New to posting on biggerpockets forums but have been reading and watching many podcasts. I’m a new investor interested in purchasing my first turnkey investment property. I’ve been looking at turnkey properties in Memphis between 100k and 115k. With rates staying high, what is the consensus on purchasing all cash vs financing for the first property? I know leverage is typically the recommendation but why not buy all cash if possible and leverage the equity for future properties when and if rates decrease? Less headaches when there are vacancies. And if I leverage the equity in the future for additional properties my break even time period can be reduced. To me seems like a good way to start with less things to worry about with a path to leverage the first property into a few more in the future. Curious to get opinions from more experienced investors than myself. Thanks
New to posting on biggerpockets forums but have been reading and watching many podcasts. I’m a new investor interested in purchasing my first turnkey investment property. I’ve been looking at turnkey properties in Memphis between 100k and 115k. With rates staying high, what is the consensus on purchasing all cash vs financing for the first property? I know leverage is typically the recommendation but why not buy all cash if possible and leverage the equity for future properties when and if rates decrease? Less headaches when there are vacancies. And if I leverage the equity in the future for additional properties my break even time period can be reduced. To me seems like a good way to start with less things to worry about with a path to leverage the first property into a few more in the future. Curious to get opinions from more experienced investors than myself. Thanks
Check out Memphis Real Estate podcast w @Douglas Skipworth and @Dean Harris on Memphis zipcodes It’s gold Very accurate
Real Estate Agent · Memphis, TN · Member since 2019 · 365 posts · 264 votes
2y
@John Rass welcome to the forums and congrats on the first post! The first thing I would tell you is be careful on where you're investing, I operate in Memphis and that price point is much higher risk. If you are adamant on staying in that price range I would advise paying cash or putting more money down to reduce your monthly payment. Since the clientele you'll be working with is less desirable it'll be a riskier play if you're leveraging, and like you mentioned you could refi down the line when it's more favorable.
Feel free to reach out if I can be of any assistance! I've worked with hundred of clients who invest in Memphis and know the market very well. Best of luck!
New to posting on biggerpockets forums but have been reading and watching many podcasts. I’m a new investor interested in purchasing my first turnkey investment property. I’ve been looking at turnkey properties in Memphis between 100k and 115k. With rates staying high, what is the consensus on purchasing all cash vs financing for the first property? I know leverage is typically the recommendation but why not buy all cash if possible and leverage the equity for future properties when and if rates decrease? Less headaches when there are vacancies. And if I leverage the equity in the future for additional properties my break even time period can be reduced. To me seems like a good way to start with less things to worry about with a path to leverage the first property into a few more in the future. Curious to get opinions from more experienced investors than myself. Thanks
Check out Memphis Real Estate podcast w @Douglas Skipworth and @Dean Harris on Memphis zipcodes It’s gold Very accurate
Investor · Eagle Point, OR · Member since 2011 · 181 posts · 118 votes
2y
Welcome John
You're highly unlikely to find a turn key rent ready house in that price range. You can find a place in that price range, but will need $30K reno to make it rent ready.
Buy with cash using BRRR strategy is best if you're looking toward future expansion
Be SURE you find a good property manager you can trust to tell you what rent range is to get ROI calculations you can live with.
We've been investing there since 2011 & are happy with team we use . Can refer you if desired.
Investor · Worcester County, MA · Member since 2016 · 122 posts · 72 votes
2y
The Median home sale in Shelby County is around $200k. I would recommend buying a house that is renovated in the $200k to $220K range. Put 40% to 50% down and it should cash flow a little. You will have a better tenant base and longer between turns. This would be a better first investment property. A better first experience. You'll benefit from leveraged appreciation over the next market cycle. Find good property management.
When investing in areas they don’t really know, investors should research the different property Class submarkets. If you apply Class A assumptions to a Class B or C purchase, your expectations won’t be met and it may be a financial disaster.
Our OPINION for the Metro Detroit market (always verify each area for yourself!):
Class A Properties: Cashflow vs Appreciation: Typically, 3-5 years for positive cashflow, but you get highest relative rent & value appreciation. Vacancy Est: Historically 10%, 5% the more recent norm. Tenant Pool: Majority will have FICO scores of 680+, zero evictions in last 7 years.
Class B Properties: Cashflow vs Appreciation: Typically, decent amount of relative rent & value appreciation. Vacancy Est: Historically 10%, 5% should be applied only if proper research done to support. Tenant Pool: Majority will have FICO scores of 620-680, some blemishes, but should have no evictions in last 5 years
Class CProperties: Cashflow vs Appreciation: Typically, high cashflow and at the lower end of relative rent & value appreciation. Can try to reposition to Class B, but neighborhood may impede these efforts. Vacancy Est: Historically 10%, but 15-20% should be used to also cover nonpayment, eviction costs & damages. Tenant Pool: majority will have FICO scores of 560-620, many blemishes, but should have no evictions in last 2 years. Verifying last 2 years of rental history very important! Also, focus on 2 years of job/income stability.
Class DProperties: Cashflow vs Appreciation: Typically, all cashflow with zero or negative relative rent & value appreciation Vacancy Est: 20%+ should be used to cover nonpayment, evictions & damages. Tenant Pool: majority will have FICO scores under 560, little to no good tradelines, lots of collections & chargeoffs, recent evictions. Verifying last 2 years of rental history and income extremely important to find the “best of the worst”.
Make sure you understand the Class of properties you are looking at and the corresponding results to expect.
