The solution for many individual investors has been to seek out direct real estate investment opportunities in markets that are, in every way, the opposite of New York City luxury real estate.

A great example of this is the current "darling" of individual investors, Birmingham, Ala. Birmingham offers an extraordinary fundamental picture for real estate investors, including:

  • Strong supply of renovation-ready homes at very attractive prices
  • Overwhelming demand for rental property
  • Highly favorable net returns from cash flow
  • Low fixed expenses
  • Excellent housing voucher program for low-income properties

The numbers are very favorable to investors. An investor deploying $500,000 -- such as those who might choose to fund Extell's skyrscraper through the EB-5 program -- could realistically expect to acquire eight to 10 fully renovated turn-key rental properties, and to enjoy a net yield of 10%-plus from cash flows.

Furthermore, by using the Housing Voucher Program offered through the city of Birmingham, investors receive their rental payments directly from the government, so rents are always paid on time and in full.

While it does appear that the new housing market faces strong headwinds, there continues to be extraordinary opportunity for savvy investors in strategic markets throughout the U.S., such as the one in Birmingham.

This article is commentary by an independent contributor. At the time of publication, the author held no positions in the stocks mentioned in his self-directed IRA or in his hedge fund. Projects in this article are based on analysis of past transactions and are not a prediction of future results.

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