All Forum Posts by: Chris Clothier

Hey James,

This biggest benefit to involving local businesses and churches is that you can provide labor opportunities and safe, affordable housing to their workers and members.  The labor may only be odd jobs or the actual labor of cleaning and yard work - hey may not be skilled laborers like carpenters or plumbing, electrician.  But you would be surprised what happens when you ask those questions.  The work steps forward and the local, neighborhood residents will respond with thanks.  

When it comes to tenants, you have an opportunity to rent the property to someone who was alerted to your plans for cleaning and revival and they will support you.  They will help you find a quality tenant that will take care of the place.

That is the theory anyway and it does work - maybe not 100% of the time - but it will go a long way toward your eventual success. 

 Great point by you and it does add some levity to it.  Just about every poster who takes shots at one city or another or one type of investing, is from locations that deal with the same issues.  Every major city does.  There will be blight, abandonment and failure and it takes a tremendous concerted effort and even then, the effected area is usually smaller than most would like and the blight still exists in other parts of the city.  

For Memphis, it is absolutely worst in the urban core and in zip codes both south and north of the downtown area nearest the river.  It will take decades and millions of dollars both private and municipal to turn those areas around.  It would also be a huge boost to have a major job supplier move in and offer jobs and infrastructure to an area.  Much like Nike did in Raleigh.  But before anyone starts thinking Raleigh itself is a great area, it is still fractured and even with Nike, the renewal has been super concentrated,  In other words, there is still blight in Raleigh after Nike built a huge distribution center.

Lastly, I tried the route of being the leader on a renewal project on a cove here in Memphis with 14 houses.  The area was blighted for sure and in need of major overhaul.  I was able to secure 12 of the 14 duplexes on the cove.  We spent hundreds of thousands of dollars on this cove but made some major mistakes.  We did not involve any business near us and we did not involve two churches that were nearby.  Without support of those directly around the neighborhood, the houses experienced tremendous turnover vandalism and destruction.  I have made a choice to stay away from these areas as an investor because they are so difficult to make work.  Anyone who thinks the answer is just to buy up everything in one area - think again.  Without a partner with a vested interest, it could be a long, painful investment.

 Hey Aaron,

It is certainly not an unworthy topic, although I'm not sure the ordinance you are speaking of does or was ever intended to do what it is you are asking.  I remember when this ordinance was first introduced and there was a lot of uproar on both sides.  I don't think the city council was ever serious about this ordinance and as it stands, it is still not in force meaning it is an ordinance that the city has not implemented into their policy.  Why?  Because it was only intended as political cover, in my opinion.  It was poorly written and was a convenient talking point about all the evil investors buying up property and turning the city into slums.

The reality is that the worst effected areas, as the study you just citied is going to show, are concentrated and have been in decline for decades.  

As for why the ordinance was never serious - it is written to basically effect no one.  A property must meet three criteria.  1.  It must be vacant  2.  It must be abandoned.  3.  It must be delinquent in taxes.

If a property meets all three criteria, the owner has long given up and has no intention of ever registering or paying anything.  There is a high probability that they can't pay it.  In what you are asking - owners with boarded up houses and no intention of fixing them up and putting them back on the rolls to just please register - the very action of boarding them up often means they are not abandoned and if they are paying taxes in a timely manner, then they are not abandoned.  So those owners, who sometimes make business decisions to board up a house rather than continue to lose money trying to keep it operating.  At some point, the write off no longer out-weighs the opportunity to sell and they unload the property.  

Lastly, saying an owner would be worried about their precious cash flow on a boarded up property is also a bit confusing.  A boarded up property is producing exactly zero in cash flow so I doubt an owner in that situation is worried about losing cash flow by registering a property.

I like the passion and the zeal.  I would suggest you meet with the gentleman who runs the Frayser Development Corp. and with the leaders of Community Lift.  There is an attorney her in Memphis who is also fighting hard against blight, but mostly with larger properties - I cant think of his name.  Either way, there are a lot of people here in the city who are as passionate as you about fixing the blight.  This ordinance is not really intended, in my opinion, to help because it is so poorly written that it will only effect those owners who have already given up anyway.

As for the fees you mentioned on cutting grass, that is handled by the Code enforcement division of the city as well as a lot of other issues you mentioned as well as tearing down dilapidated properties.  Once those services are done, they are added to the taxes of the owner as a lien.  

Good luck with your first property and hopefully you are successful in buying more in the city.  I think you can have success with your passion if you network with some other really good people here in the city fighting the same cause.  Good luck

I ran across this article this morning on Business Insider.  It is painted with broad strokes, but it still has some data that could be troubling or encouraging depending on which side of the fence you sit.  I just wanted to see what investors in these states are seeing and if the increase in foreclosures is leading to an increase in opportunity?

http://www.businessinsider.com/states-with-highest...

According to RealtyTrac, bank foreclosures are up 66% year over year and the foreclosure rate nationwide is 1 out of every 407 homes.  There are 12 states that are foreclosing at a faster rate than the national average.  If I'm not mistaken, this is the same trend that precluded the last housing crisis as foreclosures were clustered in a few areas around the country.

Here are the states seeing increased foreclosures:

Delaware
North Carolina
Indiana
Ohio
Georgia
New Mexico
South Carolina
Illinois
Maryland
Nevada
Florida
New Jersey

Anyone feeling a big increase in foreclosures?  And is that good or bad for what we do? 

 These numbers are mind blowing.  I read where 60 some-odd % of single families in SF area are over $1million in value.  And, I've read that San Jose and east bay areas are experiencing the same massive price growth.  Seriously, how much higher can they go?  With as many west coast investors out there looking for opportunity, someone needs to figure out a TK business model focusing on the bay area and offering a fund model (i know there is a proper word for this, but my mind is simply not working right now).   10 equal shares in one property?  

 Jay - 

For us it is all about timing and speed.  We move quickly and have a solid reputation as a management company so we can move properties much quicker than if we waited for a process such as Section 8.  They can always apply, but usually before they even get an appt set to inspect the property it is already on a two-year (or longer) lease.  That is one other reason for us - we only allow two year leases and have a 77% success rate of getting a tenant to complete their lease and sign a new extension.  No need to wait for Section 8 when we are having that kind of success and getting top of the rent range for the market and neighborhoods.

@Account Closed also made a point about markets being landlord or tenant friendly.   I'm not sure how he has handled his management or his properties, but I can tell you that if you invest in better properties, nicer neighborhoods (more attractive amenities and attributes) and treat your houses and tenants with respect, then landlord or tenant friendly never comes into play.  I would imagine from all of his comments that he has had a pretty good grasp on how to do business the right way.  

Tennessee is considered by many to be landlord friendly or at a minimum neutral.  So it should be easy to do evictions and the reputation of a place like this is that there are evictions happening all the time.  That does not have to be the case - 

We started the year managing roughly 2,700 properties and are right at 3,200 right now in Memphis, Dallas and Houston.  We have only had 18% of the portfolio experience a vacancy and only 25 evictions.  Less than 1% - why?  Because this business is easy if you know how to treat the houses and the people in the business with respect.  That includes tenants.

Also, @Mihn Lee brought up some points about home affordability and rents.  You miss one major point about many midwest areas.  Home ownership or lack thereof is not about affordability and often times is effected by culture.  Upward mobility, moving into the next property, looking for the next advancement - among other things - are not part of the fabric of many of these communities.  There is a completely different mentality - I will speak for Memphis specifically - when compared to an area like Silicon Valley.  You used the phrase "common sense" to describe the way investors should view statements from Turnkey companies and I don't disagree, but it is a common psychological error to anchor back to what we know when dealing with something that we don't.  

It is very common for individuals, couples and highly successful ones at that, to rent their housing and often for long periods of time.  Often without ever thinking of or moving toward owning a home.  I have multiple rental properties in Germantown, TN which is an affluent suburb of Memphis and right now have tenants who can easily afford to own the home they are renting from me, but choose to rent instead.  It does often come down to a mentality that is hard to understand by anyone who is driven by upward mobility, taking advantage of appreciation and building assets.  The drive is not always the same in all parts of the country so it is not quite as easy as saying just use common sense.

 A couple of quick things Johnny.  When you say you closed recently, how recently was it and are you sure the items stolen were in place the day you closed?  That would be my first question, but only because I am not sure based on your email.

You've received some other advice on here and some has been good, but I may say things a little differently.  First, I would NEVER board up a property.  I learned a long time ago that If you have to put boards up on a property, then you may be investing in the wrong parts of town.  I never made money where I needed to board up houses and I quickly moved up the food chain to better properties.

As for delaying the placement and even pulling condensing units when a property is vacant, it depends on the part of town you are in and how long you anticipate the vacancy.  Neither of those suggestions is a bad suggestion regardless of area of town.

If your property was newly renovated and the items placed were new, then you should call the police and file a report since whomever you bought from should have paperwork and serial numbers.  You can ask your property management company to have someone to meet the police at your property to take down a description of what was stolen.  I have used this technique a couple of times just to show police presence at my property after it was vandalized.

I would also suggest calling your insurance carrier at a minimum to see what coverages may apply to you.  Being that it sounds like it was vacant, there may not be any recourse with police or insurance.  Small time theft should be written off, but if you do nothing, you also place a big target on your property.

@Michael Swan - Reading through your post, it sounds like you have a solid plan.  I love reading the plans of other investors when they are well thought out and the best thing you have done is train a good, small management company to react to your needs over in Ohio.  Best of luck as you start your next steps in motion.

 Yup!  Summed up perfectly and we can all move on to a new thread!  @Tony Velez, there are plenty of forums on here to read and learn and plenty of people to help give you advice.  Best to do a search for Turnkey in the upper right hand corner and read the posts from the last 30 days.  It may feel like a rabbit hole, but there will be plenty of reading material.

 Like I said earlier, I think you make great  and very valid points Jay.  You just did it again with Property Management.  It is extremely difficult, though not impossible, to find good management at lower price points.  However, even with good management, I think @Account Closed mentioned gambling earlier in the thread and that is essentially what is being done in lower priced areas of every city across the country.  Lower priced homes command lower rents and are primarily occupied by tenants who can only afford a lower rent.  Those tenants face hard choices daily about where to spend $1.  Food, medicine, lights, gas, water, rent.  They are insecure when it comes to basic necessities to a degree most of us cannot imagine.  That does not mean they are bad people and stereotyping that they will all fail as renters and cost an investor money or headaches is wrong as well (not that anyone has done that - just pointing it out).  So it is very, very challenging at lower price points to have a consistent performing investment.  It can be done - it is done for out of town investors every day - but it is also very challenging and if the stat were kept and accurate, I believe it would show that a majority of investors who expect these to perform at their highest level are disappointed.