Buying in Memphis or Birmingham

29 Replies

Hi,

I am quite new on BP.

I am a french citizen living in France, in the Paris area. Last year, I created a Georgia corp. that bought two houses in Atlanta (80 000 $ each). Now I plan to use this corp. to make further investments. As I am far away, I intend this time to use turnkey companies (I plan to go to the States once a year maximum). For now I intend to pay cash because it seems too expensive to borrow in the States for a foreigner. (I look in France but it’s not so easy either because if I give a stock portofolio as a warranty, it has to be twice in value of what I borrow). In any case I intend to put around 200 000$ in cash. So I have several questions:

I investigate Memphis and maybe Birningham which are not too far from Atlanta and have a good rent to buy ratio. The drawback I see, is a decrease in population since 2 000 in those cities and a high crime rate. All depends of course of the area in which you are investing. Is investing there a good idea ?

With a 200 000 $ budget, should I buy two houses 100 000$ each or three houses 66 000 $ each?

Be sure I will appreciate your comments

Originally posted by @Jean Paul Rousseau:

Hi,

I am quite new on BP.

I am a french citizen living in France, in the Paris area. Last year, I created a Georgia corp. that bought two houses in Atlanta (80 000 $ each). Now I plan to use this corp. to make further investments. As I am far away, I intend this time to use turnkey companies (I plan to go to the States once a year maximum). For now I intend to pay cash because it seems too expensive to borrow in the States for a foreigner. (I look in France but it’s not so easy either because if I give a stock portofolio as a warranty, it has to be twice in value of what I borrow). In any case I intend to put around 200 000$ in cash. So I have several questions:

I investigate Memphis and maybe Birningham which are not too far from Atlanta and have a good rent to buy ratio. The drawback I see, is a decrease in population since 2 000 in those cities and a high crime rate. All depends of course of the area in which you are investing. Is investing there a good idea ?

With a 200 000 $ budget, should I buy two houses 100 000$ each or three houses 66 000 $ each?

Be sure I will appreciate your comments

Hi Jean,

Its great to have an investor from France on the forum.

I was also once a foreign investor just like you before I moved to the US 2 years ago.

I would strongly suggest that you don't get caught up in calculations of declining populations and crime rates.

There are good and bad areas in every city of the US the same as growing and declining populations.

Through my experience I have learnt that the most important thing especially when investing from overseas is to have trustworthy people on the ground that will have your best interests at heart.

I have probably written the above words in almost every one of my posts lol

I like Memphis and both Birmingham. They both offer some very nice figures. Look at Ohio and Michigan also. I am sure you will find great numbers there also.

Focus on the people more than anything else.

Thanks for reading and have a great day.

Medium list n sell logo designEngelo Rumora, List'n Sell Realty | [email protected] | 419 740 6999 | https://agentscomefirst.com/ | Podcast Guest on Show #89

@Jean Paul Rousseau  I've lived within a 4-hour drive of both cities for most of my life.  So I know enough about them both to know that I would not invest in either city unless I had a very good knowledge of the specific locations.  There are some areas where it's just safe at all.  Some areas that are turning around, and some that will continue to decline.  Many are making money there, but be careful.  

I meant to say "not" safe.

@Engelo Rumora  makes a great point.  You'd do best focusing on picking your team vs. your house.  Also, population growth should play a significant role in your location selection.  

Also on my short list, I'd look at Jacksonville, Savannah, Chattanooga, and Charlotte.  These are mid-sized cities with significant population growth.  

Last but not least, if you have two rentals in Atlanta, why not build upon the foundation you have there?  It's a direct flight.  Charlotte is also a direct flight I would think.

Merde!

@Jean Paul Rousseau  

Rick

Originally posted by @Rick Baggenstoss:

@Engelo Rumora makes a great point.  You'd do best focusing on picking your team vs. your house.  Also, population growth should play a significant role in your location selection.  

Also on my short list, I'd look at Jacksonville, Savannah, Chattanooga, and Charlotte.  These are mid-sized cities with significant population growth.  

Last but not least, if you have two rentals in Atlanta, why not build upon the foundation you have there?  It's a direct flight.  Charlotte is also a direct flight I would think.

Merde!

@Jean Paul Rousseau  

Rick

Oui Oui Rick :)

Thanks for the mention

Medium list n sell logo designEngelo Rumora, List'n Sell Realty | [email protected] | 419 740 6999 | https://agentscomefirst.com/ | Podcast Guest on Show #89

Thank you for those replies. For the people, I contacted some of them by phone, and selected those who seem trustworthy, but it is difficult to make an definitive selection my phone. In any case I plan to go to the States before buying. I would like to avoid being to far from Atlanta to minimize the travel expenses. I prefer to buy elsewhere from now to diversify my source. 

Now I have two different opinion on those cities (as usual, I assume), I will try to pursue my investigations.

Again I appreciate any comment

I have only visited Birmingham a few times and I felt it was a lot like Memphis.  I own several in Memphis and highly recommend obtaining properties that rent for at least $895.  Memphis can be rewarding, but in the wrong areas, you can get burned bad.  Also, most of the houses that that rent for under $1,000 are older homes; you will want to make sure the home is renovated well and that you order a good home inspection.  I would avoid any houses with carpet in the high traffic areas as this will be an expensive maintenance cost for you.  Investor grade carpet, while looks good, does not hold up well to high traffic.  Whatever you do, Management will be the most important aspect of what you do. Even if you go Turnkey, interview at least 3 management companies.

Lastly, you should take a look at Little Rock, I have expanded my portfolio over there, cash flow is excellent, probably a little better then Memphis as property taxes are lower and lack of hedge fund presence has kept housing prices low.

Medium turnkey logoAlex Craig, Turnkey Properties | [email protected] | 901‑848‑9028 | http://www.memphisturnkey.com

BTW, I did not answer your question.  For $66,000, you really can't find a quality property in Memphis. If you don't need the cash flow now,  I would buy two $100,000 properties or possibly look at putting down 35 to 50% down and acquiring 4 properties utilizing private financing.  Leveraging is a good way to buy multiple properties, create more tax breaks through interest deduction and create larger cash flows down the road.

Medium turnkey logoAlex Craig, Turnkey Properties | [email protected] | 901‑848‑9028 | http://www.memphisturnkey.com

Thank you for all those good advices that will encourage me to dig a little bit more on the subject. I was specially impressed by J Benoit french, I had no problem to understand what he said...

@Jean Paul Rousseau

Like @Alex Craig   stated both markets are similar.  One thing I would tell you is to make sure that whomever you decide to work with, make sure they are actually local to the area meaning they live there and have a true physical location that you could visit when in town.  There are too many shady characters who their people work out of their houses or outsource workers from other countries, its all puff and smoke.  

Considering your a long distance investor you need to make sure you have a reliable team that is physically on the ground.  You should check out @Alex Craig and also check out Craig Jennings @Buy Memphis Now.  Both companies will have the type of product and service your looking for. 

Medium buymemphisnow stacksCurt Davis, Buy Memphis Now | [email protected] | 605‑310‑7929 | http://www.BuyMemphisNow.com | TN Agent # 00321765

I agree with @Alex Craig !! Little Rock, Arkansas is another fantastic option with inexpensive homes and a great rate of return. ;)

To answer the question about 2 homes for 200K or 3 homes:
Focus on your target ROI and your investment objectives. If you want to make 10% annually off of the renter + long term appreciation and you can do that off of fewer properties, then why not?? There is little downside, fewer renters to deal with, fewer HVACs, Roofs, Pipes, etc.
I wouldn't go much over 100K each though. As the overall price of the rent increases the number of potential renters decreases as those renters are temporary or many times would also qualify for a loan to purchase their own home.

If you can increase your ROI by going with smaller properties without significantly increasing maintenance expense, then I would seriously consider doing so.

Your eyes on the ground should be able to help you determine the variables above.

And I hope you decide to join us in Little Rock. :)

I appreciate all those good comments, I will also investigate little Rock and Jacksonville.

Curt, I had a look at your site, but I understood I had to buy before rehabilitation is completed. Due to the fact that I am far away, and to minimize potential problem, I will prefer to buy houses completely rehab.

@Ray Ellen  

There is no doubt that less expensive properties work better in Little Rock, then in Memphis. We find good cash flow in the Broadmoor neighborhood at the 70k and under price point.  

It's good to find somebody else from the Little Rock investor community on bigger pockets!

Medium turnkey logoAlex Craig, Turnkey Properties | [email protected] | 901‑848‑9028 | http://www.memphisturnkey.com

My question is: Why not more in Atlanta?

Is there some problem there?

By branching out into more cities... it is going to force you to find more teams on the ground. I would think it would be easier to focus on 1 city and get one set of top notch people there. I guess you can eventually find good teams in any city.. but it is going to be more work for you.

Originally posted by @Jean Paul Rousseau:

...

I am a french citizen living in France, in the Paris area. Last year, I created a Georgia corp. that bought two houses in Atlanta (80 000 $ each). Now I plan to use this corp. to make further investments. ..:

I investigate Memphis and maybe Birningham ...

Your Georgia corp might have to register to do business in those other states.  There could be state income taxes that have to be filed and paid in those other states.  Just some other things to consider.

@Jean Paul Rousseau  

Bonjour!! That's as much as I can remember from French Class in High School... Memphis and Birmingham are very similar as far as Real Estate investing and Crime.  Both cities are great Buy and Hold locations not great if you looking to flip or make a huge profit from appreciation in 1-3 years. In some cases it takes more than that..

The location you invest in is not that big of a deal to me... It's more of the people that you will have to manage the property or purchase from I would concentrate on. I would suggest do your own due diligence (Google, Yahoo, local searches) to find out about each company/people you decide to do business with just as I am sure you did with your 2 investments properties in Atlanta.

Your questions:

Is investing there a good idea ?

Yes, investing in either city is a great idea, as long as you invest in the right team that you can trust!! Regardless of the population decrease and high crime.

With a 200 000 $ budget, should I buy two houses 100 000$ each or three houses 66 000 $ each?

You should evaluate your current portfolio and decide... It's like investing in stocks, bonds, or mutual funds each has its own risk and rewards. Here are a few examples are you looking for high or low appreciation, cash flow, low or high crime areas, low risk or high risk, low return or high return, big company or small company, buying in with a lot of equity already in the property or buying at retail with little to no equity in the property..etc etc etc the list goes on and on and on.

Do not rush into anything...Take your time do your research...

La vérité vaut bien qu'on passe quelques années sans la trouver.

By: Renard

Medium new logo for bigger pockets..Derrick Craig, Memphis Buy and Hold | [email protected] | 901‑212‑4476 | http://www.memphisbuyandhold.com

I purchase and rehab SFR in the Birmingham area. It's been a great market! I can buy under $30K properties and rent $700-$750 month. I buy in working class neighborhoods.. You can make money in BHAM!!..There's also many surrounding areas with great numbers!

I'm not a fan of Memphis as a market anymore. It's way past it's hayday and for the returns you can get there, you can get the same or better in markets with better growth potential. I would pick Birmingham over Memphis personally, but it's personal preference. I would even buy in Atlanta over Memphis. Are you set on investing close to Atlanta tho? There are a lot of markets out there that are great for buying in.

Which price point to buy at totally depends on the market. I would buy a $100k house over a $66k house in Memphis or Atlanta any day, but there are other markets where I'd be totally fine buying a $66k house.

Medium hipsterinvestment logo black300dpiAli Boone, Hipster Investments | [email protected] | 310‑957‑2101 | https://goo.gl/x52ZKJ | CA Agent # 01911993

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I like atlanta but I had various problems. I bought in october 2013 and the tenants only came in february 2014, I had unexpected high maintenance cost and excessive Bill from the attorney. So for now I prefer to change. There are several turnkey compagnies that looks fine in memphis and birmingham, but I found nothing appealing in jacksonville

@Ali Boone

How many homes do you own in Memphis or how many times have you been here to drive the city to know the markets?  To say its not a viable market anymore in my opinion is a false statement especially coming from someone who is not living here.  

Memphis has been a solid market for years and I would have to think it might stay this way for years to come, even when other markets that are hot now go cold.  

The % of renters to home owners here will make this market a great place to own as almost 50% of our population rent.  

Anyone buying homes for $30k with rent of $700, those are low income areas and will long term fail. Cash flow and ROI look great on paper but thats about it. Bham in that regard is no different then Memphis. I could sell people junk like this but choose not to as I know what happens long term.

Here you should be mostly buying in the $65k low end to $120k range.  Those will fair better especially the higher price you go and your risk tolerance.

Medium buymemphisnow stacksCurt Davis, Buy Memphis Now | [email protected] | 605‑310‑7929 | http://www.BuyMemphisNow.com | TN Agent # 00321765

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