Where to buy my next investment property?

Question

Folks - I purchased a property in Jan 2017 in Memphis, TN and the following is the analysis over the last five months.

As you see, net income is -$5206.15. A few key things:

1. The reason for negative net income is because of 3.5 month vacancy. I fired my first PM and replaced with a new one that got a tenant on Apr 20.

2. The reason for May income (rent) reduction is because the pro-ration of the rent was done in the second month with first month being full month rent.

3. The rehab costs are the ones you see in repairs that I have to expense since I have had to first purchase the property.

4. The cost in the Other section is mortgage principal and escrow during the months of Mar to May.

5. From a cash flow perspective, I am -$3490.97 with additional coming due for the rehab costs that have been expensed but have not hit cash flow yet. I am still hoping that when the rent starts smoothening out in upcoming months my net income is probably going to tend positive.

The reason I offer this is because this has been a good learning experience with rehab and vacancy being the key drivers of negative numbers below. I am in the market for my next property investment and am talking to a turnkey provider in Memphis, TN. My assumption is that the property will be cash flow positive from Day 1 due to their quality of rehab and pricing the rent below market which can reduce vacancy. Since my first experience going out on my own has not been optimal, I want to find out a few things and would appreciate advise:

1. Are there other landlord friendly markets outside of Memphis, TN that I can consider?

2. Can you provide references to agents or turnkey companies in those markets?

3. I live in NJ. Given that it has high property taxes and is called a not so landlord friendly state, would you recommend investing here?

4. It's getting a bit cumbersome to track expenses, equity etc. by Excel. Would you recommend any specific s/w program? I saw a lot of discussion on Quickbooks versus Quicken.

Regards,

Azeez

Eugene Lee · Answer

if you want to stay in Memphis, I've had a good experience with Alex Craig and his team with Memphisturnkey.

Otherwise, I really like USREEB in Kansas City due to macro factors

Andrew Johnson · Answer

@Abdul Azeez Just a thought, but you might want to try another few months with your current PM before making any decisions. Once you find a good PM they will be able to advise you on properties that they "will manage" versus "want to manage". Places they would go by alone at 11:00 p.m. to collect rent in cash and places the would never consider that. In short, a good PM can be extremely helpful for subsequent purchases. It appears that you might have had to spend $5,200 to find this PM. If the relationship works it will be easier to build your portfolio around them than set up new PMs in each new market geo. I wouldn't want to have multiple property managers (turnkey or not) in the same geo but that's just me. I like one relationship to manage, one person to talk to, etc. Either that or I'm just lazy...

Mike D'Arrigo · Answer

@Abdul Azeez Indianapolis and Kansas City are both landlord friendly, good cash flow markets with strong economic and demographic fundamentals. I would definitely have them on your short list. I know both these markets well. Feel free to reach out if you'd like insight on either.

James Wachob · Answer

@Eric Hyde thanks for the shout out! I love working with my investors to help them earn passive income. The key is to find a great team! Ideally you would find a company that has everything under one roof. Acquisitions team, renovation crews (fully licensed and insured), Property Management, and a Real Estate Investment Brokerage in case you ever decide to sell.

By teaming up with a solid firm you can mitigate your risk and have some "boots on the ground" that have your best interest in mind.

Eric Hyde · Answer

@Abdul Azeez I have focused my time/research/energy into the Memphis market (for many reasons) so I can't answer to your questions. However, I have two properties with @James Wachob and his turnkey company. One of my houses was rented before I closed escrow! My second house is still being renovated so I'll get back to you on that one, however, my experience has been great! They are full turnkey with PM in house. All the expenses you had on your spreadsheet above would be included into your original investment cost. Lastly, to address the property tax concern, that is one of my considerations into Memphis. I don't know the NJ market but for me it's just a numbers game. If the numbers work even with high property taxes then the numbers work. If I can get my 1% rents and 10% returns and my other criteria are met then I'm happy.

Marty Bosse · Answer

I have 2 properties with Alex Craig from Memphis Turnkey Properties. He also owns and operates the the property management side so the "skin in the game" your looking for is there. At the very least you should have a conversation with him.

Abdul Azeez · Answer

@James Wachob No offense but my experience with standalone PMs in Memphis has not been optimal. The first PM I hired (with recommendation from BP) turned out to be a dud letting my property sit vacant for 3.5 months. I eventually had to replace them with another one who performed repairs around $1000 and forgot to inform me although the PM agreement explicitly says that I need to approve anything over a certain threshold. I eventually had to settle this amount after a long discussion. I am looking for TK providers who own their PM firm as I believe they will have more skin in the game as they are servicing a property they sold. Again, I dont have the experience. So, I do not know if this would be a better option. All I know is that I have tried Option A (standalone PMs) and Option B (TK + PM) is not something I have tried, so I naturally assume this is going to work better. But only time will say.

Getting back to my original questions:

1. Are there other landlord friendly markets outside of Memphis, TN that I can consider?

2. Can you provide references to agents or turnkey companies in those markets?

3. I live in NJ. Given that it has high property taxes and is called a not so landlord friendly state, would you recommend investing here?

Getting back to my original questions:

1. Are there other landlord friendly markets outside of Memphis, TN that I can consider?

2. Can you provide references to agents or turnkey companies in those markets?

3. I live in NJ. Given that it has high property taxes and is called a not so landlord friendly state, would you recommend investing here?

James Wachob · Answer

I'd be happy to chat with you about the Memphis market. If you have any question, please reach out to myself or @Sean Tagge

Where to buy my next investment property?

Where to buy my next investment property?

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