50% 0FF ARV!!!
Most Popular Reply
Chris ClothierBusiness Member
Rental Property Investor · memphis, TN · Member since 2009 · 2k+ posts · 3k+ votes@Chaz Reid - If you are open to it, I'd like to give you a little advice. You are posting this property on a public marketplace that is looked at by real estate investors from all over the country and probably the world by now. That is important in this scenario because you are virtually wholesaling a property and it happens to be in a great investment city, but a tough zip code that is going to have challenges.
Anytime you want to wholesale a deal like this and investors form anywhere in the country can look at the listing, you have to be very cautious and super detailed as well as spot-on accurate with your data. You simply cannot afford to earn a bad reputation by putting out bad data. That means, you have to be much more detailed about the necessary renovation, the comps, the estimated appraised value, the picture profile that you show the public. When you put things out to the world and want people to buy from you virtually, you have to give them a reason to have the utmost confidence in you, your data and the deal itself. You need to build a package on the property where all of that data is accessible without anyone having to ask you for it. That is the world of a virtual sales cycle.
I would also stay far away from hyperbole in your headline and the description of the deal itself. Forget all the hype about 50% off and just be super detailed and more buyers will look very closely at your deal.
When you have deals like this one, I would suggest you market it only to local Memphis investors and I would only list the property and your asking price. I would say that you have some information that might be helpful, but every local buyer will be capable of reviewing a deal for themselves. Most won't pay much attention to your numbers or your analysis - only because they will have experience doing it themselves. This is definitely a deal for local buyers only in my opinion.
The brand new investors will most likely stay away or they will pepper you with a ton of questions. I know all about "buyers' responsibility" for due diligence, but in these types of rougher areas, you should do everything you can to sell to experienced investors who know how to succeed and then they will come back to buy more from you. If you limit the sales pitch you will actually be doing new investors a real service by not accidentally selling them into something they cannot handle.
@Curt Davis and many of the other posters are correct on your renovation analysis that is seems low at best and likely has no room for the major work that needs to be done or the code permits that need to be filed, which this property will need a lot of permits. I also agree with @Dean Letfus that all of Frayser is not bad. I try to stay away from the area now because we have concentrated our company on other areas of the city, but there are investors who are able to do well in Frayser. The entire zip code is not bad and there are good areas, but there are also very, very challenged parts of that area of Memphis and it takes a really good property management company that focuses on those rental ranges to make properties there work.
40 Replies
- Investor · Fayetteville, NC · Member since 2014 · 916 posts · 190 votes12y
@J Scott , thats exactly what I'm trying to do here. Thru all the reading I've done, I had a general idea. You can read about how to ride a bike but it doesn't compare to the real thing. I know now exactly what to do and look for and people I need to have in place. Kind of embarrassed by what happened with this post but at least it was a great learning experience. My next ad in the marketplace will be a home run deal and thats my honest word...
- 12yCurt DavisBusiness MemberFlipper/Rehabber · Memphis, TN · Member since 2008 · 5k+ posts · 2k+ votes
How in the world are you making any money selling a full renovated 4/2 for $28k? Frayser homes can be purchased cheap but any good renovation is going to run on average $10k or better. You would have to have picked that home up for about $13k max to have made even $5k.
Curt Davis - KAIZEN Realty538 Reviews - Real Estate Investor · Audubon, PA · Member since 2009 · 13k+ posts · 8k+ votes12y
Originally posted by @Chaz Reid:
Now I might be a little guy, but the max estimated rehab cost, plus our listed price totals $31k. With a ARV of $50 leaves $19k. Thats a hell of a paycheck in my eyes. Thats counting the highest estimated rehab cost and the lowest estimated ARV. The range is 50 to 65 though. Coach me here @Bryan L. ! I might be looking for the wrong thing all together. Plus all of this has been done 100% over the internet. I have never been to Tennessee, not even drove through.So why aren't you buying this outright to get that $19K payday?
- Residential Real Estate Agent · Cookeville, TN · Member since 2013 · 1k+ posts · 948 votes12y
@Chaz Reid - The common response that I keep hearing here is that none of us believe your rehab estimates based on the pics that you have provided. More pics and a detailed rehab estimate would be helpful. My guess is that the contractors only gave you labor and not materials in their estimate.
- Specialist · Memphis, TN · Member since 2012 · 1k+ posts · 1k+ votes12y
@Curt Davis , we do it by being exceptional at everything we do.
Buy better houses in better shape at lower prices. When you come from New zealand where you have to make a hundred offers to buy 1 house we are just used to working real hard to find good deals. Serves us extremely well in memphis!!
- 12yJay HinrichsBusiness MemberReal Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
Steve the short answer is NONE of these houses in those C areas that Dean and Curt are talking about will ever sell for ARV its a figment of marketing imagination. And one I have struggled with as a HML over the years in these markets.
And it was a big learning curve for me coming from the West Coast as all our properties sell here for ARV or within 1 or 2% once put on the open market.
If you think about it.. Look at all the TK marketing companies presentations most if not all talk about instant equity... Well in the stronger markets there is no such thing.. property once rehabbed sells for what its worth not 20% less leaving all this equity.
IN this case the 19k is just a figment of the ARV imagination .
And depending on who is doing the appraising many times the appraiser has been allowed to use GRM for these properties and because most of these C class props have a high rent to price ratio they can substantiate the higher values based on a GRM and this leads to these inflated ARV's... Or they will use a comp that sold retail to substantiate the values.. There are a few out there but they are far and few between in the areas of these towns and the class of properties.
- 12yJay HinrichsBusiness MemberReal Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
the issue is collecting the rent in Frayser there is a reason a 795 rent and the house only sells for 28k just go to Detroit you can buy thousands of them with the same metrics... But can you collect rent :)
- Wholesaler/rehabber · Arcadia, FL · Member since 2013 · 341 posts · 22 votes12y
you also want to check out local taxes and selling points like how good the local schools are and local crime rate or a shopping mall near by. all things that make a buy and hold property easier rent sometimes. good thing to know if any liens or anything like that are on the property. some back story on why the property is in its current condition wouldn't hurt either. a good way to turn a no deal in to a deal is to go back to the seller and negotiate the price. just say based on feedback from other investors the price is to high when compared to the rehab cost and the final arv if we can get a lower price we can make it work. get some pics and a few more contractor estimates to accompany before so at least you know how low you have to ask for if your rehab costs are on the high side.
- 12yCurt DavisBusiness MemberFlipper/Rehabber · Memphis, TN · Member since 2008 · 5k+ posts · 2k+ votes
If a turnkey provider is selling a home for $28k that rents for $795, that can only mean a few things:
1. There was very little spent on renovations leaving the home still looking out dated with no new major mechanical or roof.
2. The provider got the home for free or for less then $10k which is possible in a crap whole area like Frayser.
$795 wont sustain too long in that area. The turn over and repair issues will plague any investor buying in this area.
Why would a seller leave so much money on the table with numbers like that?
Dean, not picking on you but these numbers dont add up to me and there is no way in heck this is a stellar deal, its Frayser for $28k !!!!! Anyone can get 20 deals locked up in that area.
Curt Davis - KAIZEN Realty538 Reviews - 12yJay HinrichsBusiness MemberReal Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
Anyone selling Frayser to investors that are off shore or out of town are selling them down the river... that be the Mississippi .... These areas are only appropriate for local slum lords who can watch these types of properties daily... And for those TK operators who really don't care what they are selling and just want to make a fast buck and be down the road.
Its the same with all Ghetto area TK operators... does not matter if its Memphis , Detroit,, KC, Indy,, Rochester.. the facts are the facts. As Curt says anyone buying these that is NOT LOCAL and in the bizz will over time own a money pitt.. And those that think these are great investments as TK investment really do not have their clients best interest at heart. this is my personal opinion and experience having dealt with hundreds of these from the lenders side of the table. If it looks like a duck and walks like a duck and walks through that hotel in Memphis then it is a duck.
- Investor · San Francisco, CA · Member since 2013 · 147 posts · 97 votes12y
@Jay Hinrichs and @Curt Davis it's clear that both of you are not big fans of Frayser. What's your take on Raleigh, 38128 zipcodes where properties are rented at 825-$900. A lot of Turn-key providers like this area and I personally own few properties in this zipcode. Do you think it's not a good area to buy for local and out-of-state investors?
Thanks,
Haim
- Specialist · Memphis, TN · Member since 2012 · 1k+ posts · 1k+ votes12y
More relevant Haim is that anybody who says all of Frayser is a ghetto clearly is clueless about Frayser. Our PM's are very fussy and there are several parts they will happily manage and that Bridge will lend into.
There is zero similarity between Memphis and Detroit. One has lost nearly 250,00 people, was a one industry city likely to never recover. Memphis is stable, diversified and growing. As a non American I see a lot fo the anti Memphis sentiment is race based, not numbers driven.
We are four years in now and the increase in yields and values we have seen and the low entry cost make memphis absolutely number 1 in our books.
It was no surprise that a recent major survey also picked Memphis as the number 1 capital growth play in the entire USA. That's why the hedge funds keep coming here!
You just have to stay completely away from low C and all D grade areas.
- Corona, CA · Member since 2014 · 154 posts · 100 votes12y
If we were to assume your numbers were right, its not absolutely horrible deal its just not great. I buy properties like this sometimes, that need 20k-30k rehab. But the rent demand is alot higher...Lets assume your numbers are right (which no knows unless they've been by the property) but lets just assume
Purchase $17k
Rehab $25k
Pur +Reb= $42k
ARV= $55k (modestly)
Its not ideal for a flip....
After youve done your reserach and got an appraisal and are 100% sure on ARV value..you turn around cash out refi, lets say at 50% of the value, (21k)...your looking at a mortgage of (depending on credit factor) betwen $150-$200 a month. You rent it out at $650.
Minus PM, taxes, utilites etc. you could possibly cash flow this for $300 a month and youll put $21k back into your pocket....its not the best deal on earth but its works. I do them very similar to this one...Find a local buy and hold investor and sell this as a buy and hold ONLY dont try and paint it as a sweet quick flip deal thats not reality....
And again im just assuming your numbers are correct or not too far off....
- 12yChris ClothierBusiness MemberRental Property Investor · memphis, TN · Member since 2009 · 2k+ posts · 3k+ votes
@Chaz Reid - If you are open to it, I'd like to give you a little advice. You are posting this property on a public marketplace that is looked at by real estate investors from all over the country and probably the world by now. That is important in this scenario because you are virtually wholesaling a property and it happens to be in a great investment city, but a tough zip code that is going to have challenges.
Anytime you want to wholesale a deal like this and investors form anywhere in the country can look at the listing, you have to be very cautious and super detailed as well as spot-on accurate with your data. You simply cannot afford to earn a bad reputation by putting out bad data. That means, you have to be much more detailed about the necessary renovation, the comps, the estimated appraised value, the picture profile that you show the public. When you put things out to the world and want people to buy from you virtually, you have to give them a reason to have the utmost confidence in you, your data and the deal itself. You need to build a package on the property where all of that data is accessible without anyone having to ask you for it. That is the world of a virtual sales cycle.
I would also stay far away from hyperbole in your headline and the description of the deal itself. Forget all the hype about 50% off and just be super detailed and more buyers will look very closely at your deal.
When you have deals like this one, I would suggest you market it only to local Memphis investors and I would only list the property and your asking price. I would say that you have some information that might be helpful, but every local buyer will be capable of reviewing a deal for themselves. Most won't pay much attention to your numbers or your analysis - only because they will have experience doing it themselves. This is definitely a deal for local buyers only in my opinion.
The brand new investors will most likely stay away or they will pepper you with a ton of questions. I know all about "buyers' responsibility" for due diligence, but in these types of rougher areas, you should do everything you can to sell to experienced investors who know how to succeed and then they will come back to buy more from you. If you limit the sales pitch you will actually be doing new investors a real service by not accidentally selling them into something they cannot handle.
@Curt Davis and many of the other posters are correct on your renovation analysis that is seems low at best and likely has no room for the major work that needs to be done or the code permits that need to be filed, which this property will need a lot of permits. I also agree with @Dean Letfus that all of Frayser is not bad. I try to stay away from the area now because we have concentrated our company on other areas of the city, but there are investors who are able to do well in Frayser. The entire zip code is not bad and there are good areas, but there are also very, very challenged parts of that area of Memphis and it takes a really good property management company that focuses on those rental ranges to make properties there work.
- Memphis, TN · Member since 2013 · 969 posts · 524 votes12y
Keep your head up!!!
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