Memphis Passive currently owns and manages a portfolio of 213 rental units throughout the Memphis market. The entire portfolio is occupied by tenants participating in Memphis Housing Authority programs and collectively generates approximately $120,000 per month in net cash flow.
What made you interested in investing in this type of deal?
Security back by the US government.
How did you find this deal and how did you negotiate it?
BRRRR Method just recycling money over and over again.
Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
1mo
nicely done 150k a door average that puts you in better areas of memphis..
did you pull all your cash out or you say you have 7 mil invested in the porfolio which is basically 20% into each one in cash.. is that what you mean there. ???
Investor · Collierville, TN 38017 · Member since 2017 · 602 posts · 449 votes
5d
Everything I do is a cash-out refi. Typically, I get them with cash for the hard money down payments and holding costs. Typically, it runs about 20%, and then I refi and get all my cash back out. Rinse and repeat method.
CPA, CFP®, PFS · FL · Member since 2017 · 5k+ posts · 3k+ votes
2d
A little late on this one, but this is a really interesting example of scaling a BRRRR strategy beyond the typical single-property approach.
The part that stands out is the focus on recycling capital and using a repeatable process. At 200+ units, the operational side becomes just as important as finding the deal itself, management, reserves, tenant programs, financing structure, and tracking performance all become critical.
Appreciate you sharing the numbers and the thought process behind it. Always interesting to see how investors move from individual properties into larger portfolios.
Investor · Collierville, TN 38017 · Member since 2017 · 602 posts · 449 votes
2d
Dmitriy, Ashish - thank you both, and Ashish put his finger on the thing that actually changes, so let me go further with it than the original post did.
What breaks between fifty doors and two hundred is not that operations get harder. It is that your problems stop being independent. At twenty doors a bad month is one bad house, and the portfolio absorbs it. At two hundred, in one market and one program, the failures start arriving correlated. One housing authority policy change touches every door on the same day. One insurance renewal reprices the whole book at once. One hail event hits forty roofs. A labor shortage in a city of this size is not a maintenance problem, it is a capacity problem across the entire portfolio simultaneously. The diversification you think you have inside one market is largely an illusion, and scale is where you find that out.
Which changes how I think about reserves, and this is the part I would argue with most spreadsheets about. Per-door reserve numbers are almost always calibrated on average maintenance. Average maintenance is not what hurts you - you can absorb average out of cash flow. What hurts you is the simultaneous event, and the correct question is not what does a door cost me in a year, it is what is the largest number of doors that can need money in the same week. Reserve against that and the number is uncomfortable. Reserve against the average and you are fine right up until the one month you are not.
On tracking performance, since you named it: the two numbers I would defend over anything on a standard report are days actually vacant, which is not days on market and is usually much worse, and the share of work orders closed on the first visit. That second one is the best single proxy I know for whether the people touching your houses know what they are doing, it predicts your maintenance spend a year out, and almost nobody measures it.
And one correction to my own post above, because it has been sitting there a month and it is sloppier than it should be. I wrote security backed by the US government. That is too clean. The housing assistance payment is reliable and it arrives, and that genuinely is the best part of this business. But the payment standard is a policy number set by a local authority inside a band, and it can move down as well as up - I have been writing about the FY2027 changes elsewhere on here for exactly that reason. And the tenant portion is not government money at all; it is a household's money, and it collects like any other household's money does. Calling the whole thing government-backed overstates it, and somebody underwriting off that sentence would be underwriting off a version of the program that does not exist.
Ashish, since you are a CPA and I am not - the recycling process has a ceiling that I do not think gets discussed enough, and it is not operational. Every turn of the BRRRR depends on an appraisal, and in a market this cheap the appraisal is the least reliable input in the whole model. The comparable set is thin, and it mixes renovated and unrenovated stock that trade at genuinely different levels, so the number that comes back is often one that neither kind of buyer would actually pay. When that number comes in light you do not recycle the capital, and the repeatable process stops being repeatable. That is the real constraint on this strategy at scale, far more than management is.
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