Difficulty selling rental properties at loan amount

299 Replies

@Ralph R.

Thank you, Ralph, and I am glad it was helpful to you, although I am still not sure what else to do what I haven't already tried out. I did my research ahead of time. I guess the biggest dilemma is that one would not know what areas are considered "TK monopoly area" or not. A "TK area" is definitely a higher challenge finding OO or getting closer to retail value. The comps just won't allow it. My investments did well in the first 1 1/2-2 years but then it just turned into one issue after another from all angles. In addition to professionals screwing people over almost as part of a game, tenants not caring about being evicted or switching jobs, etc., Memphis has been the biggest challenge. I don't have any of these issues anywhere else. I just wonder if all these other cities are going to catch onto this game because it appears that Memphis properties and practices have been chewed, spit out, eaten again over and over again...

I too find this tread very interesting.  I bought my first property in Memphis from a TK this past march.  Everything was going great for 4 whole months when the renter of a 2 year lease left a 2.5k mess for me.  It's only money but so glad I only bought 1 property.  I will be the first to say it's a great idea if I ever get that lucky.

As a new investor, I am in no position to provide advice. That said, I will note this thread should be required reading.  I am an avid keyword search "turnkey" reader.  This has been one of the more informative threads especially insightful is the reactions of the Turnkey community.  This is a solid reminder of best practices. 

@Pam Schuster and @Aaron B. I am glad I could provide some insight.

To all:

I wanted to clarify this one more time:  The deal looked like a great deal from the beginning. The exit strategy was to either increase rents or sell for profit.  This is being promoted by TK providers (and after all, my properties showed 75% equity when I financed it - in hindsight I wonder if the initial mortgage company was also a scam as it no longer exists!). What they failed to say that the area was a TK dominated area, thus, one could never get retail or find buyers with credit to qualify for financing.  If rents had been paid on time and professionals didn't screw me over, all would be fine and dandy, like it should be.  I know, I know, as an investor leasing to tenants is always an issue.  However, the issues there are so much greater than any other rental properties/deals I have known.  It's almost like a "pest in Memphis" for anybody not having lived in Memphis.  I did my due diligence in the beginning.  I flew out there, met with the team, drove around, saw multiple properties and areas, calculated, chewed up the numbers from every angle - everything looked fine but one will never see what's really going on until it's too late.  Add that with not being in the same area to remedy issues right away because information has been held back from you, then it turns into a complete disaster.  At one point it was good that I had 3 properties so if one tenant moved out, the cash flow from the others would cover the losses.  But that was very short lived.  I never once took out funds for my personal needs, instead, I consistently transferred thousands of dollars into the account to pay for everything that built up.  In the meanwhile, I am trying to list the properties myself to see what response I may be getting.  I have rented out 2 of the 3, with the 3rd one in the prime area showing great interest for rent while the 2nd tenant is already giving me another headache only after 1 month of living there (this is a BAD tenant from the prior management company!).  So the saga continues...

This post has been removed.

Originally posted by @Sabrina Brown :

I own 3 rental properties in Memphis and have been renting them out since I got them.  However, last year I tried to sell them at 25% below market value and still only got offers for less than the loan amount.  I ended up having to put tenants in it again after not receiving any income for a year in addition to putting in another 20K to fix these properties up to make them turn key.  I can't refi because I am self employed and I can't do a short sale or approach the banks as to not to jeopardize my excellent credit rating.  

I would like to sell these properties as a package. They generate at least 1K/month in net profits (after PITI and management fees) and don't need any repairs.

Is there any other strategy I could use to offload these properties at a minimum of breaking even or just a tiny bit of a profit?  

I am currently looking for MFH's in CA and would also consider an exchange or other unique options.  Please advise!

 Is there an address for each of the properties and any meaningful financials?

Account Closed

Hi Greg,

Yes, there is (since one of the prior posters already disclosed it).  

I just lowered the price on 2 of the 3 properties again. You may have your own criteria in evaluating the property. If there is specific information you need, such as insurance cost, etc. I can provide that as needed. If you are talking about financial statements under the LLC these properties are in, yes, I have accurate Quickbooks records.

Please let me know if you are interested or have any questions. 

Thank you.

Account Closed  The details of the properties, including addresses, are listed on my website under "properties for sale" (see my signature field for the link).  Thank you.

Originally posted by @Sabrina Brown :

@Greg F.  The details of the properties, including addresses, are listed on my website under "properties for sale" (see my signature field for the link).  Thank you.

 What is the net income and/or current mortgage payment on each of the rentals? It only list the monthly rent amount and cash flow from each.

Originally posted by Ashley Wishinski:

Hey there, what if you contacted Memphis invest. They seem to have their finger on the pulse and are connected with investors.
A

Ashley:  I can only assume you didn't read the thread.  Memphis Invest is WELL represented in the 7 pages of comments, including details from Chris Clothier about their involvement with the properties and the OP.  The OP overpaid for the properties, at least she overpaid for her current exit plan.  The properties did and could provide cash flow but will not likely sell for much over current  loan value.  For a VERY interesting and informative read, I suggest going back and reading the entire thread.  Lots of very good info and thinking on TK expectations from everyone, but especially from two Memphis TK providers and PMs, both of whom are familiar with the properties.  Destined to become a Best of BP Classic.  :)

Originally posted by @Sabrina Brown :

@Greg F.

Hi Greg, I just emailed you back.  The cash flow is the net income on each of the properties.  Hope this helps.  Thank you.

To clarify, what is listed on the website defines cash flow (CF) as CF after mortgage payments, taxes insurance etc. The information that I need is/was the net before those expenses on each of the SFH. You may also email it for confidentiality reasons.

Originally posted by Account Closed:
Originally posted by @Sabrina Brown:

Account Closed

Hi Greg, I just emailed you back.  The cash flow is the net income on each of the properties.  Hope this helps.  Thank you.

To clarify, what is listed on the website defines cash flow (CF) as CF after mortgage payments, taxes insurance etc. The information that I need is/was the net before those expenses on each of the SFH. You may also email it for confidentiality reasons.

Greg:  if you read the thread from beginning to end, there is invaluable income and valuation information provided by those who know the properties and that managed them for the OP.  If you are considering making an offer, definitely read the entire thread.  It includes agent and TK provider opinions about the specific properties and their pros and cons.  One of the properties is considered an untouchable, given location and tenant pool.

@K. marie P.  (not sure why your name doesn't pop up to tag you):

Thank you for "promoting" my thread - I appreciate it very much! :-)

The one property that was considered "untouchable" is actually not.  It was outdated information when the property was still boarded up.  Some people call the area a "war zone" but it is not, it is actually a newer developed area and now most properties in that area are fully rehabbed with tenants in place or with owner occupancy.  My property has been made turn key again with a tenant in place who may be interested in a lease option.

Thank you.

Originally posted by @Sabrina Brown :

@Ralph R.

..... A "TK area" is definitely a higher challenge finding OO or getting closer to retail value. The comps just won't allow it.

Sabrina: This challenge is not specific to "TK areas". There are more non-TK rentals than TK in any neighborhood. TK has not taken over the US rental market, or even Memphis. It's a tiny niche thing comparatively speaking. It's the non-owner-occupied rental nature of a neighborhood that deters OO buyers. If the flavor of the neighborhood is mostly rentals, it doesn't matter who owns them, the lack of homeowners usually shows in and will deter OO home buyers. This is especially true in low income and working class neighborhoods.

Your issue in trying to sell these properties is price, plain and simple.  At this point it doesn't matter what you paid, how much you spent on improvements or how much you owe.  There is a buyer, likely an investor buyer, at a lower price than your current asking.  I think you may be able to get out for loan value, but know that people bring cash to closing every day to get properties sold.

Originally posted by @Sabrina Brown :

@K. marie P.  (not sure why your name doesn't pop up to tag you):

Thank you for "promoting" my thread - I appreciate it very much! :-)

The one property that was considered "untouchable" is actually not.  It was outdated information when the property was still boarded up.  Some people call the area a "war zone" but it is not, it is actually a newer developed area and now most properties in that area are fully rehabbed with tenants in place or with owner occupancy.  My property has been made turn key again with a tenant in place who may be interested in a lease option.

Thank you.

If I were a potential out-of-area buyer, I'd take the comments on this thread about that property from local agents, PMs and TK people pretty seriously.  Getting it rented does not change the fact that there are local TK providers and PMs who won't work that area or that property.  

Even negative advertising is still advertising.  IMO, the kind of exposure those properties have had on BP would have gotten you buyer already if there was not something wrong with price, income potential, area or all three.    

UPDATE:

I received an offer on one of my properties from my listings on postlets.com which then posts to numerous other sites.  It is in escrow now and looks like it is going through.  Coincidentally, I received a call this morning regarding an offer on another property of mine, also resulting from my postlets listings.  Still early to say if it is going to be a sale.

In the meanwhile, I got the privilege of being referred to one of the best management companies in Memphis that usually only takes on management for their own properties.  They take care of things immediately, are honest and responsive.  I wish I had known them years ago and I wouldn't be at this stage.

Funny thing is that I received notification from the management company prior to hiring this new management company that McNutt is in jail now.  McNutt was the management company before that.  Here is the link:

http://wreg.com/2015/11/15/property-management-ceo-jailed-for-bad-rental-properties/

McNutt had the guts to still contact one of my tenants to get into the property for showings to a potential buyer, which I am not aware of.  I believe that he tried to scam this new buyer because the property couldn't be sold until I gave authorization.  Because McNutt did not complete repairs as promised and after paying him, I had lost a potential lease purchase buyer.  Furthermore, McNutt owes me several months of rental income for 2 properties that he never forwarded to me (tenants paid in cash).

Ironically, the management company that sent me the McNutt link is now eager to pay me past due rental income!  Justice will prevail.

@Sabrina Brown, thanks for the update and glad to see that things look like they will worked out. I haven't been on BP that long but I still think this was one of the most followed posts and opened a few eyes regarding exit strategies. 

@Kevin Darrell It sure has been a "ride" and still is.  The current management company I use also sells their own properties as turnkey but they are fair and unbelievably responsible!  Let me know if you still look new TK properties and I will refer you.

Sabrina, Can you share who was the TK operator who sold these properties to you? Was it McNutt or was he only the PM and could you share who is the new PM you found? Are you still happy with them?

@Olga Levin The properties were sold to me by Memphis Cash Flow.  Later I was asking them to take them back from me and they were again trying to put a huge premium on top of the already overpriced properties that I bought from them.  I am still struggling to get offers close to my current mortgage balances.

McNutt "managed" my properties for less than 2 months only to find out that he didn't make the necessary repairs that I paid him for but he also collected rent and never paid me.  I filed a lawsuit against him as he also practices without a license.  I have had to pay for the same repairs once again that weren't made by him.

My new management company is called MidSouth Best Rentals.  They are awesome!  They have high standards and are extremely reliable and honest.  I can consider myself lucky to have been able to get them as they usually only handle a large portfolio.  If you are looking for TK properties, they also offer them under their own name.  

At this time, I have two of those properties rented with happy tenants and leases of another year each.  My 3rd property has been vandalized for the 3rd time in 2 years and is once again boarded up.  The tenant that McNutt "found" (if that tenant wasn't also in the game to screw me over as he stole utilities) abandoned the property upon which my property became another target for vandalism. I never saw rent from this tenant for the 6 months he lived there.

@Sabrina Brown Thank you so much for sharing this information. I am currently considering TK operators in Memphis and I read invaluable information in this thread. Is your problem property the one that is not in a great area?

Unfortunately I have experienced all of the property management issues you have had first hand. It is really crucial to find someone reliable. It sounds like you finally have!

Originally posted by @K. Marie P.:
Originally posted by @Sabrina Brown:

Even negative advertising is still advertising.  IMO, the kind of exposure those properties have had on BP would have gotten you buyer already if there was not something wrong with price, income potential, area or all three.    

So, it's many month later since you started this thread.  You still own all three props.  You still owe more than they are worth, or perhaps values are up to loan value on the two better ones. The one I called "untouchable" is again vacant, boarded up and vandalized in spite of your opinion that it is not in a bad area and that you had a viable tenant.  I'm curious, what's your exit plan now, especially on the untouchable one?

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