12 Replies

hey guys!

I read the great book, "Who Not How", recently, and in respect to the wisdom of the book I'm landing right here to ask this question!

Memphis, TN, seems very appealing for a remote rental investment territory.  I've noticed MANY neighborhoods where houses can be bought sub-$20k. But, a quick drive down the google street view and it looks like everybody is either working from the sidewalk or inspecting the patios for signs of rot.  Obviously this turns around any thoughts of considering these regions, but I do notice that there are a handful of zones where you can spend maybe around $40k or $50k and the next street over is starting to find 6 digit homes being listed.

My question here is what would you say the best neighborhoods are, for a BRRRR investor? I have about $10-15k to put down on a property of my own, and another $10k from a partner. I'll be holding mine as a rental but flipping the house with the partner for an equity split. It doesn't have to be IN Memphis either, mostly just commuting distance.

Do any of you guys/gals have property management and/or realtors that you recommend?  I'll absolutely give them a call and if you like I can drop your name as well as the reference.  

Thank you for any info and hope your 2021's are off to a good start!

You want to learn about classes of neighborhoods.

Those sub-$20 houses are D-class and you want to avoid them like the plague. If you are a long-distance investor, you're unlikely to find a property manager to handle them for you. These homes can make good money but they are very hands-on, will have a lot more turnover, more evictions, more damages. I recommend you read "Evicted" by Matthew Desmond to get an idea of what it's like to invest in a D-class neighorhood. 

C-class can be tricky. Good cash flow but it still requires more work and will have more issues. I manage and own some of these and the cash flow is nice, but the definitely take more of my time and effort.

B-class is your sweet spot. Blue-collar workers with families that tend to stick around for a while.

A-class may be your best for appreciation and with fewer problems but it's more expensive to get into the market, won't cash flow as well, and may sit vacant longer while you wait for the white-collar worker to come along.

your heading for financial suicide thinking of 20 to 40k remote flips in the midwest.  

Nathan thank you for that!  And I'm going to download that book right now and give it a listen that's great advice!

And Jay thanks for you input as well, can you elaborate for me?  Have you had experience or seen others do this?  

Hi Brendan, I have been studying the Memphis market since May 2020 and what I've learnt is that each zip code vary street by street. I've also listened to Crest Core podcast, they have 2 episodes talking about the zip codes and giving an overview of each.

@Kenneth Williams I just met and he can share with you a zip code guide. I started using that to compare with the guide that I have. I can share with you as well.

Another thing I would suggest, (I'm finally understanding the benefit of this now) make realtor, Redfin and trulia your best friend. Just go on the MLS, type in Memphis and view properties to see what they are being listed for. Redfin has an option where you can filter your search for properties last sold so you can do a comparison. Then, start analyzing them using the BRRRR calculator. It doesn't matter if your numbers aren't correct right now, but try to understand which numbers affect what so you know how to make adjustments. For rent, use rentometer and if you finish your free trial, use zillow.

You can also reach out to @Stephen Akindona he has been super helpful. He has a team and can manage your renovations as well.

Shoot me a private message if you have any questions. Rookies helping each other out.

You have received great advice above. 

I am in the area and have worked all over Memphis.

If you send me the number and street, I may be able to give you input.  Some streets here change by the block as to issues.

I'm not familiar enough with Memphis to make recommendations. I just know you have to be careful because you get what you pay for down there. You need someone that really knows the market and very specific communities. Have you read Long Distance Real Estate Investing by David Greene? He has good advice about finding the right experts.

Originally posted by @Hassan Mahmood :

Hi @Nathan G. , what neighborhoods/zip codes do you recommend for A & B-Class properties in Memphis? What price point would they be in? And do you have any brokers you recommend speaking to? Thanks

Hi Hassan, I see you are making your first posts in a while on here.  Welcome to the conversation and best of luck as you get going here.

I am pointing these comments not just to you, but to everyone reading this.  @Brendanan Lawrence If you want to have long-term success buying from out of state, you have to stop using the A,B,C class discussions about houses and neighborhoods. Investors run the very real risk of getting burned badly when they use these very rudimentary classifications.  The reason being - a seller will tell you whatever you want to hear about a neighborhood to give you confidence that it is higher up the classifications than it really is.  

Investors have to pay attention to the median home value, the median income and the median rent although that last number is the hardest to get good quality data on.  The arbitrary ways of describing a neighborhood create false senses of security for out-of-state investors and make it much easier for sellers to over come buyers obstacles.  Buyers really need to be better educated.  If you are buying homes in the bottom 10-20% of value in a city and expecting to have a positive experience- especially from a distance, in most scenarios investors are going to be disappointed.  

Memphis is absolutely a city where out of state investors lose money and get taken advantage of - especially at lower price points - every single week.  There are some very good people who work with out of state buyers and try to help them, but many buyers have poor expectations from the beginning.  Too often, investors think a property in the bottom 10-20% of value is a "C" area because someone they connected with told them that was case. The reality is, these price points are often avoided by many local investors because of the crazy amount of risk and the high level of work that has to be done to make these successful.  I personally know several investors who do great at the lowest price points in Memphis, but they live here and are in these neighborhoods and by their houses daily if not weekly.  It takes hard work and is often very hands on.  It is tough for a management company to offer this kind of service to a passive, out of state investor.  Do your due diligence and dig deep on these super low prices and go in with your eyes wide open.