How and Where to Invest in Birmingham, Alabama
With Investor-Friendly Agents all over the United States, Evernest has come a long way since starting out as a small local property manager in Birmingham in 2008. Over the last eighteen years we’ve opened up shop in Florida, California and everywhere in between, but no matter where we go or how much we grow, local passion and pride are essential to our philosophy. Here at company headquarters, we haven’t lost a bit of that when it comes to our hometown.
We’re not just sentimental or biased- Birmingham is called the Magic City for a reason! And if you’re a real estate investor, this mid-size metro in the Appalachian foothills has truly limitless potential. Prices are affordable, value-add opportunities abound, and rental demand is strong.
However, there is a catch: Birmingham is a street-to-street market.
Birmingham’s history, topography, and diversity have created a real estate landscape that rewards those who know it intimately and punishes those who don’t. It’s a city of hills and cul-de-sacs, 1920s streets next to brand new developments, and micro-neighborhoods that change dramatically from block to block. A seemingly similar house one street over renting for X amount of dollars may tell you something about the property you’ve got your eye on, but it just as easily may not. If there were ever a place that proved having boots on the ground is the key to success in real estate, it’s Birmingham.
In this post, we’ll walk through how to think about different types of neighborhoods, highlight some of the best areas to invest in, and teach you how to avoid the biggest mistakes investors make when they buy from out of town. We can’t convey every nuance of this unique city in a single blog, but by the end you should have a much better grasp on how to approach the market in Birmingham.
The ABC’s (and D’s) of Neighborhoods
Since Birmingham is such a tricky place for investors who aren’t in the know, it can be tough to know where to start.
We find it’s best to pinpoint what your goals are first and foremost, and then narrow down your search to neighborhoods that align with them. There are roughly four different types or ‘classes’ of neighborhood in Birmingham, and which one is right for you depends on what you’re trying to achieve. Some are where you go to buy safe, appreciable assets to park your money in, and others are where you look if you’re trying to net strong monthly profits right out of the gates.
Here is the breakdown of each class of neighborhood and what they have to offer:
A-Class: Top of the Top
A-class neighborhoods are the most affluent and expensive. They offer exceptional quality of life and housing in these areas is highly sought-after. Investors who buy in these neighborhoods enjoy lots of stability, as appreciation and re-sale prospects tend to be very strong. If you’re simply looking for a safe place to park your wealth, this type of neighborhood will definitely fit the bill.
However, A-class can also pose some big challenges. The pool of renters is smaller and initial investment and overhead costs are much higher, so those with immediate need for cash flow are likely to struggle.
B-Class: Upper Middle Class
B-class neighborhoods are one step below the very top. They tend to offer good schools and stable communities with high rates of homeownership, which makes them particularly attractive to families and high-earners.
B-class is often the sweet spot for investors who want fewer headaches, better resident profiles, and solid long-term performance. Cash flow generally isn’t huge on day one, but over time these properties really pay off.
C-Class: Working Class Neighborhoods
C-class neighborhoods are where you’ll find quality affordable housing. Rental demand in these areas tends to be particularly strong.
C-class neighborhoods are where a lot of smart buy-and-hold investors focus. These are the places where you can find discounted properties with great value-add opportunities and a wide tenant pool. If cash flow and reliable occupancy is what you’re after, C-Class is where you’ll want to look. However, this is also where the “street-to-street” factor really starts to set in, so you need to be careful.
D-Class: The Danger Zone for Investors
D-class areas are the roughest parts of town. These are the areas with high crime and low community investment. They’re where the spreadsheets look amazing, but reality usually turns out to be quite the opposite.
This is where we see investors get burned by trusting comps pulled from the wrong side of the tracks, believing in “up-and-coming” narratives that don’t pan out, and buying houses sight-unseen.
It is possible for neighborhoods to change, but it takes concerted effort, a lot of resources, and a significant amount of time to turn an area around. You’re much more likely to have them vandalized, broken into, and/or languishing unoccupied forever. Unless you’re an experienced local investor, it’s best to steer clear of D-class neighborhoods.
The Best Neighborhoods in Birmingham for Investors
So, what are some examples of A, B, and C-class neighborhoods that are good for investors? Here are some of our favorites:
Crestwood South
A-Class
Location
Approximately 15 minutes east of downtown.
Types of properties available
Most of the properties in Crestwood South are high end, single-family homes. Given its distance from central Birmingham, the lot and home sizes tend to be bigger and more on par with traditional suburban areas.
Rental profile
Young professionals and people with families looking for larger properties.
Why residents love it
As it falls near the outskirts of Birmingham, Crestwood South is closer to the green spaces that surround the city. With only an 11-minute drive to Mount Ruffner and a 20-minute drive to Lake Purdy, residents of Crestwood South have great access to not only the entertainment of the city center, but also the great outdoors.
Why it’s great for investors
Many of the residents in this neighborhood own their homes, making it the ideal location for an investor looking to renovate and resell. Renters also love this neighborhood, so it’s a solid buy and hold option as well, even if the profit margins aren’t as big as they might be in B and C areas.
Highland Park
B-Class
Location
The western side of the city, roughly nine minutes away from the city center.
Types of properties available
Highland Park is almost entirely composed of single-family homes, with a few newly developed apartment buildings mixed in. Most of the properties are historic-style homes, some of which have been recently renovated and others that are perfect for an investor in search of a fixer-upper.
Renter profile
Families and professionals who want a short commute to the city. There is also a large student population thanks to its proximity to the University of Alabama Birmingham.
Why residents love it
With plenty of bars, restaurants, and coffee shops, Highland Park is an excellent area for residents who like their circle nearby while still retaining access to the city. Its convenient location makes it an ideal fit for those who work in the city center. This neighborhood is in close proximity to many of Birmingham’s parks, as well as the expansive Highland Park golf course. It’s also a short drive away from the University of Alabama Birmingham.
Why it’s great for investors
Despite being a B-class neighborhood, the large number of historic homes means that many are priced below average for the city of Birmingham, making it a great place to find value-add opportunities with strong appreciation potential. It is also regarded as one of the most developed suburbs in Birmingham and most residents rent their homes.
Forest Park
A-class
Location
About ten minutes east of the city center, close to Crestwood South.
Types of properties available
Forest Park is mostly single-family houses with a few small apartment buildings mixed in. Many of the properties are well-maintained historic homes.
Renter profile
This is one of Birmingham’s most affluent neighborhoods and very popular with white collar professionals and families.
Why residents love it
Forest Park offers access to many shops, bars, and restaurants while still maintaining the larger property sizes of a more suburban area. There’s also great access to parks for residents ready to get outside in addition to its close proximity to the city.
Why it’s great for investors
There are plenty of young professionals that choose to live in Forest Park due to all of its convenient amenities as well as its proximity to the city, so while the area is very sought after, most residents rent their homes. There are also lots of well-maintained older homes, making it easier to find properties that don’t require a ton of work to become rent-ready. Plus, there is a surprisingly wide range of price points, so investors can usually find a property within their budget that will hold its value and have great appreciation potential.
Homewood
A-class
Location
Six miles south of the city center.
Since it is located outside of the city center it offers all the benefits of the suburbs, with crime rates that are lower-than-typical, and some of the best schools in the area. Essentially, properties in Homewood are sure to hold their value.
What types of properties are available?
Homewood is entirely made up of A-Class, single-family homes, many with large lots and spacious yards, which are perfect for residents with families or those looking for a little more space.
There is a wide range of property prices across the city of Homewood, so there’s room for any investor to find the perfect fit for their needs. Similar to Forest Park, the high-end properties keep the neighborhood value up, protecting your investment.
What other benefits are there?
The greatest benefit of living in Homewood is the school district. Jefferson County schools, and specifically the schools in Homewood, are regarded as some of the best the Birmingham area has to offer, and are a huge selling point for families looking to relocate.
Like other areas in the city, Homewood is notable for its access to parks and greenspaces, as well as large shopping centers such as The Summit.
East Pinson Valley
The final neighborhood on our list is East Pinson Valley, located 20 minutes north east of Birmingham’s city center.
This neighborhood is one of the best areas for new investors. That’s because the low property prices make it an easy area to buy into, signaling a great fit whether your plan is to flip or rent.
The area is quite rural, great for residents who are looking to get out of the city, while still maintaining better-than-average schools for the area, making it a good fit for families.
What types of properties are available?
The properties here are primarily C-class, meaning great ROI if you’re willing to put in the work. Given that the area is rural, the home sizes are bigger than average while still maintaining a low price point. This means that they also make for excellent fixer properties.
Many of the homes are well over 2,000 square feet and come with plenty of land, if you’re looking to build a mother-in-law suite, or accessory dwelling unit (ADU), for additional income.
What other benefits are there?
East Pinson Valley is one of the most diverse areas in Birmingham, and is also one of the closest neighborhoods to Birmingham-Shuttlesworth International Airport.
Like most areas on the outskirts of the city, EPV has access to many parks and green spaces, such as Cosby Lake and Jefferson State Community Park. While the biggest driving factor for residents is definitely the rural feel, you’re never too far from the conveniences of the city
The East Lake Example: Why You Can’t Generalize
East Lake is a perfect example of why Birmingham requires specificity and local insight.
Some parts of East Lake (especially higher numbered streets and those closer to Ruffner Mountain) have seen strong renovations and real appreciation. Meanwhile, other parts are still very rough.
That’s why, if someone says to “invest in East Lake,” it could be good advice or bad. It all depends on which side of the lake they’re talking about, which street, and which pocket.
In Birmingham, broad labels can get you in trouble. Even individual neighborhoods have their own submarkets that can vary drastically from one street to the next.
The Best Advice We Can Give Investors in Birmingham
If you’re buying in Birmingham—especially if you’re not local—here are the rules we’d follow:
1) Don’t buy anything without a second opinion
If everyone is telling you it’s a great deal and nobody is pointing out risks, that’s a red flag. Speak to a local investor who will give you the real scoop.
2) Don’t trust a spreadsheet more than a street
If you haven’t visited an area yourself, you simply can’t interpret the numbers on the page. Whether they indicate a great opportunity or a lost cause can only be determined by seeing the neighborhood for yourself.
3) Avoid half-renovated projects unless you are local
Half-gutted houses that need permits or takeover permits are some of the hardest properties to sell.
4) Leave yourself an exit strategy
Even if things go sideways, you want enough margin to sell and at least break even. Always have a Plan B.
5) When in doubt, stick to B-class
If you want stability and predictability, B-class neighborhoods are usually the safest lane, especially for out-of-state investors.
Birmingham Rule #1: Street > Spreadsheet
The most important thing to know before investing in Birmingham is that the streets will tell you everything and spreadsheets will tell you very little.
Birmingham is a city where a lot of out-of-state investors from high-price markets come searching for cash flow. They see the comparatively low prices and get lulled into thinking that they equal low risk, so they blindly trust what they see on paper.
It usually looks like this:
- Buy for $50K
- Put $20K–$25K into it
- Rent for $950–$1,000
- Buy multiple houses
It’s easy to see why someone from a market where 3-bed bungalows go for $900K might see this as a fool proof plan, but the problem with spreadsheets is that they only show theoretical numbers and not real risk factors. There are plenty of great areas in Birmingham, but there are also plenty of others where investors routinely face issues such as vandalism during vacancy, unpredictable turnover, difficulty finding qualified tenants, expensive rehab surprises, and the brutal reality that some houses just aren’t rentable. When that happens, those supposedly low-risk, high cash flow investments reveal themselves to be money pits that are almost impossible to sell.
In other words, the original numbers you saw on the spreadsheet quickly become obsolete when you buy in the wrong neighborhood. To keep the ink in your ledger black, you must see the house and the street for yourself, or at least send out someone you trust to have a look.
The Bottom Line
Birmingham can be an incredible market for investors, but only if they know their stuff.
If you’re looking to invest in Birmingham and want help narrowing down neighborhoods, evaluating deals, or getting a realistic picture of what’s rentable (and what’s not), the right local guidance can save you months of stress and a lot of money. Connect with an Evernest Investor-Friendly Agent to talk strategy, neighborhoods, and next steps.
