Help With Memphis Property

12 Replies

As a new investor I am hoping someone could help me in looking at two properties in Memphis.

Property 1:

6740 State Line Rd

Memphis, TN 38141

2 floor, 3 bedroom, 2 .5 bath with a 2 car garage selling at $99,000. Just renovated with most things being new. 1,775 sq feet on a 10,000 square foot lot. Built in 1996. Last sold in 2012 for $55K.

Price: $95,000

Mortgage Amount: $79,200 (20% down)

Closing Costs: $4,950

Cash Invested: $24,750

Rent: $1,095 a month and $12,483 annual (8% vacancy)

Property Tax: $1,086

Insurance: $900

Interest: $3,643.2

Property Management $1,051.2

Repairs and capital expenses: 9% of rent ($1,087.99)

NOI: $4,320

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Property 2:

4350 Egyptian Cv,

Memphis, TN 38128

1 story 3 bedroom, 2 bath with a garage selling at $64,500. Just renovated with most things being new. 1,105 sq feet on a 8,310 square foot lot. 5 total rooms with a fireplace. Built in 1993. Last sold in 2008 for $51K.

Price: $64,500

Mortgage Amount: $51,600 (20% down)

Closing Costs: $5,500

Cash Invested: $18,400

Rent: $850 a month and $9,384 annual (8% vacancy)

Property Tax: $700

Insurance: $900

Interest: $2,373

Property Management $918

Repairs and capital expenses: 10% of rent ($938.40)

NOI: $3,554

@Gary Freidman  

Please let us know exactly what type of help are you looking for us to help you with?

Please be a little more specific so the BPers can reply to your forum question..

@Gary Freidman  

  check to make sure there is only one TAX  Memphis has city tax and county tax.. so tax's can be more than what your projecting

I am sure @Derrick Craig  

  could tell you right off the top of his head if this is the case on these two properties.

In addition you normally have a leasing fee your not accounting for.

@Derrick Craig  I was just curious if I was paying too much or if any of the assumptions were unreasonable. In many cases people on the ground also know things about certain locations others do not from outside.

@Jay Hinrichs  that is correct but in this case there are no city taxes. The other side of that is that it is also out of the way more than other properties that I know better in more developed areas from when I lived there very early on in life (close to White Station).

I think leasing fees were included in management but I need to make sure. 

@Gary Freidman

Those two homes you are asking about happen to be owned by yours truly!!!  Curious as to where you found them for sale at?  

Your repairs and capex allocation seems pretty optimistic to me...

@Justin H.  what would be a better number for a newer property built in the 1990s?

@Gary Freidman  how did you come up with your numbers for capex and repairs? For capex, a simple spreadsheet will get you to a better number knowing the details of the property. One of the BP blogs was recently written on this so there's a reference. I think the numbers there are high for TN but maybe not if you are out of town. The monthly capex number is the same, renovated or not. The current condition should just affect how much you set aside at the beginning. All this assuming you want to have cash available when the replacement is required. Offhand I'd say probably $150mo is reasonable for the 1700 sq ft home and little less for the smaller over the long term. Do a little math and let us know what you calculate.

@Justin H.  Thank you for the input. Do you know anyone who has such a spreadsheet or a reference guide for useful lives?

I used my number because I had seen 10% - 12% on average when I looked at posts on here but since it is newer and 100% fixed up I thought a slightly lower number than average was warranted.

I am on here for advice though so if you think it is too low I should probably use a higher number. 

@Gary Freidman  

The only way you can make absolutely sure you are not paying too much for the home is going out and hiring an independent Home inspector and also getting a Home Appraisal. I am sure if you are financing the home they will require you to do this. 

I think the Vacancy rate should be higher than 8% maybe 10% is better number to use.

You can always view various comps in the area just by scrolling through Zillow and moving the map around this will give you a better idea if it I a good deal or if you could possibly find another home in the area for a better price or not.

Vacancy and repairs are light. I would use 10% for vacancy to be safe and assuming a turn every 12 months you need to allow 2K a year for maintenance.

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