Thoughts about Shelby Forest-Frayser in Memphis TN?

Question

Hi,

Does anyone have any opinions on this area in Memphis TN (zip code 38127)?

James Wachob · Answer

@Chris LumLee Like most larger cities, Memphis can be street by street. I would consider the majority of 38127 to be “C class”

My definition of a C class community = the majority of the homes are rentals. Many of the investors I’ve worked with have told me that they do not want to be limited in their exit strategy.

If a neighborhood is predominantly rental properties and homeownership is in decline, your ability to sell this property in the future would rely primarily on selling to another investor.

However, I know several investors who own large portfolios including property in 38127 and they perform.

To succeed in owning C class properties, the key is to grow a large portfolio, as quickly as possible. Once you have 25+ properties you can sustain more frequent turnover, vacancies, and expenses.

The average out of state investor, buying in Memphis, owns 2-3 properties...

Jason Hopkins · Answer

@Chris LumLee  I love 38127 and have had great success there over the years.  But like many zips in Memphis it goes by street to street.  There are some streets that I would buy up the entire block if I could and there are some that I wont drive down.  Many local turn key companies are selling properties in this area at a high rate to out of state investors.   If you are considering investing here I would strongly suggest talking to local investors who are actually here.  Investing in this area will require a solid PM as well.  I'm local and use a PM.

@Jack Inman  you are spot on, many investors are having great success in 38127.  Turnkey companies have waiting list to sell their properties and they are going in the 60K-71K range.

Jenny Gremillion · Answer

I live in Louisiana but I went to UofM in Memphis. We have rentals down here but Im interested in investing in Memphis or other remote areas possibly, for better cash flow. How do you guys figure out these yields for remote areas from where you live? Thanks so much.

Michelle J Olson · Answer

This is my opinion, but I recommend driving out there & carefully looking around, maybe use Google Earth to look very closely & follow along the roads.  It varies greatly

My parents live in a huge & beautiful home in the ‘Shelby Forest’ area (SF backs up to Meeman-Shelby State Park & there are many homes in Shelby Forest’s extended area up the bluff towards Tipton County that are close to million dollar homes).  We have more than 600 acres of farmland —that we farm, some along the Loosahatchie and there are some really great families & homes up that way.  It is a more rural area, even though, as the crow flies, it’s very close to downtown Memphis.

Their home is only about 6 miles from our nearest rentals in Frayser (which we consider inner-city Memphis &, yes, in crime-filled neighborhoods) .... These are ENTIRELY different quality of homes & it seems mostly rentals that are barely cared for, or just keep getting vandalized again & again.... compared to ‘Shelby Forest’.  For comps, I’d suggest looking at crime rates for Frayser, not just the big zip code of 38127.

FWIW, IMO (been here 30+yrs & living with increasing crime & feel how, sadly, it’s changed for the worse)... Many parts of Memphis should seriously be carefully considered street by street/block by block, when it comes to comps, there can be huge old beauties (midtown mansions) sitting only a couple streets (less than 1/4mi) from sadly dilapidated/blight blocks that aren’t being cared for/kept up, many are boarded up.

Sure wish some big investors who have the funds would come into Frayser and revamp it all up cute like some other areas of Memphis are being remodeled and help make it a safer & cleaner area for all the families and children.  On a more positive note, many Frayser homes were built well / seem sound, foundationally.

Joe Funicello · Answer

Hi Guys,

Love the information on this thread. Helpful and not so opinioned where it looks like one individual knows everything.

I am a beginner investor from Connecticut who has just bought a single family home in 38127. I was looking to flip and hopefully ideally sell to a family in the area. But after reading this thread it seems like I would be better suited to rent the property and sell to an out of state investor once it is tenant occupied?

Not really worried about messing up as I am just getting started. The best way to learn is through experience IMO.

Looking for some further feedback on the 38127 for flipping instead of turning into a turnkey.

Michelle J Olson · Answer

We’re happy to help.  Southerners are known for it.☺️

(Shelby Forest/Shelby County, Tennessee thread)

Wishing you the best in your REI adventures!

Michelle J Olson · Answer

I was hoping someone would jump in and try to help with your question.

I don’t have much experience  figuring out yields.

I’m not sure this is going to be of any help, or even any sound advice, but I grew up in rural Tennessee, so the back-woods remote areas are home/comforting to me... I just drive around, try to look closely at properties & neighbors (who could be many acres away) & try to get a decent feel for it.  And, my daddy (73 yr old farmer/investor/work-aholic/entrepreneur main man our team) seems to have fun diving right into what some might view as way too murky of waters/risky ventures... so I don’t feel I can very well adress your question, if u KWIM?

Good luck!

Dean Letfus · Answer

Some of it's good and a lot of it is bad. Depends on your risk profile and your goals. Unless it's in a good street you need to buy it real cheap and have very good management. Apart from investors who like to play in the down and dirty end it's not really where you want to be long term for growth in rents or values. A reminder there are some GREAT parts so it does depend on the street.

For example Maritavia Drive 38127 will cost you close to 100K to get into, same house in Grenadier cove is 14K!

Jay Hinrichs · Answer

@Jack Inman  I don't know about great success.. I think the reason investors have gone there is they are chasing paper yields and don't fully understand the risks.

I mean you buy in a nice neighborhood in Memphis and get say 8% or so return.. or they see these at 10 to 12% and have no understanding about how risk plays into yields.. why are they 12  when other much better areas are 8%.. ??? it all boils down to tenant risk..

Thoughts about Shelby Forest-Frayser in Memphis TN?

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