3827 40th Ave N

Birmingham, AL 35217

$95,000B+

4 bd · 2.0 ba · 1,974 sqft · Built 1920 · MultiFamily · Pending · 111 DOM

Cashflow @ list (25.0% down · 7.5%)

• Estimated rent: $1,996/mo
• Mortgage (P&I): −$498
• Tax + insurance: −$177
• HOA: −$0
• Vac / Maint / Mgmt: −$419
• Net cashflow: $902/mo
• Annual: $10,819/yr
• Cap rate: 17.68%
• Cash-on-cash: 40.67%
• DSCR: 2.81
• 1% rule: 2.10%
• Cash to close: $26,600

Investor read

• This is a 2 × 2-bed/1-bath units multifamily listed at $95k.
• At list price, monthly cash flow is $902 ($11k/yr) — positive. Per door: $451/mo.
• The deal already cash-flows at list — no discount required.
• Meets the 1% rule at list price ($2k rent vs $95k).
• It's been on market 111 days — a 9% lower offer ($86k) is reasonable based on typical stale-listing flexibility.
• Recommended offer: $86k (9.0% below list) — sets the bar for market timing.
• Local home prices are declining (-3.0%/yr); year-one equity from $657 of loan paydown is wiped out by about $3k of value loss. Plan a longer hold.
• Location reads 67/100 on livability (#78 in AL) — a middle-class / working-renter tenant base. Strengths: commute A+, cost of living A+, housing A+; Watch: amenities C-, schools F, crime F.
• Birmingham City (urban): math 4% / reading 20% proficiency, ranked #116 of 129 in AL (top 90%) — low school quality limits family demand, transient renter base, plan for 1-2y turnover; 82% free/reduced lunch — lower-income household profile, screen leases tightly.
• Watch-outs: built in 1920 — expect roof / HVAC / electrical / plumbing capex.
• Market conditions: Rents rising (+3.6%/yr); 94 active listings in the ZIP; 22 comparable units currently listed for rent nearby; rentals lingering (median 44d on market — plan ~5-8 weeks vacancy on turnover, expect pricing pressure); 50% of comp listings sitting > 30 days — soft ceiling on asking rent; lower-income renter base — watch delinquency; 2,114 units permitted in Jefferson County in 2024 (556 in 5+ unit buildings).
• Jefferson County population projected to shrink 4% by 2050 — rents likely to lag national; underwrite the cash flow, not the appreciation.
• 6 sale attempts since 9y ago; this cycle's ask has dropped $25k (21%) from the opening price — seller is motivated, your offer sets the floor, not the list.
• At projected returns (-3.0% appreciation + 3.6% rent growth), your $27k cash investment doubles in ~3 years — after that, you're playing with house money.
• Climate carrying-cost: major wind risk, 27% chance of damaging wind over 30y; extreme-heat days projected 7→20/yr by 2055 (HVAC capex compounding) — expect insurance premiums to compound above CPI over the hold.
• Cap rate 17.7% vs local median 6.2% in Birmingham — top-decile yield for the area; either an underpriced asset or a hidden risk that comps aren't pricing in. Stress-test before assuming the spread holds.
• At $1,996/mo this rent would consume 59% of the median local household income ($40k/yr) (locally 594% of renters already pay >50% of income on rent) — very limited rent-growth headroom before tenants either downsize or default.

Questions for listing agent

• It's been on market 111 days. Have you received any prior offers? Is the seller open to a 9% concession, seller financing, or rate buy-down credit?
• Can we see the unit-by-unit rent roll, current vacancy, and any below-market leases? What's the average tenancy length?
• What capital expenditures (roof, boiler, parking lot, exteriors) have been made in the last 5 years, and what's planned in the next 2?
• Built in 1920 — when were the roof, HVAC, electrical panel, plumbing, and water heater last replaced?
• Why hasn't it sold? Are there any deal-killer items the seller is aware of (foundation, flood, title, zoning, code violations)?
• Is there a deadline driving the sale (1031 exchange, divorce, estate, relocation)? That informs how much negotiation room exists.
• Schools are F-rated, which usually means shorter tenancies and higher turnover. Who's the typical renter profile here, and what's been the actual vacancy rate?
• Crime grade is F in this area — have there been break-ins, vandalism, or insurance claims at this property in the last 3 years? What carrier currently insures it and at what premium?