Any thoughts on this deal?

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Chris Clothier · Answer

I have no idea who is offering this property or where this description came from:

75k asking price; Described fixer. Centrally located in the heart of Memphis minutes from Annesdale Mansion, University Club, 240, downtown entertainment, and medical district. Great potential for a fixer upper in an area with lots of revitalization and surrounded by sought after neighborhoods.

But, that is far from an accurate description of this location.  It may be accurate that those things are nearby, but I see no mention that no one lives in the historic Annesdale mansion, NO ONE renting or owning in this location will be a member of the University Club and you will never receive $1100 in rent on a property fronting Lamar Avenue.  Lamar used to be a two lane highway connecting Memphis to Birmingham (still does) and in this location, the property is surrounded by houses turned into dentist offices, printing shops and off-shoot churches or abandoned.  I'm surprised they didn't list the intermodal exchange around the corner as a positive even though this house is 4 blocks from dead-ending into the rail exchange.

There is a lot of revitalization going on in Memphis but hardly any is happening of any consequence for $10 a foot.  At $10,000 in estimated repair costs, someone is either completely making up numbers to make something look good and earn a few bucks or they are incompetent.

In no way would I purchase a property fronting Lamar street for $70,000.  I would never expect it to rent for $1,100 and I would laugh if someone told me I could ix it up AND get $1,100 in rent by spending $10 a foot.

Alaska, you can do better!

Chris Clothier · Answer

Hey Alaska,

I reread my comment this morning and I apologize for coming across so strong!  It kinda read like I was being a jerk and I hope you didn't take it that way even a little.  I just want you to be successful!

Best of luck as you get started investing.  I would definitely reach out to an experienced realtor here in Memphis if you want to purchase and add value yourself.  They will help steer you away (hopefully) from mistakes like the one you were asking about.

If I can give you one tip.  More expensive doesn't always mean a house or a renovation is going to be better, but in many cases it will.  Cheaper will never mean a better investment.  There will always be heightened risk and danger with cheap.  Whether that is cheaper houses or cheaper renovations and $10 a square foot to renovate a property literally means it is in near perfect condition and only needs a few minor things.  Low costs and low prices to renovate per sq ft on a project should at a minimum make you really dig in deep on a project.

Jay Hinrichs · Answer

your welcome..

Stephen Bighaus · Answer

I lend on properties in Memphis and have never seen rent of $1,100 on a $70,000 property

Chris Clothier · Answer

So, cheap is a relative term, right!  I would suggest you try and invest in a property near median value for the area or within say 20%.  That is going to keep you in a range where your resident will be a little more stable and hopefully looking for a long-term relationship.

That means pricing right now roughly $110,000 to $150,000 after it is fully renovated.  If you go above that range, I think you are in a great spot as there is great demand, but little inventory on the rental side.

To you question, what is cheap?   I'm not interested in investing in anything right now below $100,000.  The lower you go in price, the lower you are going in rent as well.  The further you get from $100,000, to me is just way too much risk as an out of state investor.  In my opinion!  Best of luck to you

Alaska Wagoner · Answer

Hi Chris, @Chris Clothier, no need to apologize! I actually took your post as very informative and was honored that you cared enough to type that much :-) Thank you!

I did team up with a realtor last week, who has already steered me away from a few more properties, and dug up a few civilians who have offered to weigh in as things come along.

I'm definitely coming to understand what you mean by cheap not being a better investment.  What is cheap?  Do you have a cut off for things you won't touch?

Alaska Wagoner · Answer

@Chris Clothier Thanks for taking the time to write such a thorough response; I'm still in the throwing-handfuls-of-darts stage when it comes to learning Memphis.

I'm definitely leaving this deal behind, but thanks to everyone: @Lexi Teifke @Jay Hinrichs @Katie Pepin @Stephen Bighaus @John P. @Caleb Heimsoth @Chris Clothier

for talking it out with me.  I appreciate you!

Caleb Heimsoth · Answer

@Alaska Wagoner got an address or square footage/ bedrooms and bathrooms? Without a major rehab it’s unlikely you’ll get 1100 rent, but it really depends on size.

John P. · Answer

Fwiw my last MEMPHIS purchase, late last year, was just about exactly $70k purchase plus $11k in repairs and is now rented for $1,135.   It's way out in 38141.  The one in your report appears to be right under the freeway so comps might be skewed by that. I try to find ones that are not right on the freeway, right on the train tracks, right on busy street, etc...  I think the general idea of your deal looks good and attainable in Memphis but I just don't know about the rent comps for that exact house.  Good luck.

Jay Hinrichs · Answer

fixer from afar creates another level of risk.

Any thoughts on this deal?

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