All Forum Posts by: Phillip Gainey

Curt,

I am only repeating what MEMPHIS property managers are telling me, which jibes with my own investment experience in Memphis.

Of four Memphis tenants I've had, 3 of which were managed by a PM YOU RECOMMENDED:

One ran off with the last month's rent in their pocket.

One had to be taken to eviction court twice in 6 months and fin
ally evicted (had 5 evictions in 2008, got past PM you recommended).

One moved out this month the appliances! Also didn't pay final months rent.

If I am biased against Memphis TENANTS, it is based on my experience and what PMs have told me.

Maybe you should be more upfront with clients about the quality of the tenant base in Memphis.

Also, please refrain from sending me private messages threatening to talk bad about me to my current PM who happens to work at the same company you do.

Are you a member of the MAAR? If so, you are subjecting yourself to a COE complaint.

Have a nice day.

PG

Forgot to add:

4. We no longer invest in most minority neighborhoods. Not worth the extra hassles. That pretty much eliminates Memphis (and Detroit for that matter). This is not a political decision, just a business one based on our experiences. And this is not a "hood" versus "not hood" issue. The trouble we've had in Memphis was not in the "hood".

We try to invest in neighborhoods where the racial demographics is close to the national average. If that raises eyebrows, and sounds "ballsy" on my part, whatever!

I overpaid. Maybe Curt Davis (who sold the properties) will disagree. Thinking back on it, we shouldn't have paid so much for the rehab they offered. With the 1st property, we paid 78k for the property, 27k for the rehab. Then 2 years later had to fork over 6k for new roof.

The property above with the stolen appliances (also bought from Curt) we paid 57k, and 15k for the rehab.

Add to that the fact that the market is very soft, we have decided to do the right thing.

1. Pay out mortgages even though we have NO RENT to cover.

2. Fix the properties, get good quality tenants, no matter how long it takes. Maybe go rent to own.

3. Spread the TRUTH about investing out of state in Memphis from turnkey hucksters.

PG

P.S. Curt Davis no longer works for the company "Investor Nation" we bought these properties from. I don't know how good the deals are he is offering at his current company.

I've already posted my bad experience with investing out of state in Memphis. Horrible tenants! Some on this board who SELL the "turnkey cash flow in Memphis" dream to out state (or country) investors come on and just say it depends on the neighborhood. Blah! Blah! Blah!

Well just happened again. Tenants moved out after two years and now the appliances are missing!!! Talked to my current PM (really like the guy and his upfront nature) and he said this is why his company DOES NOT PROVIDE APPLIANCES IN RENTALS.

So again, I will repeat what I've been told by three separate PMs about Memphis tentants. And remember these are people who have had to deal with the tenants in this city for years. Long after the turnkey hucksters disappear:

1. "We don't replace or provide appliances. The tenants will just steal them, and they know they can get away with it. The police won't do anything."

2. "9 out of 10 rental applicants in Memphis have poor credit and rental histories."

3. "You'd be hard pressed to find a rental applicant that doesn't have at least one financial judgement against them.

And, apparently, it doesn't depend on the income level of the neighborhood. My one property rented for 1200 a month and is a very nice neighborhood.

Bottom line: Yes, lots of renters in Memphis (45% is the figure much touted by sellers). That's the good news. Bad news is that they suck. Figure it this way. Homes are cheap in Memphis. Then why so many renters? Why? Because there is an INORDINATELY high percentage of folks in Memphis who financially irresponsible. That's the LOGICAL way to think about.

You have to figure in all of the above into your thinking process before deciding to invest there, or anywhere else.

PG

Okay, here is a rough breakdown of PM #2

Hired in late May.

Got tenants out June 20. Great. So what do we need to get it rent ready again. Tells me soon after some roof shingles missing, couple leaks in roof. Should cost about 200 bucks. Okay I tell him, will mail a check for 300. I did. Weeks go by. "Still waiting for estimate, still waiting for estimate, blah blah blah! July 27th I email him asking what is going on. He tells me I need a new roof, 4500! I'm thinking, it takes you 5 weeks to tell me that! He had said weeks ago the roof guy was there, just needed his estimate.

At this point I am pissed. Oh he then tells me the garage is broken, need to fix. At this point I tell him I just want to sell. I check with an agent and find that the comps are just not good. I call his dad, tell him to go ahead and fix the dang roof. Nothing happens for a week and a half. I get fed up and fire him. August 12th. I take a week to cool down.

I hire Reedy on the 22nd. On the 25th I get a couple dozen photos from him. Still a huge pile of trash in the yard from the evicted tenants. Waist high grass..etc. New PM tells me on the phone the place is a "Real mess". I think, what the HELL had PM 2 been doing? Tenants evicted 2 months ago. At least cut the freaking grass and get rid of the trash.

I ended up getting a citation from the county health dept!

We emailed him last week. Tried to claim they had kept the grass cut, and someone must have just come along and dumped trash in the back yard. Also trying to tell me it had been 2 months since they had that property under mangment. Don't know where he gets that. I have the email I sent firing him on the 12th. Photos from PM 3 were taken on the 24th. That's some mean growin Memphis grass son!

What makes me made is they lie and absolutely refuse to admit to any wrongdoing. Yeah right, trolls dumped trash in the yard!

He later admitted he didn't think I would pay for a new roof and would rather sell. I think this is why he let 5 weeks go by before telling me about the roof. I think they just let the property set. But don't freaking lie about it!

PG

P.S. Haven't seen one dime in rent on this property since March! Two months of it due to PM #2

P.P.S. New roof is in place, trash gone, grass cut, siding repaired (pm2 never mentioned siding!), garage cleared out (never told about that). Just need to paint over the african murals on the walls, new water heater, clean carpets, and should make a good rental.

Bought from Investor Nation.

Eddie,

You're right, nothing to recoup. It won't take long to file a complaint. I'm actually doing the board a favor. I'm giving them a chance to police their own. If they choose not to, that's their problem.

Members of the local board of realtors sign an oath to uphold their code of ethics. If they didn't have a code, I wouldn't bother. OTOH, reporting someone to the state licensing board is a legal issue. Much harder to do.

Anyone can find out the status of any realtor with the local board. I checked and the first PM recommended by Investor Nation was recently placed on the "Realtor" list.

In his case, he didn't properly screen the tenants, left the wife off the lease (she had 5 evictions on her rental history). Tried to play dumb on the phone about her. Didn't tell us about two leaks on the roof the tenants had complained about. Not one word! They claimed that was why they quit paying the rent. He then tried like hell to keep me from evicting them. Probably so I wouldn't find out about the condition of the house (which would to have happened with tenant turnaround). Note, I don't need to "prove" this. Just show a preponderance of the evidence.

Now some run of the mill schmuck PM might get away with that. But more is expected of a professional who has achieved the lofty designation of "REALTOR" with the Memphis Association of Realtors. That is, if their Code of Ethics means anything.

PG

Shanequa,

Okay, so it would be a nonperforming note. UPB of 45k, FMV of $130k (well didn't sell so let's drop that down to $100k).

You buy for 45k. You sell to an owner occupant with decent credit for say, 100k using seller financing 80-10-10. You discount the note to an investor for 60k, or so, after a few months of seasoning. You've made 15k without using any of your money and are now out of the picture.

Investor now holds paper on a property worth 100k, he/she paid 60k for. Collecting payments around 1300. First year interest would be around $800 a month. Yield should be around 15%.

Problem is what is the REAL market value. They couldn't sell for a year? What was their asking price? Price reductions?

Inquiring minds want to know!

PG

Can't get rid of the property as there is more mortgage than market value. Mainly due, IMO, to the overpriced, inadequate rehab done by INVESTOR NATION. Unless you think needing a new roof only 2 years after a 20k rehab is satisfactory. Yeah, we got "taken"!

Both PMs are members of the Memphis Association of Realtors. We are filing complaints. They have a "Code of Ethics". First item has something to do with looking out for the best interest of the client and being truthful. I think we have a "preponderance of evidence". I have started the process. If there is a hearing they can plead their own case. Hopefully, get caught up in their own lies. One PM tried to tell me that the huge pile of trash in the BACK yard could have been put there by some rogue "dumper". Sure! Tell that to your board of realtors with a straight face!

I would like to reiterate that my CURRENT pm, has done it the way they are suppose to. Within DAYS i had numerous photos of the property and it's condition of disrepair, and a list of items needing to be fixed and estimates.

PG

I don't get it. If the landlord only owned 45k on a home worth 130k, that's a lot of equity. Or was that the other way around?

PG

The ones I see on the big online note exchanges (eg. FCI) aren't discounted much. Probably note buyers trying to sell off their portfolio at a profit. CAPITALISTS!

I think it's a matter of networking. To answer my own question.

PG