Birmingham, Alabama
Multifamily & Residential Property Strategy
Targeting Undervalued Assets for Upgrade
At Sousta Real Estate Advisors, our strategy focuses on purchasing multifamily properties in Birmingham that are underperforming due to poor management or deferred maintenance and upgrading them to significantly boost both rental income and asset value. This approach is well-aligned with Birmingham’s economic growth, where demand for high-quality, affordable housing is on the rise. By targeting properties that require substantial renovations, we unlock value through capital improvements, driving both immediate cash flow and long-term appreciation.
Market Trends & Opportunities
The Birmingham MSA is undergoing a significant multifamily construction boom, with over 2,100 units expected to be delivered soon. Though vacancy rates are currently higher at 11.3%, this provides an opportunity to acquire underperforming properties at a discount. Rent growth has been relatively flat (-0.1% over the past year), but units with modern amenities and enhanced community appeal will attract higher rents as the market stabilizes.
Projects such as Mountain Woods and Park at Rocky Ridge recently underwent renovations that increased rental income. We aim to replicate this success by acquiring properties with similar potential for value appreciation through capital improvements.
Case Study: 1601 E. McKinney, Denton, Texas
We successfully applied this approach in Denton, Texas, where we acquired a 308-unit property for $13.3M with 20% vacancy. After investing $1M in capital improvements, we raised rents, improved occupancy, and sold the property for $25.5M. We aim to replicate these results in Birmingham by targeting properties that are ripe for significant upgrades and enhanced asset value.
Potential for Tokenization
In addition to our traditional value-add strategy, there is potential for tokenization on some of the properties we acquire. Blockchain-based tokenization could allow fractional ownership in select properties, providing smaller investors with access to real estate opportunities typically reserved for larger players. Tokenization could also offer enhanced liquidity and transparency, making it easier for investors to buy, sell, or trade their stakes in a property. While we are evaluating which properties may be suitable for tokenization, this innovative approach could open the door for new types of investors to participate in Birmingham’s multifamily market.
Community Enhancement
A cornerstone of our strategy is community enhancement. Beyond improving the physical assets, our focus is on creating vibrant, thriving neighborhoods. We aim to improve not only the properties but also the overall tenant experience by offering modern amenities and fostering safe, welcoming environments. This community-centric approach increases tenant satisfaction and retention, while also positively impacting the surrounding area, benefiting both local businesses and long-term property value.
Strategic Focus Areas
1. Undervalued Properties in Emerging Markets: Focus on acquiring properties in Birmingham’s secondary and tertiary neighborhoods where there is room for rental growth and improvement.
2. Capital Improvements: Renovate units, enhance amenities, and upgrade management practices to elevate rental rates and asset value.
3. Potential for Tokenization: Leverage blockchain technology selectively, allowing fractional ownership for investors in applicable properties, which could increase liquidity and broaden access to real estate investment.
4. Community-Centric Investment: Focus on enhancing neighborhoods by improving tenant living conditions, creating safe environments, and supporting local growth through high-quality housing.
Long-Term Growth Projections
Birmingham’s economic growth, supported by major employers like UAB and new corporate investments , will continue to drive demand for high-quality housing. Over the next 3 to 7 years, we anticipate that rental growth will increase as more residents are drawn to the region for employment and new business opportunities. By focusing on undervalued properties needing significant upgrades, combined with the potential for tokenization and a community-centric approach, Sousta Real Estate Advisors is well-positioned to maximize returns while positively impacting Birmingham’s neighborhoods.
By balancing value-add property improvements with innovative financing options like tokenization, Sousta Real Estate Advisors will continue leading in creating sustainable communities and delivering strong returns for investors.
Birmingham, Alabama, presents a wealth of opportunities for real estate investors, particularly those interested in leveraging the benefits of investing in undervalued and distressed assets. The city’s vibrant economy, the presence of Historically Black Colleges and Universities (HBCUs), and its growing status as an in-migration destination make it a prime location for value-add investments. Here are some key reasons why investing in Birmingham is a smart decision:
Presence of HBCUs
Birmingham is home to several prominent HBCUs, including Miles College and Lawson State Community College. These institutions attract a steady influx of students, faculty, and staff, creating a consistent demand for quality housing. Investing in residential properties near these campuses can provide a stable and lucrative rental market. Students and staff seek safe, comfortable, and modern living spaces, and investors who can meet this demand stand to benefit significantly.
Moreover, the presence of HBCUs contributes to the city’s cultural and economic vibrancy. These institutions often serve as hubs for community engagement, research, and innovation, attracting additional investments and fostering economic growth. By investing in properties around HBCUs, investors can support these vital institutions while also enjoying the financial benefits of a thriving rental market.
Opportunity to Purchase Undervalued and Distressed Assets
One of Birmingham’s most attractive features for investors is the availability of undervalued and distressed assets. The city’s real estate market includes numerous properties that, with the right improvements, can be transformed into valuable assets. This presents a unique opportunity for value-add investments, where investors can purchase properties at lower prices, renovate or upgrade them, and significantly increase their value and rental income.
Value-add investments in Birmingham can include a variety of property types, from single-family homes to multi-family apartment complexes and commercial spaces. The key to success in this market is identifying properties with strong potential for improvement and implementing strategic renovations that enhance their appeal and functionality. This approach not only increases property values but also contributes to neighborhood revitalization and community development.
Vibrant Economy
Birmingham boasts a diverse and growing economy, which is another compelling reason to invest in the city’s real estate market. Historically known as a center for iron and steel production, Birmingham has evolved into a modern economic hub with strengths in healthcare, finance, education, and technology. The presence of major employers such as the University of Alabama at Birmingham (UAB), Regions Financial Corporation, and a burgeoning tech scene provide a strong economic foundation and a steady demand for housing.
The city’s healthcare sector, anchored by UAB and its medical center, is particularly robust. As one of the largest academic medical centers in the country, UAB attracts healthcare professionals, researchers, and students from around the world. This influx of highly skilled individuals creates a constant need for quality housing, making Birmingham an ideal market for real estate investors.
In addition to healthcare, Birmingham’s finance and tech sectors are growing rapidly. The city is home to several major banks and financial institutions, as well as a growing number of tech startups and innovation centers. This economic diversification ensures a resilient local economy and offers multiple avenues for investment.
In-Migration Destination
Birmingham is increasingly becoming an in-migration destination, attracting new residents from various parts of the country. According to recent data, the Birmingham-Hoover metropolitan area experienced a net in-migration of over 5,000 people between 2020 and 2021. This trend is driven by Birmingham’s affordable cost of living, vibrant job market, and high quality of life. Young professionals, families, and retirees are moving to Birmingham for its economic opportunities, cultural amenities, and overall lifestyle benefits.
This influx of new residents boosts demand for housing, making Birmingham an attractive market for real estate investors. The growing population creates a need for more rental properties and homeownership options, providing investors with a steady stream of potential tenants and buyers.
Community Revitalization and Quality of Life
Investing in Birmingham’s real estate market also offers the chance to contribute to community revitalization and improve the quality of life for residents. Many neighborhoods in Birmingham are undergoing revitalization efforts, with new developments and renovations breathing new life into previously distressed areas. By investing in these neighborhoods, real estate investors can play a crucial role in this transformation, creating safer, more attractive, and more vibrant communities.
Improving housing quality and availability can have far-reaching benefits for Birmingham residents. Upgraded properties provide better living conditions, reduce crime rates, and increase property values, leading to a higher quality of life. These improvements can also attract new businesses and services to the area, further enhancing the community’s appeal and economic prospects.
Strategic Location and Connectivity
Birmingham’s strategic location in the southeastern United States is another advantage for investors. The city is well-connected by major highways, railroads, and an international airport, making it an accessible and attractive destination for businesses and residents alike. This connectivity supports economic growth and facilitates the movement of goods and people, further strengthening the local real estate market.
Additionally, Birmingham’s affordable cost of living compared to other major U.S. cities makes it an appealing choice for young professionals, families, and retirees. The combination of affordable housing, a vibrant economy, and a high quality of life positions Birmingham as an increasingly attractive destination for both residents and investors.