and you flip to “for sale” in Zillow and realtor.com there’s very low ratio between fixer price and fixed up price. It’s not enough margin for flippers to make any money. So they can’t compete against you in a rental neighborhood. A 1980 house at a fixer might be 150,000, but it only sells for two 25. That’s not enough margin for a flipper to compete against you.

Curt Smith:
So when you flip to buy, where to buy, you have this footprint kind of mentally pictured or draw it on a map, to buy a house in Zillow, put in the same filter, take out the 1500 to 1800 and have the lower price blank and have the upper price around 150,000. In Atlanta, and it’s probably pretty close for Birmingham to, I bet, maybe 110, maybe 120 maybe. But if you set that as a maximum, yes, you’re not going to have many deals, but they’re all fixers.

Curt Smith:
And Suzy homemaker with her FHA loan pre-approval is not going to be competing against you. It’s only going to be other investors. Because it’s a cash deal or it’s, what’s called a home-style repair loan where they combine the repair costs with the purchase price in occupant space, that’s called a 203K, but in investor space, it has an odd name, home style rehab loan. Find a bank that caters to investors because underwriting getting through the loan process with Bank of America, with a fixer and a home style loan, it would be disaster. swbc.com is a fantastic lender. They’re not public. So they don’t have to answer to a bunch of BS stockholders. swbc.com, very easy to underwrite.

Curt Smith:
So there you have it, 150,000 is ideal for what you would pay. I typically spend between 15 and 30,000 to fix. And I do minimum. I keep every cabinet, I paint. I have another hour, I can squeeze it to a half hour, on how to rehab a rental by painting the cabinets, putting new hinges on I’m sure a Spencer you paint cabinets. When you have a 1980s house, those cabinets are solid wood.

Spencer Sutton:
Yeah, they’re good.

Curt Smith:
They may be gunked up with grease and the hinges are rusted, but they are completely re habitable, and it’s a beautiful kitchen. I don’t even replace countertops. A lot of my 1980s houses still have that nice wood grain Formica countertop. And guess what? They rent the same.

Spencer Sutton:
Yeah, they do. They do.

Curt Smith:
It rents the same. So, I could be dropped down in Timbuktu and use this model. Choose blue collar. Find out in that area what blue collar gets paid, multiply times three, and then that’s divided by three so that you get what you would qualify with a landlord three times rent. And so in Atlanta, that’s 1500 to 1800, and find out where those houses are for sale.

Curt Smith:
Then set up Zillow and realtor.com email alerts for anything less than 150,000 in this area, go look at them. And there’s an inefficiency in the marketplace that I have seen deals on realtor.com that aren’t on Zillow and on zillow.com that aren’t on realtor.com. Once upon a time, when stuff was flowing through HUDHomeStore, I’d find deals on HUDHomeStore that was not listed. The listing agent on HUDHomeStore was supposed to list it. But sometimes they don’t.

Spencer Sutton:
They never did. Right.

Curt Smith:
I was the only bidder. Guess what?

Spencer Sutton:
Hey, you win every one of them.

Curt Smith:
Almost. Yeah. So set up your email filters for this price range, for these areas, and now your job is to go look at those houses and make qualified bids.

Spencer Sutton:
Well, I think this is great information. And for all of you who are out there thinking about Atlanta, we think the same thing about Birmingham, really, I think the temptation is we get lured into these, these numbers that people are putting on spreadsheets as cashflow opportunity. And it tempts us to buy these older, more rundown houses. “Oh, you know what, is 1935 house isn’t so bad.” But you’re going to pay for it, one way or the other.

Curt Smith:
two one? Right. Those old two ones or three ones. Oh my God. No.

Spencer Sutton:
Yeah, listen, we have tons of them in Birmingham. Three ones built in the 1930s, 1940s and investors buy them, not realizing how much rehab they’re going to have to do, how much maintenance is going to be required. And it just eats those numbers alive.

Curt Smith:
And who’s going to apply when you have it fixed, what type of tenant type are you going to have?

Spencer Sutton:
That’s right.

Curt Smith:
So if you want a tenant that moves in and never moves out, you’re not going to get that with three ones, because with a three one you’re going to … Three unrelated adults, they’re transient.

Spencer Sutton:
Yeah. And that’s a great point about transient. I mean, Curt you’ve mentioned your average tenant stays about five years. How do you do this? How do you make sure that a tenant stays there long? Obviously you’re buying the right type of house. Talk to me about how your relationship is with that tenant to ensure you’re handling all the landlording yourself.

Curt Smith:
There’s actually no secret. Once you have targeted a tenant type and bought houses where that type of tenant wants to live, and you have a fence back yard for their dog, then it’s just a matter of screening. Because once you chose the right person, they move in and they never bother you, and they tend to fix leaky things all by themselves. So when you have a three-two, that’s decently fixed, has a fenced yard. And 10 minutes to the freeway, 30 minutes to jobs, is in my How To Buy a Bulletproof Rental portfolio.

Curt Smith:
So don’t buy houses out in Timbuktu, buy them 10 minutes to the freeway, 30 minutes to a job. Those two things mitigate, not buying in a top school district, because blue collar people need jobs and jobs pay your rent. So when I have my rentals, which are all within 10 minutes to a freeway and I put it up and I have beautiful pictures, they’re nothing special. They’re just LVT and paint. I get a queue of folks, and then I screen for …

Curt Smith:
I have all my written requirements at the bottom of the ad and it says, number one, must be a long-term tenant two years or longer. And then my first question is, how long do you plan to stay? And then I read this book, Landlording On Autopilot. Landlording On Autopilot. I forget the guy’s … but he’s a police detective. He’s fantastically psychological. So he asks the same question, multiple ways, separated by a couple … and he says that the brain cannot switch gears and detect that you’re trying to trick them.

Curt Smith:
I’m not really being mean. I’m just wanting to find out what the truth is because people will tend to dress themselves up. It’s a natural human being thing to put your best foot forward. So I say, “Hey, are you planning on buying a house after they said, yes, I plan on living there two or three years. Oh, yeah. We’re saving for a house.

Spencer Sutton:
You’re thinking one year and they’re out.

Curt Smith:
Right? So if you want someone to stay five years have the goal of long-term tenant, have a dog and I’m moving, why are you moving? Because the landlord is selling the house, and I want my kid to stay in the same school district. Or my father-in-law lives a mile away. So I want things that don’t change. Because I’m close to work, it’s actually not as sticky as you think, because jobs change.

Spencer Sutton:
The systems are good, and relatives.

Curt Smith:
Right, and relatives. And, yes, I’m going to be a long-term tenant. I’m not going to buy a house. And ask same question. So, when I’m screening them, I’ve turned down people that had too much income. There was several folks that had $13,000 in their bank account. I said, “No, you’re going to buy a house. Aren’t you?” “Well, yeah.” They were going to buy a house. Okay. Thank you. Out of here.

Curt Smith:
So after long-term tenant and their story makes sense, why they’re wanting to rent my place. Because of schools, then it’s bank account. They must have a bank account with three times rent. I know in Birmingham, you’re going to have a tough time because your tenant type is a little lower in the blue collar, but I’m sorry. In Atlanta-

Spencer Sutton:
We still do three times. We do three times gross though. You do three times net, correct?

Curt Smith:
Net, for income, but bank account balance. I have a lot of rentals in rural Georgia and bank accounts is actually surprisingly and disappointingly, not that common. So if someone has a bank account, that’s a step ahead. If they have a bank account with more than a thousand bucks. That’s a big step ahead. But for me, I want three times rent the rent’s 1500. I want to see 4,500 in that bank account. Do a screenshot, send it to me.

Curt Smith:
And if you are willing to wait it out and I recommend that you wait it out, 4,500 in a bank, they’ve got 4,500 from good jobs that they’ve been on for a couple of years. They have a reason for moving to your place. You check their car out. I don’t like brand new cars. I look in their car for trash. I call their current landlord and their previous landlord. If it’s a house, I will drive by their house and look at their exterior of their house.

Curt Smith:
There are some landlord teachers who do surprise inspections and want to get inside the house. If you’re serious about avoiding problems, then you do the surprise inspection.

Spencer Sutton:
Not a bad idea.

Curt Smith:
Now, I haven’t done it.

Spencer Sutton:
You know, I think, Curt just also dropped a lot of great information. But something that he said just resonated with me. He said, “If you can wait, and I recommend you wait.” Okay. So the temptation, another temptation that landlords have, because it’s the biggest pain in the neck is showing property, is dealing with prospective tenants, is declining people. So the temptation is to say, “Well, I’m not going to be at that strict. I’m going to let somebody in …” and I’m telling you it is trouble if you do that.

Spencer Sutton:
We know, trust me, we manage 4,200 houses around the country. We deal with thousands of prospective tenants. You cannot let your criteria down. You need to stick with it. And really showing houses and dealing with prospective tenants is the most tedious, time consuming and painful part of being a landlord. But if you can wait, and I recommend you do be very disciplined to your screening.

Curt Smith:
Yeah. It’s another story. I remote show. I have my contractors show, because a lot of my houses are more than an hour away. The painter, if there’s a truck out front, just knock on the door and go in. It’s being painted, don’t worry, the painter will let you in.

Spencer Sutton:
That’s good.

Curt Smith:
There’s another story, I intentionally show houses in poor condition during rehab. You know why? Because I want someone who doesn’t care about what color it is. They just want a good, safe house. I had someone ask, well, what color are you going to paint that deck? And I was heartbroke when they didn’t come back. And it took me two weeks to realize that was a blessing.

Spencer Sutton:
Yeah, that’s right. That’s right. They could have been all kind of trouble.

Curt Smith:
So I’m always showing houses and taking a reservation fee before flooring is in. Honest to God

Spencer Sutton:
All good information. Everybody, this has been another great episode with you. Curt I appreciate you sharing that information. Listen, if you follow his advice and do exactly what he’s talking about, realtor.com and zillow.com and be disciplined to the process, you will find deals. You’ll find deals in great areas. So thanks for that Kurt.

Spencer Sutton:
And again, like I mentioned before, you can get in touch with Kurt. You can reach him at 678-948-7151, if you want to text him or call him, ask him any kind of questions. And then [email protected] All right, this has been another episode. If you haven’t already subscribed, please do so. Leave us a review. We’d love to hear from you. And we will be back with another episode of the Atlanta Real Estate Investor Podcast.