All Forum Posts by: Jack Inman

It would be challenging to find a cash flow of $300/ month after all expenses and debt services are accounted for. But keep in mind that cash flow is only part of the picture. A real estate investment can make money through three ways: property appreciation, increase in equity through payments on the mortgage principle, and of course positive cash flow like you mentioned. 

Once you take in consideration all three of these profit drivers, you can calculate the internal rate of return for your holding period, and then you can truly compare a real estate investment against any other available investment. I do this for all of my deals and my IRR has hovered between 15-19% using very conservative estimates. (This year the property values went up more than normal so my actual IRR was much higher than my initial estimates.)

Once you really dig into the numbers you'll find that even in today's market, nothing comes close to the returns that leveraged real estate offers. Stocks have done great this year, but over the long term, the DJI average is around 7-10% compounded rate of return. So unless you out perform the market every year, you won't beat real estate with a stocks. Even if you factor in a hefty illiquidity premium, real estate is still king in my books

There’s several good Realtors in town that deal with rental properties. I’d recommend talking to a few different realtors before picking the one that best suits your investing needs

I’ve had good luck with C and K heating and air. I put a Goodman unit in my last property. Not too expensive but good enough for a rental.   

I'd like to share a few tips that investors can use to help in the initial analysis stage of investing. We all know that the trick to any investing is to buy low and sell high; it's the back bone of every good investment. Now, for the seasoned investor this might be a piece of cake, but for newbies and/or people who are investing abroad, this is one of the most daunting aspects of real estate investing because markets are so localized and unique. So, here are a few websites and tips to help form a general idea of a particular property's market value and its investment value.

Shelby County Assessors Website - http://www.assessor.shelby.tn.us/content.aspx

^ This website will give you the assessor's opinion of what the property is worth and it also provides a tax calculator so you can calculate the city and county taxes. The assessor's property value has been fairly accurate in most properties that I've dealt with. However, it uses the law of averages, so if your property is in better (or worse) shape than the surrounding houses then the figure will be less accurate. 

Shelby County Register -  https://register.shelby.tn.us/index.php

^ This website is where all deeds and mortgages are stored for Shelby county. Simply select 'address' under 'search type' and you're ready to look up a property. This will show who has owned the property, how much they paid for it, their mortgage amount, and often you can deduce whether the owner is an owner/occupant or not. 

These two websites are great for digging up information on properties and are always my go-to websites when I am building a property analysis spread sheet. Other calculations I always include are:

Vacancy rate - 8% * source below

Repairs - I usually budget around $750-1,000 per year (keep in mind you can also use the renter's deposit to complete repairs if they caused the damage, just keep document things properly) 

Capital expenditure - Calculate the replacement costs of major items (roof, flooring, HVAC, etc.) and divide them by their estimated remaining lifetime. 

Property MGMT fee - 8-10% (even if you self-manage you should set a budget, maybe 4%)

Insurance - I pay about $600 per property for my insurance, yours may vary. 

Property tax - Assessor's website

Debt service - principle and interest on mortgage - and don't forget those pesky discount points! 

You can use these figures and create a fairly accurate 'going in cap rate,' and you should also look up how to calculate the 'Internal Rate of Return' or 'IRR.' The IRR will tell you the estimated compounded rate of return of your investment; very useful when comparing real estate to other investments such as stock market gains. The IRR is a little more complicated to calculate and to do it right you have to factor in tax items such as depreciation, and capital gains taxes (unless you are planning on doing a 1031) and also the dreaded depreciation recapture tax at the point of sale.

I highly recommend you do all of this, or hire a Realtor who can do it for ;) The goal of investment analysis is to remove as many variables as possible before you plop down your hard earned cash. Memphis is a great city and I hope you choose to invest here, also the eviction laws here favor the landlord, a major major plus. 

Best of luck!

Jack Inman

Source for vacancy rate of Memphis - https://www.huduser.gov/portal/publications/pdf/Me... )  

I'd stop by the MAAR headquarters; I think they might sell custom signs or if not, they could certainly put you in contact with someone who does. (You don't have to be a Realtor to go in the building) Here's their address: 6393 Poplar Ave, Memphis, TN 38119. 

Like Marc said, I'd certainly try to get a 3 bedroom; I've noticed that the 3 bedroom homes tend to have a more stable rental rate during market fluctuations. 2/1's are usually very inexpensive, but they tend to be in rougher parts of town. 

2 bathrooms is certainly preferable, but if the numbers work on a 1 bathroom then go for it. I recently helped an investor purchase a 3 bedroom/1 bathroom property; he paid 36k for it, did a 10k renovation job and now has it rented out for $790. So, nothing wrong with 1 bedroom at all. 

Personally, I wouldn't buy a turnkey even if I was an out-of-country investor. It's much easier to find a better deal by buying a property through an agent and then finding a property manager after the fact. Nothing wrong with turnkey properties and some do offer good returns, but generally you can find better deals elsewhere. 

Shelby county Assessor is great to use to figure out the property taxes and their assessment is certainly of some value. The Tom Leatherwood site is where the county deed records are kept - always good to know what the property last sold for. (Zillow isn't always accurate) Zillow is pretty good for estimating market rent though... Just know that zillow assumes the property is in good condition. 

I'd recommend shopping around on Zillow for a property that looks good and then call up a Realtor to go view the property for you. A good Realtor will be able to recommend a good appraiser, inspector, loan officer, and management company. 

Memphis is a great town, you've made a good choice!

 Rebecca, 

I just went through a fairly similar process here in Memphis and I've been learning a little about the bankruptcy court here in town. If you were awarded possession before they filed bankruptcy then your property shouldn't be included in the automatic stay clause. I would call a local bankruptcy lawyer and double check, but I was told by my lawyer that if I had won possession before they filed bankruptcy then I could've continued with the eviction process. Unfortunately my tenant filed bankruptcy the day before our final eviction hearing, but in your case it sounds like you were awarded possession prior to them filing. Either way the process isn't too bad, best of luck.

I live in 38111 and I own two rentals in the 38111 Zipcode and I have had great success so far. There are drastic changes in price and quality of the neighborhoods within this zip code, but as long as you buy at a decent house at a good price then you should be able to get great returns. I've had no issue finding tenants and no crime issues so far. If you are serious about getting a house in this area then talk at length with someone who knows the area well so you can get an accurate map of each individual neighborhood and the acceptable price range of each. Or better yet come visit Memphis!

If you're looking to do a buy and hold then Memphis is not a bad place to start. I have had great luck investing in the area just south of the U of Memphis campus, Shirwood Forest. When I first started, I looked into investing in Nashville and Knoxville but the numbers (and price point) looked better in Memphis. 

John, I'm also finishing up my undergrad degree and am in a somewhat similar situation. What has worked for me is finding properties that offer owner financing. Usually the rates are about 2-3% higher than the fed, but when you're a college student you've got to take what you can get. Even if the listing does not explicitly state owner financing it is still worth asking the seller if they'd consider it. Just make sure the seller owns the property out right, if they have a mortgage then things could turn south. Good luck!