All Forum Posts by: Tou V.

I've been nipped at several times in the past by pro-Memphis folks who think I suck for not liking Memphis, but I have never liked Memphis as a market to buy in. I live in CA and have always bought out-of-state, and Memphis is one market I've never wanted to touch. I am from Atlanta and went to school outside Nashville and have been in Memphis a lot for random things and just never had a desire to invest there. The short of the reasons being-- I've never heard of someone wanting to move to Memphis (speaks to desirability), the market is too high of a renter's market for me (speaks to less owner-occcupants which can affect quality), if I were to have bought in Memphis it would've been 5 years ago when the deals were better before the hedge funds and individual investors ate everything up, and for current times, there are just higher returns and nicer deals (in my opinion) in other markets. Saturation is a huge issue there, in my opinion, since the boom a few years ago and that affects vacancy rates and exit strategy (there have been posts about just those on here).

However, with all of that said, Memphis is better to invest in than the majority of US cities. At least you can get returns there, so from that vantage point, I do support it. And if you have found a really good company to work with, that will go a long way as well.

I just don't like the Memphis market personally for my own purchases, but that's not to say they can't work there. I'm certain they can and there are good companies out there.

https://www.rentrange.com/rental-rates/homes/TN/Memphis

Flat rent growth and limited appreciation?  Inflation and capex will eat you alive.

In an earlier post I read something about a "street to street" issue where one street would be monopolized (my words but this is how I interpreted it) by a TK provider whereas an adjacent street would just be a "regular sales" street.  Is this true?  If so, it makes complete sense why this "game" has been played with 3 different values as correctly pointed out before: wholesale, retail, and TK.

Based on prior posts, my asking price is not too far off from what I should be able to reasonably get the properties for.  I believe that I should still be able to get the loan amount, plus closing fees, plus a little "cushion", while the properties still generate more than enough cash flow for someone else to be able to make a profit on it.  Or am I missing something here?

Are you an engineer or trained in a profession requiring rationality, by any chance?  I feel like I went down into the rabbit hole of assumptions about the big bad TK purchase, only to come out on the other side feeling the way you do,  And no one in my family thinks of me as the rational type.

BTW, the cash flow wasn't $1K per month per the OP.  The OP knows there is limited cash flow due to her expenses, debt service and PM.  And she must have had zero CF during the months when the properties were listed and vacant.  Regardless, no money out of pocket is enviable.  In her shoes, I'd probably make it work, regardless of value, unless a muni was coming down on me hard for compliance issues or something bureaucratic beyond my control.  Bad tenants and PM are not beyond my control.

@Chris Clothier   My main points and maybe I am not conveying them well is my confusion with Mid west valuations and appraisals.. as You know I funded at least 200 million of these deals in my days... and I relied on 3P appraisals.  what I could not understand is how I could get these 3P appraisal values yet when I ended up owning the asset I could not sell for anywhere near the appraisal value regardless if I went in and did a full rehab which I did to the tune of millions of dollars.

The reality was without a highly tuned and financed resale outlet like a turn key company the appraisals were in fact meaningless to me personally. So regardless if Sabrina bought the homes and put no money down she got some national lender to lend her 75% LTV . so now 5 years later its OH Sabrina that area is a dog.. OH Sabrina this one is over priced what were you thinking etc etc.. my comment is not aimed at a company or individual its aimed at the whole mid west.. Deep south and rust belt.

And my conclusion is if one wants to buy in these areas they need to back into the 2% rule and own them basically forever.. the resale is the 2% rule because as individuals you don't have a highly financed TK company marketing your product and the MLS is useless in most instances .

In the day  in CA you had to do a public report to sell bare land.. and part of the disclosure was it would be very difficult to impossible to resell for what you paid because your buying from a highly organized and funded marketing company IE Boise Cascade.. Now this is before most of you folks were born.. but I was raised in it.

Now these developments turned around but it was literally 40 to 50 years before the values EVEN IN CA got to were folks that bought in the 60S could sell for what they paid.. SAme with Florida land.

I see mid west rentals the same way. that's all I am trying to say.. If you want cash flow buy cash flow but don't plan on selling in the next 10 to 20 years and getting what you paid for them... These areas are all rental areas will be rental areas and the big money is made by those that buy and resell them as turn key.. those are the companies that make the big dollars.. Like Curt said 15k a house minimum .. this I agree with I see the HUD's day in and day out.. Now some of my boutique guys make far less and give some pretty fair deals but you have to hunt for those. LOL.

Its just so foreign to how a west coast investor thinks about liquidity. IE we list sell in 60 days and are done.

that's my point

@Corey Hajduk  What type of loan would you get?  How much are you setting aside for reserves?  How much are you going to have to invest Day 1 to ensure the property is clean and attractive?  IF the rents are accurate and you don't have to invest any money Day 1 to get the property rent ready, here is my quick back of the envelope analysis.

Income = $35,760 ($745/month x 4 x 12 months)

Minus 15% for vacancy, loss to lease, etc

Effective Gross Income = $30,396

Expenses = $18,237 (60% of EGI)

Net Operating Income (NOI) = $12,159

Minus $100/unit/month in reserves = $4,800 

Cash flow before debt service = $7,359

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Purchase Price: $129,000

Down: $25,980 (20%)

Loan = $103,200 

Annual loan payment (assumes 30 yr amortization, 4.25% interest rate) = $6,071 

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Cash flow before debt service = $7,359

Minus Annual loan payment  = $6,071

Annual cash flow = $1,288

$1,288 / $25,980 = 4.96% cash on cash return