foreigner investing in memphis

23 Replies

Hi all!

Just joined the forum. I am particularly interested in buying rental property in Memphis and I have seen some deals on 38127 and 38109. Should I go ahead as my interest is the cash flow and intend to use a property manager?

Promotion
Marko Rubel
ATTENTION INVESTORS
Get Deals 100% Funded – No Credit, No Banks, No Job Verification
New Unlimited Funding® program for investors: low-interest, without banks or shark lenders.
Check availability

@Busayo Kayode

welcome to the forums. Please note that you can rotate your profile picture by visiting your profile and adjusting. Then people can see what you look like without rotating their heads.

If you are going to invest out of state, please be sure to read forum posts about investing out of state, turnkey, and doing rehabs from out of state.

Have you been to Memphis and viewed the houses, neighborhood and city first hand? Are you willing to go? Have you researched values and rent with sources other than the seller? There are plenty of folks willing to sell you an overpriced junker with promises of rents that are above market and are perfectly happy to leave you in a losing position. Be very, very careful. If you're unwilling or unable to get on a plane and visit the area, don't invest.

@Jon Holdman thanks for the info. I planned to use a property management company and they have viewed it and it is presently tenanted!

@Busayo Kayode....first off Welcome to BP. With both of the zip codes you mentioned, I must tell you that the risk factor is very high. Am I saying that there are not any solid rental homes in the area or any PM companies that are unable to help you in those areas? Not at all. I am going to have to agree with Jon on this one because there are certain targeted areas that certain wholesalers target because of the low purchase price, but unless you come see the area first hand, you will not be able to understand how rough certain areas in these same zip codes can be. Good luck to your future investing!

@Account Closed

First off, welcome to BP. Not sure how you originally found the website, but it is a great tool for investors and can be a great place to make some really good connections.

As for your question, there are lots of places to invest for cash flow purposes. You are not far from several good cities right there in Carolina and even just north of Atlanta. I point it out, because low barrier or entry to a market should not be the driving factor for investing. The two zip codes you listed would not be considered the best zip codes in Memphis and would be considered high risk by many investors who have been buying in Memphis for a while.

For that level of risk, there are other cities closer to you where you could find a property management company. The only difference is you could get to your properties if you needed to fairly easily. I get that Memphis may only be a flight away, but I think you should weigh your risk before buying in those particular zip codes. They are big areas where there is a lot of undulation from street to street and it is much more challenging to to get long-term and stable returns in those areas. Not impossible, but difficult.

Lastly, I am not of the opinion that there are very many property management companies that manage in those areas very well. They may do it, but few do it really, really well for you to have lasting success.

Hope that helps to give you at least some guidance before you jump in with both feet.

Chris

Welcome @Busayo Kayode

I just wanted to let you know as the others have it's always best to go visit the areas that you plan to invest in, so you will see for yourself the Good, the Bad, and the Ugly.. Some areas are not for all investors/PM companies just as @Michael, @Chris, & @Jon stated. Be careful and do your research you will be fine... Good Luck!!

FYI

I grew up in those zip codes, my mom, sister, uncles, aunts, cousins, and a ton of my friends still live in those zip codes. I attended grade school, jr high, high school, and college in those zip codes. I have also purchased real estate investments in those same zip codes...

As an out of state investor stay well away from marginal areas like this. memphis is very funky and marginal areas can turn to sh*te. Not worth the risk.

I'm an out of state investor from CA and just closed on a property in 95827. Like many others here have said you really need to be careful in many of the areas of Memphis. Unless you are really familiar with the area you can easily get burned.

I flew out to TN and did research prior to buying plus my wife is from Memphis and knows the area. 95827 has many lower priced homes but that doesn't make them deals. The purchased the home in that zip code as it was the one bad house on the street and was fully refurbished. It was a total remodel and has been performing well for the past year.

Good luck.

Updated over 7 years ago

Sorry for the typo. 38127 is the zip code for the house I closed on last month in the Memphis area.

@David Hutson

You last post is confusing. You said you just closed on a home in 95827 which is the zip code for where you live in California. How does that have to do anything with investing in Memphis or long distance?

Did you mean to put a zip code of Memphis and not your personal area code from CA?

Promotion
PPR Note Company
Note Investing
Diversify your portfolio and get completely passive cashflow.
All without tenants, repairs, or vacancies - in a real-estate-backed investment fund.
Here's how.

@Busayo Kayode

Yep it is cheap to buy in those zip codes. There is a reason for that. Be aware, very aware of what you are getting into. At the very least get to Memphis and take a tour of the city. These are tougher areas you are looking at. It can and does work in those areas, but it requires much more effort and oversight. You can lose very quickly here if you are not vigilant.

Oh and welcome to BiggerPockets!

Good luck,

Kevin

Hey @Account Closed

Also - here's a couple articles you might enjoy:

The 21 Best Real Estate Investing Books Ever

How to Rent Your House: The Definitive Step by Step Guide

Oh - and be sure to set up some Keyword Alerts- especially for "Fayetteville" so you'll be notified when people mention it here in the forums.

Thanks again for introducing yourself!

@Account Closed I just ran across this thread and thought I would give you my 2 cents. If you have the opportunity to fly out and see the houses, I strongly suggest doing that, you may be surprised just how much blight is in those areas. Those 2 zip codes are some of the roughest in Memphis. I own 1 home in 38127 without a mortgage and have lost money 2 years in a row on it. I am "all in" for $20,000.....just this last week, I offered the property at my local REIA for $10,000 and no one bit on it. That should be a warning when local real estate professionals do not even want to touch that area. If you do buy in the area, I suggest pulling your AC, Furnace and H2O tank each time it goes vacant. That will save you thousands---don't waste your money on a AC cage, those things slow down the thieves an additional 5 minutes when they take your unit. Lastly, if you are in this area, the 2% rule should be in effect.

Good Luck!

@Alex Craig. Thanks for the information. It's quite enlightening. How thorough was your screening of prospective tenants if I may ask?

@Account Closed Since we manage 300 properties, we use our PM software that has built in tenant screen. That program evaluates the credit history and score--it will also bring up any liens such as federal tax liens, etc. We also do a criminal background check and search for judgments on the Memphis Daily News. Then we do a rental history check and verify that with the past landlord. We want to make sure they do not have any prior evictions--a former landlord can verify that, but so can the public record check through the Memphis Daily News. Then we ask for pay check stubs to make sure they can afford the home. We also ask for a current utility bill--if they can't get utilities in their name, then that is most certainly a red flag. With all that information, we put the pieces together and make a decision. That is pretty much our underwriting for each and every property.

All that being said, I am also realstic when it comes to finding a tenant in low income areas such as 38127 and 38109. The property could sit for a very long time if I hold out for someone to pass all of those background criteria's. The reality is, 38127 and 38109 are not very desirable places to live and with such a high criminal activity in those areas, it naturally does not attract the "best of the best" tenant selection. Memphis is a big town, there are other places to live for the same rent price that are safer and closer to parts of town where there are things to do. 38127 is one of the most economically depressed parts of the city, if not the most depressed part. The largest chain of grocery stores in the area just pulled out of 38127. I only manage a handful out there; when I go out there, I never stop at any of the gas stations--I really don't like getting out of the car there.

I know of 1 individual that has made 38127 work. The key that will give you the best chance of success in that area is finding a Property Manager that knows how to manage in that area. I would be willing to share that individuals name with you.

Don't let me scare you off, I have seen people be successful here in those parts of town, but I also want out of state investors to fully understand what they are getting themselves into. It is not easy not for the faint of heart. It can he a high risk-high reward investment. If you find a well renovated property with good management and they luck upon an individual that will stay several years, then you will make a excellent return.

Good luck. Given that you are willing to take action is the first step that many never achieve. Feel free to reach out to me and I will help you where I can with my 2 cents and personal references that can give you the best chance to win in low income areas.

For 38127, if the house is not in SkyLake, or near Delano, steer clear. Google earth addresses in 38127 and look at the streets. Trust me, the pics don't lie.

I own 3 rentals in 38127 and they are in the BEST parts of 38127 and I collect my $700 on time every month.

Cheap doesn't always mean good, so work with a native that you TRUST that knows Memphis and won't have you looking foolish.

There are many other zip codes with quality, and deep discounts!!!

I'm going to have to agree with

@N.A. N.A. . 38127 is tricky, but if you stick to the best areas you will find some good renters!! I have one right now that is listed with me. Its near Delano and right off I-40. Contact me for more information if you're interested.

38125 is pretty great as well. I have a rental there that I refuse to sale!! My renters have been with me for 3 years and are awesome! My advice would be to link up with someone that knows Memphis and kept help you weed thru the good and bad areas/deals. I am a Memphis native and a realtor. I would be glad to help you!

Thanks,

Courtney Taylor

Busayo, do you know his royal most honorable prince Halbalama? He owes me a lot of money I sent him over the internet and being you are a magistrate in Nigeria perhaps you can help?

As a foreigner investor I get this question a lot when it comes to buying in the United States. Never chase yields. Chasing yields will usually get you into deep water fast. See the problem when going for cheap property is your main competition is local investors. This is a problem because they know their markets better then anyone. Mainly because they are in the trenches and get the deals before anyone else. Once they cherry pick the ones they want the crappy ones are left to the open market.

What I have found in my 8 years of investing is in the long run cheap properties don't carry the appreciation as an area where people are lining up to get into. If your in it for the long run I suggest to pick a more stable market. Remember real estate is always about location, location, location! A 8% yield could potential turn into a 25% yield with little hassle along the way.

Choose your battles wisely

Originally posted by @Courtney Taylor :
I'm going to have to agree with

@N.A. N.A. . 38127 is tricky, but if you stick to the best areas you will find some good renters!! I have one right now that is listed with me. Its near Delano and right off I-40. Contact me for more information if you're interested.

Mr. Taylor I believe we are saying basically the same thing. Thanks for your offer, I will keep you in mind.

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