All Forum Posts by: David Hutson

@Peter Green,

I agree.  Tenants don't get interest on their security deposits.  That being said, the security deposits you are holding should be held in non-interest bearing accounts separated from other accounts.

David

@Andy Rumple,  from what I have seen in Memphis , buying 16 homes there in less than four years, is that yes, you pay full price for a TK home.  I don't see many people who have been asked to pay more than the appraised price.  I work with a lot of other investors there and haven't seen any appraisals come in by more than a few thousand dollars.  When that happens, all but once the TK provider has lowered there price.  Basically, when you are buying TK you are usually paying the full price for what should be a fully rehabbed home.  That is where newbies run into issues.  They either don't get a home inspection, don't fly out to look at the home or don't do research on what they are buying.  I'm not going to say that all TK providers are great and trustworthy but I meet with 6-7 of the well known TK providers each time I go out to Memphis and believe most of the TK providers try to provide a good product.  I have moved my properties from one who I didn't feel was managing the homes with my best interest as the primary concern.  If companies do not do a good job I would expect that they would go out of business.

@Alex Craig, Thank you for the kind words.  I appreciate the comments.  

I have met with Alex and in my opinion he is at the top of TK providers in Memphis.  His rehabs are high quality and in quality areas.  His prices are reasonable and I would expect his homes are never above an appraisal.  What I really like about the properties Alex has is his high standards for property management.  He is the only PM I know there who actually has a checklist and does inspections with tenants at move in and move out.  Most will provide a list to the tenants and have them return it at a later date.  As an investor and a property manager I know that the only way to know whether the house is in good shape or if there are issues is to walk through the home with the tenants when they are first moving in and when they move out.  I don't like that many PMs will allow the tenants to do a walkthrough on their own.  Every market is different so I can't see that it's wrong but here in CA I ALWAYS do a move in and move out inspection with the tenant.

@Sabrina Brown, I would be happy to discuss this or any investing topics  on the phone or meet you for coffee or a smoothie on my next visit out there if you are interested.  I was just out there and met with TK providers, PM companies, RE agents, talked to my wholesalers and met with a few other investors.  I usually try to meet and talk to as many people as possible.  Feel free to contact me as I would like to have a conversation if you would like to.

@Sabrina Brown,

I don't think I will have the same issues you had.  I have been watching this post since the beginning.  I do have two houses that I have continually had issues with.  One cost me $40k and one was brand new at $155k.  It's mainly the management that will make or break you.  I have also been managing homes for 17 years so maybe that gives me an advantage. 

I spend hours every week looking at Memphis, talking with TK providers and PM's.  Besides the two I have issues with my numbers are pretty good overall.  I always account for PM, vacancy, repairs, taxes and insurance before buying and then ensure the PM is good.  (I have fired one PM out there though.) 

At four years there it's worth it.  I wouldn't change what I did if I could go back.  No matter what class of home you buy you will always have repairs.  I'm guessing you have to replace the HVAC, flooring and windows in your own home as well.  If you budget for it and actually set the money aside (don't spend it) then you should be covered at year 7 when you have these issues. 

Another thing to do is check into pricing when talking to PM's and other BP people.  See what they charge or have paid.  That's one of the reasons I fly out there a few times per year.  I want to see what is going on and how I can improve on what I'm doing.  If you meet with those back there who are agents, TK providers, investors, etc you may be amazed at what they share.  I learned a lot this past week and even passed on some helpful tips.

I know you had a very bad experience.  I think if everyone else were to use your example as the worst case scenario and follow some of the tips above it should reduce the odds of it happening to someone else.  You had one of the worst experiences that I have seen posted about here.  I don't believe that there aren't the high number of issues with TK providers.  Most try to do a good job.  You know up front you are paying full/about appraisal price so make sure the quality of the home reflects it.  If the numbers work then buy a house knowing you won't make your costs back for a few years.  It's not a short term game.  Buy houses at the auction and sell them off after if you want a short term gamble.  I have bought four there this year and will be continuing to purchase four homes a year there until the numbers don't work.

If everyone else decides to invest somewhere else I'd be happy because then I could buy a lot more homes there :-)  But seriously, $75k homes are selling for $85k in days.  A good deal last week was about a 1% price to rent ratio.  Three years ago I could get a rehabbed home for 1.25% ratio.  Small percent difference but the cash on cash return is significant.

Wow, this thread is lonnngggg but has a lot of good info so I'm going to chime in also since I just got back from Memphis on Saturday night.  I spent last week there looking for a handful of homes.  For those who say there is no appreciation in Memphis, I thought the same thing but I don't believe it now.  I have purchased 16 homes of varying quality over almost four years.  It's crazy what people are asking for properties out there today, and the rents haven't gone up much.  It's hard to get good deals like I was able to over the past few years. 

I do buy primarily from turnkey companies, knowing that I will hold them for a long time, but that is my goal.  Long term investing.  Yes, I'm often paying almost full retail but as long as they manage them well I don't complain.  I met with more than five providers that I talk to on a consistent basis and their returns are significantly lower for the very few houses they have available. 

I have purchased from wholesalers out there but after I pay someone 15% to manage the rehab, since I don't live there (from CA), plus the rehab I don't get much equity compared to turnkey and I think the turnkey was rehabbed better than what I have paid for. 

I talked to the few wholesalers I normally deal with and they didn't have anything good. The number of homes they actually had was really low compared to any other time I have talked to them.

I did go to the Auction at Comfort Inn on Thursday to look for deals and there were a few there.  The only thing is you have to compete with Memphis Invest, Mid South Homebuyers, Rent to Reward and all of the other people/companies there looking for deals.  There were 12 other people/entities bidding on a total of nine homes. 

Overall I noticed there are not as many homes available and everyone is looking for homes to rehab. The wholesalers are passing them on as quick as they can get them, the turnkey companies are struggling to maintain a decent inventory to keep up with demand and the homes I saw on the MLS (MARS) were mainly overpriced. It's a good time to have many homes there. This is the first time in four years I have gone out there and not purchased/contracted for a home while on ground. I do have a few leads but who knows what I will actually purchase.

If you are new to the area or looking to buy, like all of the others have stated, do your due diligence.  I have always recommended visiting the Memphis area to see the quality of homes, what areas you are comfortable investing in to meet the agents, turnkey providers or whoever else you are working with out there while actually standing in front of a house you are interested in purchasing.  I spent about $1,500 for five days and it's well worth it.  You will learn so much more from people if you actually visit.  I always learn a lot from the people I talk to.

I recommend at least once per year.  If you see issues every time you have someone walk through the home then go to two times a year. 

If you still see issues then consider not renewing the lease or let the tenants know you are considering asking them to move out.  Nobody needs bad tenants in the home or people who will not take care of your homes.

Afternooon, I always recommend visiting the areas you plan to invest in to get a feel for what the city, neighborhoods and streets look like.  Some cities do change street by street.

When looking at an area and house that you are not familiar with you could find an agent or someone from the site here and pay them a few dollars to talk to them and have them go by the house first.  I almost always get a property inspection done and ask the inspector to take extra photos of the home while he is there.  I haven't had any issues with them not wanting to take photos as long as you clearly tell them what you want the photos of.  Ie, front, sides, back of the house from the fence line and photos of every room.

@Philip J. Russell,

I chose them due to the quality of the homes.  They do a full rehab.  If you look at the completed photos on their website.  I'm in the military and like things standardized.  They use the same carpet, tile, cabinets, paint, etc for their homes so it's always going to be easy to maintain and replace/rehab when a tenant does move out.  Over three years I have only had two tenants move.  Their rents are just below market and the houses look great.  Tenants don't move often.

I have bought from other turnkey providers as well as MLS and wholesalers. Turnkey is just easier.

You are local to me.  You should keep your eyes open for the local meet ups or message me if you ever want to talk properties.  I meet with at least one person here every week or so.

Yes, I would say they have homes in B and C areas, more towards the C.  I own 15 homes in Memphis now, 8 with them, so I'm pretty familiar with the areas they focus to sell, down to the neighborhoods.  I'm good with these homes because they manage the tenants exceptionally well.  That's the biggest issue with rental properties in Memphis.  They have homes in several different zip codes/parts of town so you can get one from another part of town if you don't want one in a specific area.

I will say that their current wait list for a home is four months so they are doing something right.  They don't have the normal process to purchase where you pick a home that is available and put in an offer.  You would be added to a wait list and then be prepared to choose from a select group of properties when your name comes up.

If you have more questions feel free to let me know. 

@Daphne Barber, 

I get a few hundred, but I take out money for taxes, insurance, vacancy, repairs and PM, plus the mortgage and I have to put 25% down since I have so many loans.  To me that's a very good number since I have very few issues, a home in great condition and tenants that don't move out every year.  Most are longer term. 

The only downside so far with them is the wait time to get a house.  You have to wait about 4 months to get to the top of their list.  Everything else has been great.

Morning all,

I closed on my 8th home with them a few days ago and it's in 38128 which is my favorite zip code to invest in.  The home is on Edgewood and should be another steady performer.

I have been receiving many requests regarding Mid South Home Buyers lately and whether their program really works.  The management is great and I am receiving consistent returns from them.  This is primarily due to their attention to detail and ensuring they get good tenants in the home.  
They don't charge application fees to prospective tenants so they tend to get a lot of people submitting apps but then they only choose the best tenants to move in.  Since their homes are renovated to almost new standard and they keep their rents at/slightly below market the tenants tend to stay longer.  I have only had a few vacancies but the turnover time has been under a month so that is great also.  

So if you have questions about them or turnkey investing in general feel free to message me.  I enjoy helping others become successful since I have been lucky enough to do well myself.  If anyone has had issues with them I'd also like to hear about it.  Maybe I'm missing something.

David