Memphis Invest; Turn-Key Rentals
This is an open letter about my experience with Memphis Invest. I scoured the web for an in-depth review of Memphis Invest, or any other Turn-Key Rental company, but was never satisfied with the responses. It seems the only people that leave reviews are those that benefit in some way from the review or those that intend to cause damage to a company's reputation and have no other recourse than posting online. In any case, I wish someone would have written extensively on the turn-key process, interviewed several Turn-Key companies, and spent a hundred or so hours gathering due diligence...and then posted about it. So I'm doing it here.
Some context: I'm an attorney living in Seattle. The market here is not ideal for residential investors. Most deals close for 10-20% over asking, w/o inspection, w/o conditions. My primary residence was purchased after a run-off type auction, wherein multiple bidders were asked to make their highest offer after all offers were submitted. To purchase a starter house in this city (using conventional 25% down) is 200K or so, and it's nearly impossible to cash flow (unless, of course, you're a flipper w/ experience and want to manage the property yourself). As such, turn-key operations in other cities is very appealing to me.
I just closed on my first deal with Memphis Invest last week. I hope to close three additional deals within the next 12 months.The process has been nothing short of outstanding. Sure, there are some pitfalls, but I've been impressed with their service. And, to boot, one day after closing they found me a tenant and executed a two-year lease at the exact rate that was quoted in the estimates. My experience with MI has been outstanding and I've recommended them to my colleagues and family.
As I said, I interviewed a few turn-key providers. I won't name the companies here, but I will caution anyone investing in turn-key to ask a few questions prior to selecting an operator: (1) are you a broker selling another company's turn-key? (2) does your company handle management? (3) do your financial estimates (estimated return on investment and costs) account for capital appreciation, tax depreciation, equity pay-down, (or, specifically, what exactly is used to determine ROI).
The process with Memphis Invest: Memphis Invest handled the initial intake very similar to every other turn-key I interviewed. We discussed my investment goals, timeline, budget, investment criteria, MI's reputation and process, what I could expect, etc. It was a twenty-minute call. Nothing special. I would imagine they get calls everyday from people that want to invest but don't have the capital, so this wasn't surprising.
I decided to continue with MI because of their amazing reputation and asked for more info. I was sent a packet that included statistics on the markets they operate in, local economic stats, demographic analysis, stats on their vacancy rates, and some background on the MI. Nothing special. In fact, I received better brochures from some of the other companies I interviewed (however, these companies had fatal flaws noted above).
Then I worked with David Meeks to find a few properties, understand the residential RE landscape in each city, and review a few properties. He sent me properties that included scope of rehab, expected returns and costs, and several pictures. What I didn't know: the properties that MI secures and rehab are sold within hours of listing as available. And as far as I know, there is no negotiation on price because of high demand. (Both are stress-inducing and strange considering they don't mimic the residential market, so be prepared for that). This was frustrating because no one wants to rush buying a house, and their prices are higher than other turn-keys. Also, they base their pricing on expected returns, not the appraisal value (another interesting fact).
A month after looking at several houses (w/ accompanying spreadsheets), I found one I liked. I told David and he saved the property for me. I used their lender (which is not required but definitely encouraged), which was a very pleasant experience. We executed the close within 3 weeks of my offer! The appraisal came in above the purchase price, insurance and taxes came in below their estimates, and my ROI is expected to be higher than what they quoted me. Under promising and over-delivering is the keystone of this company and is why they have so many repeat customers.
My 3rd party inspection came back with some problems, but MI fixed every problem listed. The property is set to cash flow about $250 a month (I'll update this when I see checks). MI has an amazing team of folks that handle each step of the process. From my understanding (without knowing their management structure) they have an intake person that helps you find deals and answers basic questions. They have a process manager that facilitates the inspection, appraisal, closing process, secured a notary (that came to my house) and helps answer any questions about the closing/rent/etc. They have their go-to title company and brokers to secure lending and Title (these folks seem to be a little pricier than competitors, but won't bate-and-switch the APR and interest or move closing costs into another expense, like I've seen so many other companies do) and their service was outstanding. MI also has its own insurance company that offers a third-party package with better rates and higher liability (great for investors). I decided to go with this insurance company after comparing it with other companies.
As I wrote above, MI secured me a two-year lease only a day after closing. That's remarkable. I didn't have any say in the tenant, nor did I get a chance to review the tenant, which was a little troubling, but I trust PPMG to handle that process better than me. Time will determine if they made a good decision. Now I have another member of the MI team that, as far as I can tell, is the liason between me and PPMG.
Overall, MI caters to every foreseeable pain point, both in the process of purchase and the property management. They simplify everything, which has pros and cons; It's a ridiculously easy process (compared to buying a residential property), but if you're a detail-oriented person (like myself) you may be left wanting more information at times. They are forthright in their estimates, honest in their expectations, and care very much about their reputation. Every cost they sent was right-on the $$$ or lower than expected. They were dead-on with expected rent I would garner from the property, they estimated high on my insurance and taxes (which means more cash flow), and estimated low on the appraisal. I've had constant communication with several members of their team. They ensure that every point of contact on their service chain and their associates--lender, title, notary, remodel-- is extremely professional and painless as possible. The property was probably more expensive than the price on the open market, but the renovations were thorough with an eye towards being pain-free and low maintenance.
I'm searching for my next property with them now. Will update when I purchase my next properties. Also, I intend to provide ongoing posts about management. This process can be scary. It requires a lot of trust in online forums like BP, because so much of the turn-key process (buying in another state) is done in the "dark." I hope this post shed some light. PM w/ any questions.