Deliriously Ecstatic in Memphis
This is an update to my post "Desperate in Memphis" from December 28th!
Great news! We booked our second tenant (in my duplex) at $650 on a one-year lease to a young couple with solid income, excellent credit background check and a good renting history. Now, my duplex is completely booked up at a higher income than I would have ever projected. Wow, what an education I've had!
For those of you have been following this saga, it has been a wild ride but a great lesson for newbies (like me) and vets alike. As you scan over the responses (in "Desperate in Memphis") you will see they ranged from ”dump the property at a loss” to a lot of helpful suggestions and tips. Well, here's the story...
In summary, I purchased a “tenanted” duplex (3/1 on each side), nicely rehabbed, from a turn-key company based in Singapore. Shortly after escrow, my two “in-place” tenants “conveniently disappeared." The turn-key fortunately had a 6-month rent guarantee so I didn't feel the full hit -- at least not at first. Now, I know what you’re thinking – TWO RED FLAGS: turn-key out of Singapore and 6-month rent guarantee! OK, have some grace. I’m a newbie!
Anyway, the “in-place” property management firm also quit shortly after escrow. The turn-key’s “on the ground” people highly recommended another PM who ended up being “less than pro-active,” never visited the property and whose idea of marketing consisted of lowering the rent until “someone bites.” After 4 months, I was very concerned and started shopping for a new PM. Most didn't even want to touch the property because it was in “the wrong part of town.” Rent was lowered from $750 per unit to $500 and there were still no prospects. It was at this point that, out of total frustration, and after much prayer, I logged onto BP’s forum and wrote “Desperate in Memphis.”
Immediately, I started receiving a flood of comments and advice from a high level of experienced investors. Most of the comments, however, were leaning toward “dump the property now at a loss.” I was discouraged but listening and willing to do whatever was necessary. However, I’m more of a “half-full” type guy so, although the “half-empty” crowd had some great points, I knew that there was more than one way to view this problem. I strongly felt that although this may not be the best area of Memphis, people still need a decent place to live and if there was any way to keep this property I had to find out.
There were also a few BPers who were encouraging; one in particular from a veteran in Memphis named @Derrick Craig. His comments consisted of practical advice to help get the property booked. He didn't see the property as a “total loss.” He was a “half-full” guy like me AND he lived in and knew the Memphis market well. He understood property management (he owns a property management firm), turn-keys (he also owns a turn-key company) and he especially knew the area where my property was located (he grew up in a similar area).
I started checking around and spoke with other BPers who knew Derrick and asked what they thought of him. Each person had only the highest regard for his character and professionalism. And usually their comments followed with, “if you could get Derrick to handle your property your problems would be solved.” I found out they were right. I also found out he was a big Patriots fan.
I contacted him offline and, after a number of conversations, he agreed to work with me. My current PM wasn't too thrilled but I had no other choice. My PM reluctantly released the property “without penalty” and Derrick jumped right in. Before I even officially hired him, on his own initiative, Derrick went to the property, took notes and pointed out a number of issues of concern, including the fact that a squatter had moved into one of the units. I knew at this point he was a mover.
I hired Derrick January 5. By January 13, I had a section 8 tenant in one unit with a potential rent of $797. By February 11th, I had my second tenant in at $650. Gross rent of $1,447! I moved from “Desperate in Memphis” to “Deliriously Ecstatic in Memphis” in less than 60 days! Praise the Lord! Thank you BP. Thank you to all who took the time to offer their advice and suggestions on my post. And a big thanks to @Derrick Craig – Rock Star from Memphis! (Don’t move to Graceland!)
In summary, here are a few of my lessons learned:
- BiggerPockets is an invaluable resource that EVERY investor should be utilizing extensively!
- Property management is NUMBER ONE for the Buy and Hold crowd! Never settle without carefully vetting your property management prospects before hiring.
- Best turn-key companies are those with offices in the areas where you are buying.
- “Half-full,” rose-colored-glasses investors can still survive and thrive in real estate.
- Build up a great team of advisers, mentors and colleagues. I made some great contacts and friends through my post!
- Never give up! No matter how discouraged you get. Miracles still happen!
God bless. Bill