My Experience With Memphis Invest (Turnkey Company)

47 Replies

Hey y'all! So, I recently tried out my first home purchase with a company called Roofstock and had a terrible experience.

This is round number 2!! Going with a company called Memphis Invest. They have a TON of good reviews so I'm going with them mostly based off of that.

I wanted to start this thread to show you my actual numbers on the house I'm buying. With Roofstock I felt duped their numbers and the way they do business. There were a lot of numbers weren't just over-exaggerated, they weren't even close. Anyway, Memphis Invest seems to have a reputation for the opposite, being very conservative with their numbers so you know what you're getting.

So far the communication is great, but at the end of the day we'll have to see how the numbers pan out. So going to put the estimates they gave me now. 6 months from now I'll update the thread and let you know the actual numbers that went down to see the comparison. Then going to keep updating it year after year partly just for my own records, but hopefully it can help some of y'all too if you're thinking of investing with them.

Single Family Home in Little Rock, AR
3 bed, 2 bath - 1652 Sq Ft

Price: $149,900
Down Payment (20%): $29,980
Loan Amount (30 year): $119,920
Closing Costs (based on my estimates of 3.5%): $5,247

Monthly Numbers Estimates

Estimated Rent: $1,125
Mortgage (Based on lender's upper estimation of 4.85%): $635
Taxes: $123
Insurance: $44
Vacancy (4%): $45
Repairs (4%): $45
Property Management (10%): $113
First Month's Rent: $94

Total Monthly Revenue: $1,125
Total Monthly Expenses: $1,099
Total Monthly Profit: $26

So.. .couple things.

The house is fully rehabbed (new roof and everything), so that's why the low 4% repairs estimate.

For vacancy, 4% is also low, but according to Memphis Invest their average tenant stays on for 4 to 5 years, so if that's true, 4% is actually an overestimation.

This also doesn't account for depreciation savings on taxes, loan paydown, and appreciation of the house. Also, this is a completely turnkey property and fully managed, so I'm expecting less of a return than if I'd bought a house myself. I own my own business and my time is much better spent working on that than learning the ins and outs of real estate.

Anyway, I'll keep ya updated!

@Zachary Schimenz thanks for sharing your numbers! I will likely invest with Memphis Invest at some point in the future. I've heard nothing but great things about their customer service and have had a good experience in my initial discussions with them. My only issue with the numbers is that even though their properties are fully renovated, at some point CapEx will have to be taken into account.

I look forward to following along with your updates to see how this property does in the future!

@Zachary Schimenz . I’ve owned property in memphis. Some of it was turnkey (not from memphis invest). A couple of things:

1. Your maintenance is low. Rehabbed or not it will be higher over time. One service call will be 80-100 dollars. That’s just to get a contractor to go out there.

2. Your insurance is low. It will be higher. My insurance was more than what you’re budgeting and the value of the homes was much less.

3. Check the property tax assessor website for the value they currently value this property at. Let’s say it’s 80k. The year after you buy it this will likely go closer to the purchase price of 150k, leading to a jump in pricing. This happened to me twice on two separate properties in two different neighborhoods. It’ll likely happen to you.

Add this all up and this will be a cash flow negative deal long term. I highly recommend not buying this property.

@Zachary Schimenz do you live in Little Rock? 

With your if $26.monthy Profits with over 30k down it doesn’t look to appealing to me. With less down than that I could get you more profits per month that and even finance the deal myself:) It would not even show on your credit report.:) How many you want a year? 

As for as turn key companies goes if it’s the property management you need there are tons of reputable management companies. 

You must make a ton of money at your business to be able to put that kind of money down with little to negative cashflow in return.

I agree with @Caleb Heimsoth . I think if you were paying into your repairs, capex, and vacancy at a higher rate that is the definition of conservative. If you give yourself criteria on what you're looking for and how much you want to pay for what you're after it will be less properties that will be viable but the ones that fall within that sweet spot will become your bread and butter. Being selective is not a bad thing. This one has too thin a margin for me. I look for pp and repairs all in to come in under the 1% rule for rent. It's just a guiding rule so that I don't get too carried away and over buy or undercut repair costs.

Originally posted by @Caleb Heimsoth :

@Zachary Schimenz. I’ve owned property in memphis. Some of it was turnkey (not from memphis invest). A couple of things:

1. Your maintenance is low. Rehabbed or not it will be higher over time. One service call will be 80-100 dollars. That’s just to get a contractor to go out there.

2. Your insurance is low. It will be higher. My insurance was more than what you’re budgeting and the value of the homes was much less.

3. Check the property tax assessor website for the value they currently value this property at. Let’s say it’s 80k. The year after you buy it this will likely go closer to the purchase price of 150k, leading to a jump in pricing. This happened to me twice on two separate properties in two different neighborhoods. It’ll likely happen to you.

Add this all up and this will be a cash flow negative deal long term. I highly recommend not buying this property.

Caleb,

I wanted to correct one thing in your post.  The insurance costs on the property are accurate.  We have our own insurnace program for properties that we have renovted and that are in our management company.  Why is it so low?  Because when you renovate to such a high level, do such a good job renovating and managing property that residents stay on average over 5 years, you have an insurnace loss rate that is 60-70% lower than a typical property management company, and are able to negotiate rates on the basis of managing 6,000 of those properties, you are able to provide lower rates.

I saw you mentioned that you had not bought from Memphis Invest, so I totally understand that your opinions are based on your experiences with other companies.  I just wanted to point out that the other numbers you mentioned have some variables.  The insurance doesn't.  It is going to be that low if Zachary uses the program built on the strength of how we operate and the size of our portfolio. 

Originally posted by @Chris Clothier :
Originally posted by @Caleb Heimsoth:

@Zachary Schimenz. I’ve owned property in memphis. Some of it was turnkey (not from memphis invest). A couple of things:

1. Your maintenance is low. Rehabbed or not it will be higher over time. One service call will be 80-100 dollars. That’s just to get a contractor to go out there.

2. Your insurance is low. It will be higher. My insurance was more than what you’re budgeting and the value of the homes was much less.

3. Check the property tax assessor website for the value they currently value this property at. Let’s say it’s 80k. The year after you buy it this will likely go closer to the purchase price of 150k, leading to a jump in pricing. This happened to me twice on two separate properties in two different neighborhoods. It’ll likely happen to you.

Add this all up and this will be a cash flow negative deal long term. I highly recommend not buying this property.

Caleb,

I wanted to correct one thing in your post.  The insurance costs on the property are accurate.  We have our own insurnace program for properties that we have renovted and that are in our management company.  Why is it so low?  Because when you renovate to such a high level, do such a good job renovating and managing property that residents stay on average over 5 years, you have an insurnace loss rate that is 60-70% lower than a typical property management company, and are able to negotiate rates on the basis of managing 6,000 of those properties, you are able to provide lower rates.

I saw you mentioned that you had not bought from Memphis Invest, so I totally understand that your opinions are based on your experiences with other companies.  I just wanted to point out that the other numbers you mentioned have some variables.  The insurance doesn't.  It is going to be that low if Zachary uses the program built on the strength of how we operate and the size of our portfolio. 

Thanks for pointing that out Chris.  I had thought of that after I posted.  OP didn’t clarify if that was an estimate or actual cost. 

Originally posted by @Zachary Schimenz :

Hey y'all! So, I recently tried out my first home purchase with a company called Roofstock and had a terrible experience.

This is round number 2!! Going with a company called Memphis Invest. They have a TON of good reviews so I'm going with them mostly based off of that.

I wanted to start this thread to show you my actual numbers on the house I'm buying. With Roofstock I felt duped their numbers and the way they do business. There were a lot of numbers weren't just over-exaggerated, they weren't even close. Anyway, Memphis Invest seems to have a reputation for the opposite, being very conservative with their numbers so you know what you're getting.

So far the communication is great, but at the end of the day we'll have to see how the numbers pan out. So going to put the estimates they gave me now. 6 months from now I'll update the thread and let you know the actual numbers that went down to see the comparison. Then going to keep updating it year after year partly just for my own records, but hopefully it can help some of y'all too if you're thinking of investing with them.

Single Family Home in Little Rock, AR
3 bed, 2 bath - 1652 Sq Ft

Price: $149,900
Down Payment (20%): $29,980
Loan Amount (30 year): $119,920
Closing Costs (based on my estimates of 3.5%): $5,247

Monthly Numbers Estimates

Estimated Rent: $1,125
Mortgage (Based on lender's upper estimation of 4.85%): $635
Taxes: $123
Insurance: $44
Vacancy (4%): $45
Repairs (4%): $45
Property Management (10%): $113
First Month's Rent: $94

Total Monthly Revenue: $1,125
Total Monthly Expenses: $1,099
Total Monthly Profit: $26

So.. .couple things.

The house is fully rehabbed (new roof and everything), so that's why the low 4% repairs estimate.

For vacancy, 4% is also low, but according to Memphis Invest their average tenant stays on for 4 to 5 years, so if that's true, 4% is actually an overestimation.

This also doesn't account for depreciation savings on taxes, loan paydown, and appreciation of the house. Also, this is a completely turnkey property and fully managed, so I'm expecting less of a return than if I'd bought a house myself. I own my own business and my time is much better spent working on that than learning the ins and outs of real estate.

Anyway, I'll keep ya updated!

If you hit all the numbers exactly as you predict your Cash on Cash return in year 1 is .88 percent. This is less than inflation. You can earn a lot more return with a lot less headaches than rental properties In a lot of other ways.

Technically, by your own numbers a high yield savings account would earn you more (closer to 2 percent) and there’s virtually no risk.  Think about that for a second.

Originally posted by @Clifford Paul :

Wholly smokes! Are you really going to invest $29k for a return of $26 a month? 

A 10 plus year bull market leads to some crazy things...

 

Originally posted by @Caleb Heimsoth :
Originally posted by @Clifford Paul:

Wholly smokes! Are you really going to invest $29k for a return of $26 a month? 

A 10 plus year bull market leads to some crazy things...

 I'm crazy, just ask my mental health provider but that's lock you up kinda stuff there. I have my minimum cash flow at $500 a door and have more deals than I want to buy.  I might just have to start a turnkey business. 

 

Originally posted by @Caleb Heimsoth :
Originally posted by @Zachary Schimenz:

Hey y'all! So, I recently tried out my first home purchase with a company called Roofstock and had a terrible experience.

This is round number 2!! Going with a company called Memphis Invest. They have a TON of good reviews so I'm going with them mostly based off of that.

I wanted to start this thread to show you my actual numbers on the house I'm buying. With Roofstock I felt duped their numbers and the way they do business. There were a lot of numbers weren't just over-exaggerated, they weren't even close. Anyway, Memphis Invest seems to have a reputation for the opposite, being very conservative with their numbers so you know what you're getting.

So far the communication is great, but at the end of the day we'll have to see how the numbers pan out. So going to put the estimates they gave me now. 6 months from now I'll update the thread and let you know the actual numbers that went down to see the comparison. Then going to keep updating it year after year partly just for my own records, but hopefully it can help some of y'all too if you're thinking of investing with them.

Single Family Home in Little Rock, AR
3 bed, 2 bath - 1652 Sq Ft

Price: $149,900
Down Payment (20%): $29,980
Loan Amount (30 year): $119,920
Closing Costs (based on my estimates of 3.5%): $5,247

Monthly Numbers Estimates

Estimated Rent: $1,125
Mortgage (Based on lender's upper estimation of 4.85%): $635
Taxes: $123
Insurance: $44
Vacancy (4%): $45
Repairs (4%): $45
Property Management (10%): $113
First Month's Rent: $94

Total Monthly Revenue: $1,125
Total Monthly Expenses: $1,099
Total Monthly Profit: $26

So.. .couple things.

The house is fully rehabbed (new roof and everything), so that's why the low 4% repairs estimate.

For vacancy, 4% is also low, but according to Memphis Invest their average tenant stays on for 4 to 5 years, so if that's true, 4% is actually an overestimation.

This also doesn't account for depreciation savings on taxes, loan paydown, and appreciation of the house. Also, this is a completely turnkey property and fully managed, so I'm expecting less of a return than if I'd bought a house myself. I own my own business and my time is much better spent working on that than learning the ins and outs of real estate.

Anyway, I'll keep ya updated!

If you hit all the numbers exactly as you predict your Cash on Cash return in year 1 is .88 percent.  This is less than inflation.  You can earn a lot more return with a lot less headaches than rental properties In a lot of other ways.  

Technically, by your own numbers a high yield savings account would earn you more (closer to 2 percent) and there’s virtually no risk.  Think about that for a second.

So, I'm a little surprised that in the jump to knock the numbers or the deal, no one has asked about that charge he listed for $94. First months rent of $94 as a monthly charge should have jumped out to more people than me.  It is a charge that seriously effects the numbers as it is more than vacancy and maintenace combined.  

That charge is a lease up fee. It equals 8% or 1/12th of the monthly rent to account for the lease up costs. Hopefully there is not one at the beginning of the lease as ideally the property is rented before closing. But, for conservative accounting, it is smart to accrue for it. The error though is accounting for it as if that charge occurs yearly. It does not. If a property needs to be leased every 5 years, then rather than an $94 accrual each month meaning taking a monthly charge every year, it should be $19 each month or a monthly charge every 5 years. Adding $75 to estimated monthly income or $900 yearly after all fees have been accrued is certainly a good thing.

I haven't spoken to Zacahry and won't unless it is somethign that he specifically would like to do before closing. Our team is well equipped to handle his questions. I believe that change would put the return well above inflation, your average high yield savings account and putting a bag full of cash under your mattress.  It may not be an investment that some posters here on BP would make, but it beats the heck out of buying fantasy numbers on a piece of paper decorated with cupcakes and rainbows and it sure beats hanging out doing nothing because your first deal didn't work out.  Hats off to Zachary either way for not giving up after one deal doesn't turn out the way you expected.


Turning $30,000 into $26 per month seems beyond foolish to me.

If 4% is the proven track record of vacancy rate, and 4 years the average stay. That’s simply 8 weeks for turnover at the end of that term.

@Zachary Schimenz I'm normally a very positive

, see the good in everything type guy, but.... no offense this deal is terrible ! I could play MLS roulette and find a better deal that this. Just being honest!

@Zachary Schimenz thank you for sharing the details of your deal. We don't often get this type of information on turn key deals, so it is is helpful to understand. Lots of people are criticizing the numbers. Most are comparing to their own experience of buying, rehabbing and self managing. That is not really a fair comparison. People don't go to turn key to get the "screaming hot deal of the century". They choose turn key to get a solid investment with little time investment. 

I have used the analogy that turn key is like going to a restaurant versus cooking a meal at home. Everyone knows it costs less to cook meals at home, but also takes more time and effort. In many cases the professional chef is also a better cook, so you get a better meal. Could you buy a house, manage rehab, lease it and manage it yourself and save money? Of course. It will come with a time commitment and requires skill. 

I will agree that the repair budget and lack of CAPEX budget is a little too optimistic. Even in my new home I built ten years ago, I had several repairs pop up over the first few years. Yes, even when everything is new, it can still break. Unfortunately the quality of appliances, plumbing, electrical and HVAC is not what it used to be. That being said, with my portfolio of houses, some can go years without a repair. Some have multiple repairs a year.

Turn key isn't for everyone, but it is better to get into investing using turn key, then to never invest at all. Cash flow is only one of several ways to make money in real estate.

Originally posted by @Zachary Schimenz :

Hey y'all! So, I recently tried out my first home purchase with a company called Roofstock and had a terrible experience.

This is round number 2!! Going with a company called Memphis Invest. They have a TON of good reviews so I'm going with them mostly based off of that.

I wanted to start this thread to show you my actual numbers on the house I'm buying. With Roofstock I felt duped their numbers and the way they do business. There were a lot of numbers weren't just over-exaggerated, they weren't even close. Anyway, Memphis Invest seems to have a reputation for the opposite, being very conservative with their numbers so you know what you're getting.

So far the communication is great, but at the end of the day we'll have to see how the numbers pan out. So going to put the estimates they gave me now. 6 months from now I'll update the thread and let you know the actual numbers that went down to see the comparison. Then going to keep updating it year after year partly just for my own records, but hopefully it can help some of y'all too if you're thinking of investing with them.

Single Family Home in Little Rock, AR
3 bed, 2 bath - 1652 Sq Ft

Price: $149,900
Down Payment (20%): $29,980
Loan Amount (30 year): $119,920
Closing Costs (based on my estimates of 3.5%): $5,247

Monthly Numbers Estimates

Estimated Rent: $1,125
Mortgage (Based on lender's upper estimation of 4.85%): $635
Taxes: $123
Insurance: $44
Vacancy (4%): $45
Repairs (4%): $45
Property Management (10%): $113
First Month's Rent: $94

Total Monthly Revenue: $1,125
Total Monthly Expenses: $1,099
Total Monthly Profit: $26

So.. .couple things.

The house is fully rehabbed (new roof and everything), so that's why the low 4% repairs estimate.

For vacancy, 4% is also low, but according to Memphis Invest their average tenant stays on for 4 to 5 years, so if that's true, 4% is actually an overestimation.

This also doesn't account for depreciation savings on taxes, loan paydown, and appreciation of the house. Also, this is a completely turnkey property and fully managed, so I'm expecting less of a return than if I'd bought a house myself. I own my own business and my time is much better spent working on that than learning the ins and outs of real estate.

Anyway, I'll keep ya updated!

Investing in a Turnkey is always a great way to get started in a new market. I always suggest making sure they are a TRUE Turnkey company. They should own the property first (NOT JUST LIST IT) they should do all of the renovates in-house prior to closing. They should also place a tenant before any title is transferred. Finally, they should do the property management IN-HOUSE! They should not just push you off n some "trusted" management company you have never heard of.

Try looking at:

Assessing the Risk of a Turnkey Real Estate Company


5 Keys to Turnkey Real Estate Investing

@Caleb Heimsoth Seems to have covered the cash flow aspect of the deal. Another thing to keep in mind is what would happen if you had to sell the home in the next few years. I'd recommend checking comparable sales for the area, and learning what the average cost per sale would be. Also, try to figure out how having a tenant in place would affect the sale price. (It certainly limits the buyer pool if there's a tenant in place)

I've seen investors buy turnkey rental properties, and then turn around and sell them at a healthy profit to an owner-occupant a few years down the road; check the comps to see if selling to an owner occupant could provide a realistic exit strategy. The last thing you want is a house that bleeds cash, and then wipes out your down-payment when you go to sell it.

Thank you guys for the feedback. Couple things:

1. For me, having a true turnkey experience is super important. My time is much better spent building my business where I know the market than spending that time scoping for real estate deals, dealing with property managers, etc. Memphis Invest has a reputation for being as hassle free as they get. Yes, I could make more money doing my own deal but the time commitment and learning curve isn't worth it to me.

2. I'm curious why everyone uses Cash-on-Cash as the basis for comparing to the stock market or mutual funds. Loan paydown and the Depreciation Tax Write Off are both guaranteed (as opposed to Appreciation which is likely but not guaranteed) and have a HUGE impact on ROI, so why don't most people take this into account?

3. At this point I've spent long enough "researching, reading, and analyzing" real estate. At the end of the day everyone has different opinions on estimates and I won't know the true numbers for my situation until I take the leap and actually see for myself. When I built my business there were plenty of times where I spent money trying things that ended up losing money. But I learned a lot each time and I believe by moving faster I made way more money in the long run by finding out what didn't work early on and then using that knowledge to find out what did work, instead of continuing to research.

So, long story short, I'm going to go through with the deal. Maybe it turns out great. Maybe it doesn't, I end up selling and losing some money, and I look for the next one. We'll let the future decide.

Free eBook from BiggerPockets!

Ultimate Beginner's Guide Book Cover

Join BiggerPockets and get The Ultimate Beginner's Guide to Real Estate Investing for FREE - read by more than 100,000 people - AND get exclusive real estate investing tips, tricks and techniques delivered straight to your inbox twice weekly!

  • Actionable advice for getting started,
  • Discover the 10 Most Lucrative Real Estate Niches,
  • Learn how to get started with or without money,
  • Explore Real-Life Strategies for Building Wealth,
  • And a LOT more.

We hate spam just as much as you