MEMPHIS INVESTMENT PROPERTIES Case Study

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MEMPHIS INVESTMENT PROPERTIES Case Study

Victor H nieves
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..

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

    @Victor H nieves looks good!  Would be curious to hear more about your experiences with this property, and lessons learned, if you have the time to share.

    1Reply
  • Victor H nieves
    OP
    Investor · Miami Beach, FL · Member since 2017 · 73 posts · 64 votes
    8y

    @Cameron Lange I'm hoping to do a post about it once its complete in 1.5 weeks. I wont go as in depth as this Study though...at least thats my first thoughts.

    1Reply
  • Clint Murphy
    Rental Property Investor · Vancouver, BC · Member since 2018 · 7 posts · 4 votes
    8y

    I am coming in late to the game Victor and found your post, as I am talking to Memphis Invest right now. 

    Will keep reading your chain to learn more and am interested in your actual experience. 

    With your proforma, something I recommend adding is your cash-on-cash return, including principal paydown. People often forget that the principal paydown, which reduces the cash-on-cash return, is an increase to their value. 

    2Reply
  • Yash Ranadive
    Rental Property Investor · San Francisco, CA · Member since 2018 · 19 posts · 2 votes
    8y

    @Victor H nieves curious to know what happened to your Indy BRRR. Did you work with a company to get it? If yes, which one was it? How has your experience been so far?

    0Reply
  • Ilan Friedman
    Beit Shemesh, Israel · Member since 2018 · 13 posts · 1 vote
    8y
    Originally posted by @Jay Hinrichs:

    @Caleb Heimsoth  that's the concept many of my note investors have.. they buy a few notes are making 700 to 1000 a month.. add 10k to it and in the first year they buy another now they are making 1200 to 1400 add ten k to it and buy another and the next thing you know 10 years down the line they have millions in notes paying them enough to actually live on.

    all you kids at your age are so FAR ahead of us old geezers we did not have the internet there was no real financing .. hell I was still using carbon paper when I started in this game and was your age :)

    keep at it you will be a rock star before you know it.. also keep in mind what your buying today you will NOT being buying in 5 years.. its a natural progression.. you will be looking at other cool deals and other ways to make money in and around real estate that do not include tenants.. that's been my experience and many of my cleints.

     Can you please explain what you meant in the first paragraph? What do you mean by buying notes that make money, then add 10k?

    0Reply
  • Peter Schuyler
    Fort Myers Beach, FL · Member since 2016 · 225 posts · 124 votes
    8y
    Victor, I will also post a Case study, as I did the Memphis Property Tour in May 2018 and ended up putting a purchase agreement down for a 3/2 in Memphis as a renovated unit to be completed this Sep.  It was delayed because the tenant would not leave in June.

    Some things I found grossly wrong with the ProForma:

    • As you know they require a annual yearly inspection fee for $75.00 which should be listed
    • The collect 50% rent of one month to place a tenant which really should be built into the Proforma, because its significant and predictable.  Even if you just renew there is a fee that is known and predictable.
    • They also advertise 4% vacancy in the Proforma, but the PM handbook states the average vacancy is 45 days across their portfolio which is 12%.  That is quite a difference.

    Im looking forward to closing on my M.I.P. property, but the proforma's I think are way under estimated.  Even my taxes were estimated wrong and closing costs were double what they quoted, using their recommended lender, etc.
    They also do 


    Originally posted by @Victor H nieves:

    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.

    2Reply
  • Kevin Harrison
    Middletown, DE · Member since 2017 · 13 posts · 9 votes
    7y

    I’m curious how amlost a year later, how has your experience been? Are you still receiving monthly income? Has your tenant stayed? Any repairs needed addressed? Would love to hear your current situation!

    0Reply
  • Victor H nieves
    OP
    Investor · Miami Beach, FL · Member since 2017 · 73 posts · 64 votes
    7y
    Originally posted by @Kevin Harrison:

    I’m curious how amlost a year later, how has your experience been? Are you still receiving monthly income? Has your tenant stayed? Any repairs needed addressed? Would love to hear your current situation!

    Kevin, after a year, things are going well enough. Still have a renter and cash coming in.

    0Reply
  • Kevin Harrison
    Middletown, DE · Member since 2017 · 13 posts · 9 votes
    7y

    Thanks for this update! I’ve been looking to start with a TK property as well. Question is: Since hindsight is always 20/20, would you do it again

    0Reply
  • Justin Miles
    Flipper/Rehabber · Alpharetta, GA · Member since 2018 · 70 posts · 10 votes
    7y

    @Victor H nieves can some one tell me what the line item “cap rate” means?

    0Reply
  • Priyanshu R.
    San Diego, CA · Member since 2019 · 9 posts · 2 votes
    7y
    Originally posted by @Justin Miles:

    @Victor H nieves can some one tell me what the line item “cap rate” means?

     Cap Rate is Net Operating Income / Purchase Price.

    Here's a BiggerPockets post on that - https://www.biggerpockets.com/blog/2014/05/10/cap-rates-cash-cash-returns-explained/

    1Reply
  • Kevin Grove
    Flipper/Rehabber · Charles Town, WV · Member since 2019 · 42 posts · 43 votes
    7y
    Originally posted by @Peter Schuyler:

    "They also advertise 4% vacancy in the Proforma, but the PM handbook states the average vacancy is 45 days across their portfolio which is 12%.  That is quite a difference."
    Yes, if the average stay is 12 months and the average vacancy duration is 45 days, then you would enter 12% vacancy into your Proforma.

    But many good turnkey operators have a 36-month average stay. In that case, the you would enter 4.1% vacancy into your Proforma.

    Vacancy formula:      45-day average vacancy duration / 365 days in a year / 3-year average stay = 4.1% vacancy
    0Reply
  • Peter Schuyler
    Fort Myers Beach, FL · Member since 2016 · 225 posts · 124 votes
    7y
    I have not had that luck yet, it took 6 months to fill my first unit, thats a half a year of vacancy, which over the next fews years will hurt that average as you would expect.

    Pete

    Originally posted by @Kevin Grove:
    Originally posted by @Peter Schuyler:

    "They also advertise 4% vacancy in the Proforma, but the PM handbook states the average vacancy is 45 days across their portfolio which is 12%.  That is quite a difference."
    Yes, if the average stay is 12 months and the average vacancy duration is 45 days, then you would enter 12% vacancy into your Proforma.

    But many good turnkey operators have a 36-month average stay. In that case, the you would enter 4.1% vacancy into your Proforma.

    Vacancy formula:      45-day average vacancy duration / 365 days in a year / 3-year average stay = 4.1% vacancy
    0Reply
  • Victor H nieves
    OP
    Investor · Miami Beach, FL · Member since 2017 · 73 posts · 64 votes
    6y
    Originally posted by @Kevin Grove:
    Originally posted by @Peter Schuyler:

    "They also advertise 4% vacancy in the Proforma, but the PM handbook states the average vacancy is 45 days across their portfolio which is 12%.  That is quite a difference."
    Yes, if the average stay is 12 months and the average vacancy duration is 45 days, then you would enter 12% vacancy into your Proforma.

    But many good turnkey operators have a 36-month average stay. In that case, the you would enter 4.1% vacancy into your Proforma.

    Vacancy formula:      45-day average vacancy duration / 365 days in a year / 3-year average stay = 4.1% vacanc

    Great commentary. 

    My tenant did renew so im hoping & looking forward to year 3 in a few months :)

    1Reply
  • Victor H nieves
    OP
    Investor · Miami Beach, FL · Member since 2017 · 73 posts · 64 votes
    6y
    Originally posted by @Kevin Harrison:

    Thanks for this update! I’ve been looking to start with a TK property as well. Question is: Since hindsight is always 20/20, would you do it again

     Kevin, so did you buy?

    I would do it again and I am currently closing (Dec 12) on another turnkey in Memphis.

    2Reply
  • Victor H nieves
    OP
    Investor · Miami Beach, FL · Member since 2017 · 73 posts · 64 votes
    6y
    Originally posted by @Peter Schuyler:
    Victor, I will also post a Case study, as I did the Memphis Property Tour in May 2018 and ended up putting a purchase agreement down for a 3/2 in Memphis as a renovated unit to be completed this Sep.  It was delayed because the tenant would not leave in June.

    Some things I found grossly wrong with the ProForma:

    • As you know they require a annual yearly inspection fee for $75.00 which should be listed
    • The collect 50% rent of one month to place a tenant which really should be built into the Proforma, because its significant and predictable.  Even if you just renew there is a fee that is known and predictable.
    • They also advertise 4% vacancy in the Proforma, but the PM handbook states the average vacancy is 45 days across their portfolio which is 12%.  That is quite a difference.

    Im looking forward to closing on my M.I.P. property, but the proforma's I think are way under estimated.  Even my taxes were estimated wrong and closing costs were double what they quoted, using their recommended lender, etc.
    They also do 


    Originally posted by @Victor H nieves:

    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.

    Peter,

    yes I never use their Proforma, I build my own BUT you make great points on annual inspection & lease up/renewal cost.

      0Reply
    • Victor H nieves
      OP
      Investor · Miami Beach, FL · Member since 2017 · 73 posts · 64 votes
      6y
      Originally posted by @Clint Murphy:

      I am coming in late to the game Victor and found your post, as I am talking to Memphis Invest right now. 

      Will keep reading your chain to learn more and am interested in your actual experience. 

      With your proforma, something I recommend adding is your cash-on-cash return, including principal paydown. People often forget that the principal paydown, which reduces the cash-on-cash return, is an increase to their value. 

      Clint

      so did you buy from Memphis Invest?

      0Reply
    • Victor H nieves
      OP
      Investor · Miami Beach, FL · Member since 2017 · 73 posts · 64 votes
      6y
      Originally posted by @Clint Murphy:

      I am coming in late to the game Victor and found your post, as I am talking to Memphis Invest right now. 

      Will keep reading your chain to learn more and am interested in your actual experience. 

      With your proforma, something I recommend adding is your cash-on-cash return, including principal paydown. People often forget that the principal paydown, which reduces the cash-on-cash return, is an increase to their value. 

      Clint

      I should have done a case study, IT WAS CRAZY to say the least ... Ive taken a year off of Real Estate after that Rehab (didnt even watch TV about it!) ... too many lessons learned & bruises... but Im now back into the Game.  First currently buying a turnkey....then in 2020, I prefer to do a Rehab.

      1Reply
    • Account Closed
      Investor · Columbus, OH · Member since 2017 · 861 posts · 1k+ votes
      6y
      Originally posted by @Victor H nieves:
      Originally posted by @Clint Murphy:

      I am coming in late to the game Victor and found your post, as I am talking to Memphis Invest right now. 

      Will keep reading your chain to learn more and am interested in your actual experience. 

      With your proforma, something I recommend adding is your cash-on-cash return, including principal paydown. People often forget that the principal paydown, which reduces the cash-on-cash return, is an increase to their value. 

      Clint

      I should have done a case study, IT WAS CRAZY to say the least ... Ive taken a year off of Real Estate after that Rehab (didnt even watch TV about it!) ... too many lessons learned & bruises... but Im now back into the Game.  First currently buying a turnkey....then in 2020, I prefer to do a Rehab.

      Can you give a quick rundown about the rehab and what went wrong? Was an interesting thread to read!

      0Reply
    • Victor H nieves
      OP
      Investor · Miami Beach, FL · Member since 2017 · 73 posts · 64 votes
      6y
      Originally posted by @Account Closed:
      Originally posted by @Victor H nieves:
      Originally posted by @Clint Murphy:

      I am coming in late to the game Victor and found your post, as I am talking to Memphis Invest right now. 

      Will keep reading your chain to learn more and am interested in your actual experience. 

      With your proforma, something I recommend adding is your cash-on-cash return, including principal paydown. People often forget that the principal paydown, which reduces the cash-on-cash return, is an increase to their value. 

      Clint

      I should have done a case study, IT WAS CRAZY to say the least ... Ive taken a year off of Real Estate after that Rehab (didnt even watch TV about it!) ... too many lessons learned & bruises... but Im now back into the Game.  First currently buying a turnkey....then in 2020, I prefer to do a Rehab.

      Can you give a quick rundown about the rehab and what went wrong? Was an interesting thread to read!

      Too many crazy things, but still have the property and just raised rents $100 per side. Even with all the headaches, I think it will do fine and it was a great learning lesson 

      2Reply
    • Account Closed
      Member since 2020 · 1 post · 0 votes
      6y

      @Victor H nieves Did you sign up for MIP supplemental insurance or their HVAC/termite inspections?

      0Reply
    • Sam Sala
      Rental Property Investor · Brooklyn, NY · Member since 2020 · 113 posts · 25 votes
      5y
      Originally posted by @Victor H nieves:
      Originally posted by @Account Closed:
      Originally posted by @Victor H nieves:
      Originally posted by @Clint Murphy:

      I am coming in late to the game Victor and found your post, as I am talking to Memphis Invest right now. 

      Will keep reading your chain to learn more and am interested in your actual experience. 

      With your proforma, something I recommend adding is your cash-on-cash return, including principal paydown. People often forget that the principal paydown, which reduces the cash-on-cash return, is an increase to their value. 

      Clint

      I should have done a case study, IT WAS CRAZY to say the least ... Ive taken a year off of Real Estate after that Rehab (didnt even watch TV about it!) ... too many lessons learned & bruises... but Im now back into the Game.  First currently buying a turnkey....then in 2020, I prefer to do a Rehab.

      Can you give a quick rundown about the rehab and what went wrong? Was an interesting thread to read!

      Too many crazy things, but still have the property and just raised rents $100 per side. Even with all the headaches, I think it will do fine and it was a great learning lesson 

       Great thread, any update? did you buy another? how's that one going for you?

      0Reply
    • Michael Le Blanc
      New to Real Estate · Los Angeles · Member since 2021 · 9 posts · 1 vote
      3y

      @Hau N. - newbie here, just found this thread. I'm in CA looking at OOS investing in the midwest. I realize your post is ~5 years old at this point but curious to hear if you ever ended up pulling the trigger on anything? 

      0Reply
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