Out of state turnkey with Memphis Invest

14 Replies

A bunch of folks have asked me how my experience with Memphis Invest has been going.  It has been great!

I closed on two properties last year, and both have been performing about the same, so I'll provide details on one just so folks who are considering can know some details.

Purchase price $98,900, ~25% down, 4.375% interest rate 30 year fixed mortgage

The assessed price for the properties were lower than the purchase price, so I had to provide additional cash during closing (which is why the downpayment turned out to be more like 25% rather than 20%).  This particular property had a deed restriction, so I couldn't close on it for 2 months after it was ready.  The property rented under a two-year lease for $900 a month.

The property inspection turned up pretty clean, just a few items like pushing insulation back into place or removing some pending inspection/certification labels.  I used Jason Lovelace at Precision Home Inspections.

Closing was very straightforward, and I received access to the PropertyWare website where I could view property information after resolving an issue with my login ID being incorrect.  Since then, I've been steadily receiving owner distributions.

There isn't actually all that much more to tell because the properties have been doing find since then.  I had a weekly call with one of the investor-facing staff at Memphis Invest, and that has leveled off to a monthly call.

The best part of it all was having a really excellent team helping me through the whole process.  Someone from Memphis Invest made sure I was getting routine updates about the property, checking that I had my mortgage paperwork moving along, and confirming that I had inspections done.  I also had a chance to ask any questions, and could always reach someone at the office.

About a month after closing on the first property, I received a note from the Shelby County folks - it was a charge for cleaning up litter and waste on my property from before I purchased it.  I forwarded the letter onto Memphis Invest, and they took care of it.  Just like that.

@James Wachob thanks, James. I'll keep you in mind for future visits. I definitely plan to go back to Memphis, even with the family.

After looking at the guide on what should be posted in the 'Investor Deal Diaries', I realized that this was probably not the spot for an already closed set of deals with a turnkey provider.  Alas, I probably should have read over the posting guide before posting here.

So, I'll just close out this thread with a few more facts.

Property management fees are 10% of gross rent.  Lease up fee is first months rent.  Those are the only charges I have seen in the last several months.

The PM software Memphis Invest uses is pretty nice, in my opinion.  I can see documents stored there (like leases, scope of work documents, etc.) so I don't have to ask for those documents when I need to submit them for a loan.  Also, I receive a message whenever rent is posted to the account, which is also nice.  The other software I have experieneced is Rentmanager, and I have yet to figure out how to be notified when rent is posted.

Oh, and I highly recommend a visit to Memphis, to both meet the team, as well as seeing the area and neighborhoods (plus enjoying some fried chicken and waffles or ribs).  My favorite part of seeing the Memphis Invest offices (I just can't shorten it to 'MI'... makes me think Mission Impossible) was seeing the various slogans they had around the office, especially 'you can have excuses, or you can have results'.

Thanks for the details @Kenneth Dai

Going to play quasi-Devil's Advocate here as your deal is similar to what I'm seeing (and having issues with). 

Issue #1- Applying additional DP because purchase price was higher than assessed price. There are many MANY on here that will howl about this and state it should never be done. I've also seen where a TK provider will adjust price to the assessed price. Does this concern you? Also affects...

Issue #2- Not even meeting the 1% rule. This price point is what I'm looking at (B area I presume?). Where your CF/ appreciation is balanced and tenant quality is minimal headache. And with that...

Issue #3- Cash Flow. You don't list it but when I enter your #'s in the provided calculators and my own home-brewed spreadsheets, it results in paper- thin CF. This, I think, is offset by 1) Your awesome rate (seriously, PM me those details), 2) the 25% DP, 3) 2 year lease (fights the vacancy #'s)

I receive "deals" often and my first screening criterion is the 1% rule which, using the rates and #'s I qualify for, usually "guarantees" a $200/month CF. 

Wondering what yours are/is...?

Originally posted by @Kenneth Dai :


Looks like the mention didn't work.

Let's try this.

 

Originally posted by @TJ P. :

Thanks for the details @Kenneth Dai

Going to play quasi-Devil's Advocate here as your deal is similar to what I'm seeing (and having issues with). 

Issue #1- Applying additional DP because purchase price was higher than assessed price. There are many MANY on here that will howl about this and state it should never be done. I've also seen where a TK provider will adjust price to the assessed price. Does this concern you? Also affects...

Issue #2- Not even meeting the 1% rule. This price point is what I'm looking at (B area I presume?). Where your CF/ appreciation is balanced and tenant quality is minimal headache. And with that...

Issue #3- Cash Flow. You don't list it but when I enter your #'s in the provided calculators and my own home-brewed spreadsheets, it results in paper- thin CF. This, I think, is offset by 1) Your awesome rate (seriously, PM me those details), 2) the 25% DP, 3) 2 year lease (fights the vacancy #'s)

I receive "deals" often and my first screening criterion is the 1% rule which, using the rates and #'s I qualify for, usually "guarantees" a $200/month CF. 

Wondering what yours are/is...?

Yes, I did see the multiple posts on BP about not going with property when purchase price is higher than assessed price.  I was willing to take on that risk in order to start investing with Memphis Invest.  I have heard from several others who were not willing to do that, or who will not buy further properties like that in the future.

Regarding your other issues... I double-checked what I entered in the BiggerPockets rental calculator:

Vacancy 4% (1 month out of 24); CapEx (3%, no basis); Repairs 2% (assuming just some carpet refresh during turnover and maybe paint refresh), plus insurance $30 per month, 10% PM fee, property taxes $70 per month. That comes out to $248 monthly cashflow.

You are also correct that, when I first used the calculator with more conservative numbers, I got around $50 monthly cashflow.  I think time will tell what the appropriate numbers are to estimate expenses on Memphis Invest property.  And yes, pretty much all the properties I saw offered to me had more of a 0.8% rent to value ratio.

If I were buying and rehabbing myself, I think I would definitely look for higher rent to value ratio, to account for any mistakes I might make in the process.  With Memphis Invest, I am relying on their expertise to reduce that risk, and accept the lower RTV based on what I've heard from other folks' experience with them.

Thanks for that alternate method of pulling up name... for some reason, I can't pull in your name with a direct @ reference.

Congrats @Kenneth Dai  I also bought my first property from MI and had a good experience. 

@Kenneth Dai

I just pulled their website, but failed to find any properties there.... Do you have to sort of "join" them before they show you anything?

@Diane G. I think you have to call them, yes. The properties I got to pick from were always sent directly to me by my portfolio manager, based on my preferences (location, price range, age, etc.)

@Kenneth Dai

Hmmm.... why don't they simply just list the properties on their website for all to see? 

@Diane G. they used to but it seems like they move properties pretty quickly. So people would ask about properties on the website only to find out they are sold.

@Kenneth Dai Thank you for sharing your experience! I too did research and found your post instrumental in choosing Memphis Invest.

I do have a few questions for you (if you don't mind): You calculated only 3% of rent towards CapEx, isn't this too low? I'm reading the Bigger Pockets rental guide, and they said it should be 8-12% depending on when it was last rehabbed. Also 2% for repairs, can you let me know how you found these estimations to be good?

Secondly, how are things going with them currently? Is everything still going smoothly?

I am seriously considering them and if they can pull off $250 net income that is pretty good, but if I raise the expenses closer to what I am reading is a realistic amount, that return drops significantly. Would love to hear your thoughts on this.

@Emmanuoel Haroutunian I don't mind answering your questions. Yes, the guidelines from Bigger Pockets and many members seem to indicate that there should be at least 5% put toward CapEx along with 5-10% on repairs. I did run the numbers with the 50% rule, and larger quantities for CapEx and repairs, which ends up with around $100 or so cashflow on a property. But when I asked about what types of repairs and CapEx to expect, it didn't seem like there would be any for at least 2 years, so it seemed sufficient to set aside 5% total for anything that might come up. I could be completely wrong, and find out all cashflow from several years is wiped out by one repair in 5 years. Maybe you'll get different evaluations from others who work with Memphis Invest.

As for how things are going - after this first year, still all smooth.  The only expenses so far have been property management.

@Kenneth Dai I am looking into this company investment. Have you or will you consider buying more properties from them? 

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