March 23, 2026 | 2 Minute Read
We currently own almost 15 acres of land in Birmingham, just north of downtown about 10 miles in Center Point. Back in 2018, we purchased this land for almost nothing with the goal of building both a townhome and garden home development — both already fully zoned for this purpose.
We began planning the developments, but then the 2020 pandemic hit. Supplies, especially lumber, skyrocketed. Pre-pandemic, prices were typically around $300–$400 per thousand board feet, but by mid‑late 2020, they often ranged $600–$1,000 per mbf. At that point, we decided to put the project on pause. Today, lumber prices have cooled to the mid‑$500 range, making the cost more palatable and allowing us to resume planning with hopes of breaking ground in early 2027. Of course, economic factors always play a role, and with the ongoing war in Iran, the market landscape ten months from now is anyone’s guess.
Our Strategy: Build to Rent and Cash Flow
Our primary goal is to build cash-flowing rental properties. We plan to retain as many units free and clear as possible. One approach may be selling up to 75% to owner-occupants and using that cash to pay off the remaining rental units.
However, our projections account for a potential market downturn. Every unit must be financially sustainable as a rental if we hold it long-term. Development costs and design choices are being modeled to ensure each property can generate positive cash flow under different market conditions.
Why Townhomes Work for Investors
Townhomes maximize efficiency and profitability:
- Higher density: More units on the same land footprint than single-family homes.
- Lower per-unit land costs: Reduces acquisition costs and increases returns.
- Faster absorption: Lower price points attract buyers and renters, speeding up sales and occupancy.
Affordably priced townhomes appeal to both buyers and renters who want space and amenities but cannot afford a detached home. This combination supports strong margins and consistent cash flow.
Renter and Buyer Appeal
Modern townhome communities often include lifestyle-focused amenities.
Townhomes offer multiple floors, private entrances, and more living space than apartments, providing a balance between single-family living and affordability.
Investor Advantages
- Lower purchase prices: Easier to acquire cash-flowing properties even in expensive markets.
- Strong rental demand: Appeals to young professionals, small families, and those priced out of single-family homes.
- Reduced maintenance: Many communities include HOA services for landscaping and exterior upkeep.
- New construction benefits: Fewer immediate repairs and capital expenses.
- Short-term rental potential: The townhomes can generate short term rental income similar to or higher than comparable single-family homes.
HOA Considerations
Investors must evaluate HOA fees and restrictions carefully. Fees impact cash flow, and poorly managed associations can reduce property values. Short-term rental limitations may also exist, affecting potential Airbnb or VRBO strategies. But, since we will be the owners of the development, we will retain control.
Townhomes are increasingly attractive for us investors like us seeking cash-flowing rental properties. Their affordability, strong demand, and lower maintenance requirements make them ideal for the build-to-rent strategies.
By designing developments that can flex between sales and rentals, we can optimize returns and safeguard against market fluctuations.
I am very much looking forward to this project and we provide future articles as the planning unfolds.