6 units, Midtown, Memphis 38104 - financing advice needed!

Ben Parrish

Real Estate Broker · AR | TN | MS · Member since 2020 · 15 posts · 3 votes

Good Evening, BP! I have always heard if you can find a deal the money will find you.. Well here is the deal:

6 condos in a complex

Avg rent roll $700 / market is $800-900

HOA is $180 a month per unit

3-4K in Reno as tenants turnover is needed
Seller will take 290k for all 6

I do not have the liquidity for 20% down and do the renovations.

Seller is Not open to seller financing.

I am a Rookie, and do not have an established commercial lender relationship. Looking for advice, ideas, recommendations.
thanks in advance

Ben

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Curt DavisBusiness Member
Flipper/Rehabber · Memphis, TN · Member since 2008 · 5k+ posts · 2k+ votes
4y
Ben, You will need private/hard money to take this deal down.
you might try to contact Avalon Capital, they make private loans if the deal is good.
Good luck
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Cj Powderhorn
Investor · UT · Member since 2020 · 84 posts · 91 votes
4y
Hey Ben-
I’m an investor in the Memphis market. just looking at this quickly-I’d say $290K quickly becomes $300K not up even include the time to get people to do the work-TK providers in Memphis have had to push projects back.
So, if it’s about $50K per unit (assume taxes are about $500 per unit per year)-if you rent for $700 minus $500-$180-$60 you aren’t meeting the 1% rule. That’s what I go for-yes, even these days. I believe with MF most investors are looking for a ratio that favors the investor even more.
Also, how many of the units are rented? How will you renovate, etc. Have you accounted for vacancy both during rehab and in general? My guess is if you can’t afford the DP at this time, you won’t have any reserves.
I’m pretty conservative with my numbers but that’s worked out well for me.
Lmk if I can help you with anything else-I’m not a realtor but have been able to find 2 good deals this year.
Good luck-Cj
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Tyler Tapley
Real Estate Agent · Memphis, TN. · Member since 2018 · 175 posts · 101 votes
4y
Are these the condos at 32 N. Belvedere? Be careful...they are good rentals but you need to make sure the HOA will do a good job and not spend money needlessly. Also you have to look and see if they have done any recent assessments...those could be $2000 or so (per unit). Need to see what the HOA covers and what they don't cover. I don't think you can do AirBnbs there (rentals have to be a minimum of at least a week).
I could easily be wrong about the location and I'm not trying to talk down to you...just trying to assist.
Good Luck!
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Ben Parrish
OP
Real Estate Broker · AR | TN | MS · Member since 2020 · 15 posts · 3 votes
4y
@Tyler Tapley yes that is where the units are located. There was a recent assessment for roof replacement that the seller has agreed to pay off for the roof replacement. That has been a concern of mine, as I have only owned SFR to this point.

@Cj Powderhorn, if I brought all 6 units up to $800, the Total rent would be $4800(-1080 HOA) = $3720 which would still exceed 1% rule. Am I missing something in my calc? I estimate after loan payment, taxes, insurance, Free Cash Flow will be around $1350.
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Cj Powderhorn
Investor · UT · Member since 2020 · 84 posts · 91 votes
4y

@Ben Parrish I was just looking at one unit for example. I would use $700 per unit as rent for your initial calculation - I'm assuming you aren't going in there on day 1 and raising all rents to $800? Also, I assume the renos will take place as tenants move out? You will have to account for some vacancy as you do the repairs. There is also the possible NP of rent. Personally, I would look at it as if 4 of the units are rented at $700/month (hopefully with established renters) while you renovate the other 2. Also, as I mentioned reno costs may run higher and take longer than expected. Just want to make sure you are looking at it from all sides as it seems you will be taking a loan for 100% of the cost?
Do you live in Memphis? Tyler Tapey has some good points- also, depending on how you found this 'great deal' you may want to ask yourself why it is still available in this market!

Good luck!
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John BrittPro Member
Real Estate Consultant · Chattanoooga, TN · Member since 2008 · 194 posts · 52 votes
4y
@Ben Parrish my cousin finds money for people in the Memphis area. DM me and I will send you his contact info.
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Cherie Ganesh
Commercial Real Estate Broker · memphis, TN · Member since 2017 · 60 posts · 24 votes
4y
Be careful with properties. You have no control over how well the association manages the property. If the infrastructive isn't properly maintained, one major repair could easily eat the small cash flow that may exist. As mentioned, in the hot Memphis market, I'd really do a lot of soul searching before buying multiple condo package that has been on the market for awhile. Be sure to include both city and county taxes since a lot of listings only show one of the other. I think I'd be patient and look for small multi-unit apartments or houses split into apartments. That might be an easier move from having SFR properties to multi-family. If you have any SFR that have increased in value you might see how much you can pull out of each one to take on a project larger than SFR. Also, if you have to get private financing, rates will probably be at least 2x a bank loan with 20% down.
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Adam Summerer
Lender · Franklin, TN · Member since 2026 · 28 posts · 2 votes
3d
Six Midtown condos at $290k with thin cash for down+reno usually means you're not getting a pretty 20% agency quote — think short bridge/hard-money or a small commercial/portfolio note that prices the package, then a term-out once units are rented. Condos add HOA/project-approval drama, so ask early whether the lender will even touch that association. Run a scenario with higher leverage short-term money vs buying fewer doors you can actually close; stuck earnest money hurts worse than walking.
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