The 5 Best Places to Buy Rental Property in Alabama

By Brittany McGhee

Posted on July 5th, 2022

Birmingham | Huntsville | Montgomery | Mobile | Tuscaloosa

Photo of Birmingham

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In 2022, the median U.S. home value is $428,700 — more than double what you'd pay in Alabama, where the median home value is just $202,984. With relatively affordable home prices and steadily rising values, Alabama is one of the best states to invest in real estate.

To find the best markets for investment opportunities, we evaluated Alabama’s five most populous cities according to four main criteria:

  • Affordability
  • Investment potential
  • Rental rates
  • Amenities

To assess affordability and investment potential, we used data from the Zillow Home Value Index to compare current home values in each city to the national average, as well as how home values have changed since 2015. Current rental rates are from Zillow rental market trend data, based on the median rent for a two-bedroom apartment.

If one of the cities on our list catches your eye, we recommend connecting with a well-connected local real estate agent. Our friends at Clever Real Estate offer a free, no-obligation agent matching service that will introduce you to the best Alabama real estate agents from Keller Williams, RE/MAX, and other nationally-known brokers. You can meet as many agents as you like until you find the best one to advise you on your real estate investment journey!

Best of all, Clever provides up to 0.5% cash back after closing — just for finding a great agent through their free service. If you purchase a home in Alabama's median price range, that's up to $1,000 back in your pocket!

👋 Contact Clever's licensed concierge team to meet top-rated real estate agents in Alabama today!

1. The Best Place to Buy Rental Property in Alabama: Birmingham

With 1.1 million residents, Birmingham’s metro area is the most populous in the state by far. It’s twice the size of Alabama’s second-largest metro area, Huntsville. The population of the city itself is just 200,733, and much of the growth in the area has been in the suburbs surrounding the city in recent years.

A typical single-family home in Birmingham costs around $103,431 — but home values have climbed 86% since 2015, suggesting impressive appreciation. Meanwhile, rent is relatively pricey. The median rent for a two-bedroom apartment is $1,003 per month.

Birmingham ranks among the top 100 best places to live in the U.S. — and it's poised for future growth, thanks to its status as Alabama’s largest economic center. Regions Financial Corporation and Blue Cross Blue Shield of Alabama are both headquartered there, and the Magic City has no shortage of art, theater, music, and events. It's also home to the Birmingham Civil Rights Institute and The University of Alabama at Birmingham, which has over 22,000 students.

2. Huntsville

Huntsville's fast-growing technology and manufacturing sectors have drawn an influx of new residents. Its population has risen nearly 15%since 2010, suggesting a growing number of renters in search of apartments, townhouses, and single-family homes.

For potential investors, Huntsville offers affordability, rising home values, and attractively high rents. The typical home value in Huntsville is $273,648 — the highest home value on this list. (Though it’s still nearly $64,000 less than the national average!) Home values have soared in recent years, rising 85% since 2015.

The median rent for a two-bedroom apartment in Huntsville is currently $1,035 per month, which is the highest of Alabama's five biggest cities.

Nicknamed Rocket City, Huntsville is a space industry hub that's home to Alabama’s most popular tourist attraction, the U.S. Space & Rocket Center. The Huntsville Botanical Garden and the University of Alabama in Huntsville also draw people to the city.

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3. Montgomery

Montgomery holds the impressive distinction of being the third-best place to live in America, according to U.S. News and World Report. Alabama's capital city is known for its sizable military community of over 12,500 people — due in part to the presence of Maxwell Air Force Base. It also has a fairly large student population due to nearby colleges, including Auburn University at Montgomery and Alabama State University.

Montgomery’s typical home values have climbed 40% since 2015, up to $127,030 today. That’s $210,530 lower than the national average, making the city very accessible for rental property investors. Although the median rent for a two-bedroom apartment ($820) is lower than other cities on this list, keep in mind that your costs will be lower, too.

Montgomery's history and culture are unparalleled, with internationally recognized museums and historical sites including the Civil Rights Memorial Center, Freedom Rides Museum, and the Rosa Parks Museum at Troy University.

4. Mobile

Mobile is one of the South’s best hidden gems for beachfront real estate. Located on the Gulf Coast of Alabama, Mobile is the state’s only port city. The maritime industry employs many Mobile residents, with manufacturing, aerospace, and healthcare close behind.

The typical home value in Mobile is currently $175,447 — approximately $162,000 less than the national average. While it's comparatively affordable to purchase a rental property in Mobile, home values have appreciated an impressive 64% since 2015. For a two-bedroom apartment, the median rent in Mobile is $886.

Mobile happens to be the rainiest city in the U.S., which keeps its average temperature at a comfortable 72 degrees. Drizzles don't keep Mobile residents inside, though — the city hosts unique events such as the Alabama Pecan Festival, attracting tourists in droves.

5. Tuscaloosa

The University of Alabama puts small but mighty Tuscaloosa on the map as a great place to invest. With more than 38,000 enrolled students, demand for rentals is very consistent.

The average two-bedroom apartment goes for $911, which adds up to nearly $11,000 in annual income before expenses. If you're more interested in renting out single-family homes — but can't afford to buy into other markets — the typical home value in Tuscaloosa is $205,101 (more than $132,000 less than the typical U.S. home value). Home values have steadily risen, gaining 36% since 2015.

Located just an hour outside of Birmingham, this college town is a vibrant place to live. Fun activities in Tuscaloosa include attending college football games (Roll Tide!), taking a walk on the Tuscaloosa Riverwalk or Capitol Park, or checking out local restaurants and live music venues.

Next Steps for Your Rental Property Investment

From Birmingham's family-friendly suburbs to Montgomery's internationally-recognized cultural attractions, Alabama is a great state for real estate investment opportunities.

If you're exploring places to buy rental property in Alabama, the first step is connecting with local real estate agents. Realtors can provide perspective on promising rental property opportunities, up-and-coming markets, and more.

Our friends at Clever Real Estate make it simple to find Alabama's best real estate agents. Their licensed concierge team can learn about your goals and help you take your investment journey to the next level, with free, personalized introductions to local real estate experts. There's no risk or downside to starting your research with Clever — there's zero obligation or hidden fees.

Best of all, real estate investors who find an agent through Clever can easily take advantage of Alabama's buyer rebate opportunities. You can receive up to 0.5% cash back at closing, which you can use to offset closing costs, get your new property ready for renters, or simply enjoy as extra money in your pocket.

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FAQs

What is the best place to buy rental property in Alabama?

Birmingham is the best place to buy rental property in Alabama, followed by Huntsville and Montgomery. Learn how population growth, job opportunities, and home values impact rental property investments.

Is rental property a good investment?

In general, rental property is considered a sound investment, but a rental property's success or failure depends on both local market conditions and business strategy. Learn how to spot good investment opportunities — and save time, energy, and money — before buying a rental property in Alabama.

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Posted in Buying a House, Real Estate Investing