Potential First Investment - Northaven, Memphis - 38127

3 Replies | Memphis, Tennessee

Been lurking for a while on BP and now time for my first post! Hooray for finally taking action.

I have a question for the Memphis investors, but first the details:

I have come across a potential opportunity on a 4 bed/1 bath house up in the Northaven area off Watkins. I know this isn't a good neighborhood after looking at the crime stats and being somewhat familiar with that area.

That said, for a 1st time investment, the numbers look pretty good. The home is offered off-market for $20,000. Current tenant has been there for 4 years and has renewed through June of 2019 at $495/mo. Tenant is paying all utilities - water, gas, electric, garbage - and keeps up the yard. Yearly taxes at $400. Rent has not been increased at all over the 4 years and most of the rental rates are $550 plus in that area.

After running the numbers via the (awesome) BP rent calculator, it looks like cash flow will be just over the $200 per month and ROI at 30% (on a 30 yr at 5% interest with 25% down). I may be nieve in being able to get those numbers - feedback appreciated.

My questions for those "in the know":

1. Are banks lending on home prices this low in not so nice neighborhoods? (That may be a total newb question).

2. I'm not banking on any appreciation. I'd also like to not have it depreciate a large amount. Does anyone know the trends for that area?

3. As a first time investment, would it be better to go to a more stable neighborhood? Would you take this as your first deal?

4. What am I missing or not considering that you would?

Thanks in advance!