MEMPHIS INVESTMENT PROPERTIES Case Study

MEMPHIS INVESTMENT PROPERTIES Case Study

Investor · Miami Beach, FL · Member since 2017 · 73 posts · 64 votes

Greetings BiggerPockets!

Just last month, I started crawling, walking (& dare I say running) towards being a new real estate investor! Last night, I was reading the Morris Invest Case Study 2.0 (@tyler jahnke) and not only was it enlightening to see the trials and tribulations of his journey but it was astounding to see how the BiggerPockets community got so involved in the comment threads and how helpful everyone is. Truly incredible!

A little background about me: I work in a real estate development company as a Design & Construction Manager keeping an eye on Architects/Engineers and Contractors but I don't really work on the front end with Acquisitions, Proformas, etc. so investing is generally new to me but I learn quick :)

So, my journey begins...

Oct (week 3) - I began spending hours a days reading and researching about single family home rental investments and Turnkey investment properties around the nation. I read many articles on the best cities to invest and I started finding out about companies that specialize in this investment vehicle. 

Oct (week 4) - To make a long story shorter, I ended up making an offer on a 3 bed/2 bath on Scottsdale Ave near Parkway Village with the company Turnkey Properties (@alex craig) http://turnkeyinvestproperties.com/

I really appreciated their website and the information it provided such as the Sales Offering Packet which contained a lot of information including a detailed Scope of Work that they would perform on the property. 


I had a few Lenders lined up but when the rates started coming in, it sunk my Proforma and the Cash on Cash return and Cash Flow dropped significantly. So significantly, I had to drop out of the deal which really took the wind out of my sales.


Turnkey Properties returned my Ernest money because they said I was trying in good faith to stick to my end of the deal but my credit wasn't as good as I thought it was so the 5.5% rate, points and closing costs we're just too much. (4 years ago and beyond, I didn't really pay any school loans so that came to bite me on the ***!)

Hopefully, in the future, I will get the opportunity to work with the team at Turnkey Properties (@jeremy veldman) again because I had a favorable opinion of them up to the end.

Oct (week 5) - To make a short story longer, at some point in the journey, a Lender, Security National Mortgage Company (@aaron chapman) convinces me to pay my credit card to zero and they would rerun my credit score (Every month I pay it to zero but I guess when Lenders run credit scores, I must have had a high balance). I did and low and behold, my credit which was under 680 suddenly went above 680 which not-so-magically lowered my general rate.

One thing leads to another and I end up signing a purchase agreement on a 3 bed/1 bath on Avon Road near Berclair with Memphis Investment Properties (@james wachob @mark hart  ) http://memphisinvestmentproperties.net/

Nov (week 1) - A different Lender (Supreme Lending) offers me a lower rate than 5.0% with points which allows me to move forward with the Loan. I have signed all the Loans documents to date. Unfortunately, SNMC couldn't offer me a better rate but @aaron chapman congratulated me on it (he is a true gentlemen, which EVERYONE tells me he is!).

Nov (week 2) - Today, I received the Scope of Work from Memphis Investment Properties that is to be performed. In a few days, I will post before that Scope of Work and before photos and update the BP community on the progress.

The schedule is as follows which I will update periodically:

Nov (week 3) - Renovation

Nov (week 4) - Renovation

Nov (week 5) - Renovation

Dec (week 1) - Renovation complete.

Dec (week 2) - Home & Termite Inspection to be performed. Home Inspection report issues to be rectified.

Dec (week 3) - I plan on visiting Memphis and walk the final product, meet Memphis Investment Properties team including Property Management.

Dec 18 - Close on the deal.

Questions and Comments are MORE than welcome!!!

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Most Popular Reply

Jay HinrichsBusiness Member
Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
8y

@Victor H nieves  that's more realistic  and you do have a lease fee of one months rent when you get a new tenant and if you own this 10 years you will have 4 to 5 lease fee's minimum .. unless management takes a very reduced fee or you get lucky and get a long term tenant.

pretty much anyone buying 1% or so rule property is going to net 5 to 8% COC with 20% down.. over time.. and if you get that tenant from hell you will net nothing or go in the negative.

If you get a great tenant that stays for years does not damage ( pretty rare frankly) then you could do better.

but its best to be realistic than to do blue sky performa's and then be disappointed later ..

the idea behind these rentals is very much lost in the cash flow is king debate.. the idea behind owning rentals is to get them paid for as QUICK as possible.. that's when you loving life.. up until then its managing expense's and you should put every dime back into them to pay down debt and or keep them in good shape.. the other thing is you should be buying were there is a reasonable expectation that values will climb some what you need that to offset sales cost when you do finally exit.

Now many folks I fund over the years they are buying with the intention of never selling and they have goals to own 100 or more.. I help them get to that goal.. and have done it many times one of my clients I have funded has over 250 rentals and self manages them all.. its their business its what they do and so on and so forth.. and they only take a little of the cash flow out for themselves the rest goes to pay down their debt so they can at the end of some time have decent equity.. I am NOT a refi till you die guy I don't believe in that at all.. I am a get property paid for guy.. and the most successful private owners I now have little to no debt. that's when you really cash flow.. If you had no debt you would be at 450 a month with MY expense numbers that's where you want to be..

See this reply in the discussion

148 Replies

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  • Investor · Miami Beach, FL · Member since 2017 · 73 posts · 64 votes
    8y

    @Sean Tagge congrats! you proved the naysayers wrong! if i were only wiser 2 months agao, hahaha.

  • Investor · Miami Beach, FL · Member since 2017 · 73 posts · 64 votes
    8y

    UPDATE:

    4205 Cedartree Drive is almost mine!

    Jan 11:

    • Closing - signed the final Closing Documents with the notary
    • Cash to Close - wired the balance of the funds to title company today.

    Looking for to finalizing and obtaining a renter with the investment managed by M.I.P.

  • Investor · Miami Beach, FL · Member since 2017 · 73 posts · 64 votes
    8y

    UPDATE:

    Jan 17:

    • I am not in communication with Property Management and will soon go under contract once we acquire a tenant.

    More coming soon!

  • Investor · Miami Beach, FL · Member since 2017 · 73 posts · 64 votes
    8y

    "NOW IN COMMUNICATION"....didn't mean to say NOT

  • Investor · Miami Beach, FL · Member since 2017 · 73 posts · 64 votes
    8y

    UPDATE:

    Jan 19:

    • I signed the Property Management agreement
    • Once a tenant is acquired,  I will upload a comparison of the original promoted proforma & my proforma assumptions.

    Excited to start getting Cash Flow!!!

  • Rental Property Investor · Oakland, CA · Member since 2016 · 341 posts · 643 votes
    8y

    Awesome to hear @Victor H nieves! Excited to follow along on your journey.

    -Tyler

  • Investor · Miami Beach, FL · Member since 2017 · 73 posts · 64 votes
    8y
    Originally posted by @Tyler Jahnke:

    Awesome to hear @Victor H nieves! Excited to follow along on your journey.

    -Tyler

     @Tyler Jahnke Yes same here, glad you're still posting. It's definitely good to see newer investors overcome and strive! 

    Its winter, so I'll get a tenant at some point. I'm trying to find my next deal (buy, rent, rehab!) which is a BIG step forward (hopefully not backwards, lol).

  • Rental Property Investor · Baltimore, MD · Member since 2017 · 9 posts · 4 votes
    8y

    @Victor H nieves Thank you for taking the time to detail your experience during your first OOS TK property.  This is very helpful to see how your process is going.

    With all the "hype" on OOS TK, you begin to wonder if this is the right move to make or just follow @Jay Hinrichs lead and learn the Note business... 

    Looking forward to seeing your final numbers after everything is "flowing".

  • Investor · Saint Johns, FL · Member since 2015 · 141 posts · 100 votes
    8y

    This is a great thread...A year or so ago I was considering buying a few units through MI. I did talk to James Wachob, he was a very nice gentleman. However once he handed me off to his team, the communication became very poor. I took it as a red flag and did not pursue...Glad someone shared this experience, very helpful! Thanks!

  • Investor · Miami Beach, FL · Member since 2017 · 73 posts · 64 votes
    8y
    Originally posted by @Jan H.:

    This is a great thread...A year or so ago I was considering buying a few units through MI. I did talk to James Wachob, he was a very nice gentleman. However once he handed me off to his team, the communication became very poor. I took it as a red flag and did not pursue...Glad someone shared this experience, very helpful! Thanks!

    In general, what I have read about Turnkey Providers is that they are poor in communicating and managing the client expectations.

  • Investor · Miami Beach, FL · Member since 2017 · 73 posts · 64 votes
    8y
    Originally posted by @Jason Perry:

    @Victor H nieves Thank you for taking the time to detail your experience during your first OOS TK property.  This is very helpful to see how your process is going.

    With all the "hype" on OOS TK, you begin to wonder if this is the right move to make or just follow @Jay Hinrichs lead and learn the Note business... 

    Looking forward to seeing your final numbers after everything is "flowing".

    I am about to update this post ... a renter was secured!

  • Investor · Miami Beach, FL · Member since 2017 · 73 posts · 64 votes
    8y

    UPDATE:

    Feb 5:

    • Reedy and Company notified me today that they secured my tenant (move in date Feb 23)...WHOOP!

    Here is a recap of my Proforma:


    PURCHASE PRICE: $ 72,500

    INTITIAL CASH INVESTED: $19,749 (I had to pay alot of points because of my 680 score)

    OPERATING INCOME: $831

    • Rent: $875
    • Vacancy 5%: $44 

    OPERATING EXPENSES: $ 328.08

    • Prop Tax: $87 (County & City)
    • Insurance: $40
    • Mgmt Fee 8%: $70
    • Maintenance Reserve 5%: $44
    • Capex 10%: $88

    NOI: $503

    DEBT SERVICE: $303

    CASH FLOW: $ 201 ($2,407)

    CAP RATE: 8.33%

    CASH ON CASH RETURN: 12.19%

    RENT TO VALUE: 1.21%

    Once I receive the first payment, I will update this thread...

  • Rental Property Investor · Durham, NC · Member since 2016 · 7k+ posts · 7k+ votes
    8y
    Victor H nieves what interest rate did you end up getting? Your numbers look pretty good as standard from what I’ve seen in Memphis turnkey.
  • Rental Property Investor · Durham, NC · Member since 2016 · 7k+ posts · 7k+ votes
    8y
    Also Victor H nieves what did it appraise for? Sorry if you alread answered this
  • Investor · Miami Beach, FL · Member since 2017 · 73 posts · 64 votes
    8y
    Originally posted by @Caleb Heimsoth:

    Victor H nieves what interest rate did you end up getting? Your numbers look pretty good as standard from what I’ve seen in Memphis turnkey.

     I had to pay $ points to get to 4.75%

  • Investor · Miami Beach, FL · Member since 2017 · 73 posts · 64 votes
    8y
    Originally posted by @Caleb Heimsoth:

    Also Victor H nieves what did it appraise for? Sorry if you alread answered this

     Appraised at $75 pretty much the same as Purchase Price $72.5k

  • Investor · Miami Beach, FL · Member since 2017 · 73 posts · 64 votes
    8y

    UPDATE:

    Feb 10:

    • Received the 1st prepayment of rent on the property management portal!

    Cash flow dreams becoming reality :)

  • Brian CardwellPro Member
    Investor · Odenton, MD · Member since 2017 · 204 posts · 144 votes
    8y

    That is awesome ! Rinse and repeat.

  • Rental Property Investor · Los Angeles, CA · Member since 2016 · 141 posts · 123 votes
    8y
    Originally posted by @Victor H nieves:

    UPDATE:

    Feb 10:

    • Received the 1st prepayment of rent on the property management portal!

    Cash flow dreams becoming reality :)

     Thanks for the update Victor - numbers look pretty good!

  • Investor · Miami Beach, FL · Member since 2017 · 73 posts · 64 votes
    8y
    Originally posted by @Brian Cardwell:

    That is awesome ! Rinse and repeat.

    I'm now on the hunt for a Buy Rehab property in another market so I can BRRRR!

  • Investor · Miami Beach, FL · Member since 2017 · 73 posts · 64 votes
    8y
    Originally posted by @Bo Kim:
    Originally posted by @Victor H nieves:

    UPDATE:

    Feb 10:

    • Received the 1st prepayment of rent on the property management portal!

    Cash flow dreams becoming reality :)

     Thanks for the update Victor - numbers look pretty good!

    Thanks, its been a crazy journey! Now onto the next one...BRRRR here I come!

  • Logan, UT · Member since 2018 · 23 posts · 9 votes
    8y
    Originally posted by @Victor H nieves:

    UPDATE:

    Feb 10:

    • Received the 1st prepayment of rent on the property management portal!

    Cash flow dreams becoming reality :)

      Great news! I was reading this thread like a crime novel, waiting to know what happened at the end. Thanks for posting in so much detail all of your numbers and experiences. I have just found out about TK investing and am looking forward to getting started. Looking forward to making a call tomorrow to Memphis Invest to see how they work and if we're a fit.

  • Investor · Miami Beach, FL · Member since 2017 · 73 posts · 64 votes
    8y

    @Trevor Bingham Keep in mind that my TK was with Memphis Investment Properties. Things are great thus far, cash flowing!

  • San Diego, CA · Member since 2016 · 10 posts · 7 votes
    8y

    As an aspiring TK OOS investor, this thread was an AWESOME read.  Thanks for sharing your journey @Victor H nieves.

    Will your next property also be an out of state purchase?

  • Investor · Miami Beach, FL · Member since 2017 · 73 posts · 64 votes
    8y

    @Cameron Lange Thanks. No, I am rehabbing a duplex in Indianapolis which will be complete in 10 days :)

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