All Forum Posts by: Sabrina Brown

Lately, I have been hearing investors buying properties above market value for cash flow only, as long as they receive their rental income, they are okay.  I would only suggest that if they have their own repair team and have done this over and over.  It's amazing how much risk some people take.  

As for driving through neighborhoods, now that I have lived in Memphis for 3+ months, I am starting to see what the neighborhoods are about.  Most neighborhoods are actually beautiful (even compared to CA) but you wouldn't know that the crime is high unless you live there or know the subtle signs.  Most of us are not used to growing up in gang neighborhoods or areas with high crime rates.  I would say it's mostly houses rented to tenants that are causing havoc in an area.  What I have noticed also is that one family with good credit record rents and once the lease is signed, they bring their not so great family members and gangs in to cause trouble to the neighborhood.  I informed another local management company that this was the case at one of their rented houses from their out of state investor and they were able to send them a letter stating that their lease has been violated (I don't even think they drove by to verify it themselves because after all, they "only" managed it for an out of state investor - being sarcastic but honest here!).

I appealed mine a few years ago. I had received low ball offers, which I used to reduce the tax assessments. However, the assessments were still above the low ball offers but below ARV (about 30%). If I remember correctly, it took them about 1 year to reduce the value throughout this process. The adjuster reviewing my property called me beforehand and had informed me that he could not go as low as I requested but was kind enough to explain what he thought. Because of his information, it wasn't a surprise to see a lowered tax bill a year later.

Good luck with your submission!

@George Jetson

Sorry, I forgot to mention that I held onto my properties for 7 years.  I would say that I bought my properties even ABOVE retail (the appraiser back then was most likely in business with the lender arriving at exactly 25% equity) and investment properties sell for 70% minus repairs or you put more money in to fix up and sell at retail.  There is not much appreciation here in Memphis unless you go above $150K in property values.  

I agree completely with you that TK providers know exactly what they are doing (I don't know how they can sleep at night) and we are in the business of doing it the right way.  There is no need to screw people over for everyone to be successful!  I know I can sleep better that way!

I am not saying that we want to work "with" turnkey providers.  We would evaluate an investor's deal and help negotiate, if possible, and provide local and honest feedback going over exit strategies, looking at the property ourselves, their intent to see if it makes sense and if it meets their criteria.  Yes, there were some investors that had great experiences but unfortunately, most that I know didn't, including myself, and it cost me a fortune getting out of this misery.  

I used to live in CA and invested, and hired, various TK providers in Memphis and literally ALL of them are not doing anybody a favor.  They sell the properties to out of state investors at about 30% above market value.  I just recently moved to Memphis and I can now verify the real scoop.  If you bought from a TK provider and NEED to sell at current market value you will be out of luck.  You will definitely lose a large amount of money you have invested.  It's all about the exit strategy and not paying for future values as things will go wrong along the way.

I have provided my story aka "the saga" of my experience here (see below link to the thread) and helped several out of state investors already.  Would love to hear back from any of you that I haven't already connected with.  My future work will be to help other out of state investors so that the same $%^*+@# doesn't happen to them as I have had my share.  I will be partnering up with successful and honest individuals from the Memphis Investors Group (MIG) in a business where we can negotiate on behalf of the investors in order to get fair market deals with true insight.  Please check it out and let me know what you think. 

https://www.biggerpockets.com/forums/311/topics/227602-difficulty-selling-rental-properties-at-loan-amount?page=10#p2912873

Hello everyone again,

I wanted to provide an update to continue "the saga" :  In the meanwhile, I have had one of the contractors civilly served and given a statement to the Economic Crimes division of the City of Memphis to go after him criminally as well after identifying him in a picture line up. My court appointment is within 2 weeks for the criminal case.  Please keep your fingers crossed that not only I get the judgment but also restitution for a reasonable amount and time frame.

In the meanwhile, I have made many great connections with honest and successful people in Memphis through the Memphis Investors Group (MIG) who not only offered their help based on their long presence in Memphis but also want to assist me with helping out of state investors, especially since I have gone down this bad road and lost a good chunk of my hard earned money.  

We are currently working on a structure so that we can be the go-to people for these out of state investors and negotiate with sellers and turnkey providers so that they will be getting the fair investment value with properties in conditions up to or above par, reviewing areas for determination of rent vs. own market, contracts with vendors and management companies, negotiating with lenders as needed, etc.  We would like to see every investor get into properties the right and honest way so that they can get the returns and value that they should expect without spending thousands and thousands of dollars later on realizing that their investment has gone bad.  I have heard of several California investors filing for bankruptcy after buying properties from turnkey providers and wish that this will not ever happen to anybody.

Do you think this is something out of state investors would want?  If so, what specifics are most important and helpful in getting them into an out of state market they don't know too well besides internet searches and conversations? Would someone be willing to pay a small fee in order to prevent them from losing money or overpriced properties beforehand that they would never be able to recoup even in 20-30 years?  

I would appreciate your input and suggestions.  And if you have had current bad experiences that aren't already listed in this string, please let me know.  

Thank you so much!  

@Liwen Gu

Good to hear that this post has been useful to you.  I do think it is possible for an out of state investor to be successful but only with a good and reliable team, someone you can trust and personally know.  However, I got screwed over by someone I personally trusted and have known, and so have others, too.  This applied to the Memphis market.  

In the Indianapolis market I had a well known property management company that rented out properties too low and was not checking on my property.  After all, if there isn't an emergency, which they can bill at 3-5 times the rate, there is no need for them to do the job they are getting paid to do with the monthly management fee (being facetious here!). I was going to sell the property and informed the management company that the buyer will honor the lease agreement as it is by law.  The property management company then pushed the tenant to move out into another one of their properties while I was in escrow. Therefore, the first buyer rescinded their contract.  Then there was a hail storm on the street of my property and it was on the Indianapolis news.  My management company did not notify me that there was hail damage to the entire roof and siding of the house.  I found out at the time I was going to sell my property that everyone on the street had their roofs replaced.  There was a delay in the second closing because of the insurance claim I had to file.  Altogether, I lost $21,000 in cash plus monthly upkeep for 5 months due to the "handling" of this property management company and having to sell my property at much less because I had to sell off season, was out of monthly rental income and had to pay for upkeep.  

My advice is to be extremely cautious when you never hear from your management company.  Don't assume all is well when the reality is that they are just not checking until they get notified of an emergency.  Ask for proof of logs of their drive bys, before and after pictures, etc etc.  Baby sit like it is your baby (but then, what are you paying someone else for?).  Make sure you are able to visit your properties frequently.  Don't give your management company advance notice of your visit because they will then try to do the tasks they are supposed to do at that time (while they may have charged you monthly for it but never performed the work), or they will try to cover it up and use excuses why you can't see something when you visit.  Be diligent!  Always ask for proof, which is not their verbal promise.  I learned that so many people lie with all kinds of backgrounds while they preach of being honest.  It's sad that this is what it has come to.  Make sure you talk to a lot of investors, locals, tenants, etc. and find out what they say about the companies you are trying to do business with.   Although this doesn't guarantee that you won't be taken for your money, but if you get one honest answer from someone how they handled a situation, it may prevent you from having future headaches.

Sorry for the lengthy response.  I was asked to write a book, or two, about my experiences, as I have many examples.  I am still trying to recover from my financial losses but won't give up moving in the right direction and trying to avoid middle men that could cause me financial harm again.

Sabrina

@Account Closed

I am literally driving through areas, speaking with neighbors, etc. and am looking for properties myself.  I went to an auction today to observe and meet other cash buyers that usually pay too much for properties.  The only way I "came out of the situation" is to write off the work I put in and the cash I lost but am starting over again in my life.  And soon I should have a few deals under my belt going both ways for investor purchases and sales.

@Vivek Khoche

Vivek, I have joined the Memphis Investor Group (MIG) and signed up for a bootcamp on foreclosures where we will be looking at actual and current properties, evaluate, and going to courthouse looking at title, liens, etc.  This will give me a hands on and quick approach to verify real market values here.  As you know, out of state investors have been quoted different values than what local investors would pay.  Trying to be an advocate for other out of state investors so they won't run into the same issues and financial losses that I have gone through.

@Eric C.

Eric, CA became extremely difficult to live in for various reasons.  Prices increased drastically, rents and home values almost doubled in the last 4 years.  Real estate competition is high and due to the increase in home values, us regular investors don't get a chance to do reasonable business unless we put down a fortune before securing a property.  And since I have known the Memphis market/area pretty well and have established many connections in the past 7 years (good and bad to stay away from), it made sense for me to be at the forefront rather than out of state.  However, as I have moved here, facts are not what they seem online.  Good thing is that now I can confirm any information at hand.  Property purchases and maintenance is much less than what is quoted by TK Providers or others knowing that an out of state investor can easily be fooled.  As you may know, Zillow values are not reliable either.  If there is anything I can help verify for anyone out of state, please let me know.  I am currently building a new team of reliable, honest and reasonable professionals.  Prior teams did not prove to be as good as I thought, to say the least, and I don't want to have my name associated with any shady business practices that only serves one party of the business transaction.  It has to be a win-win situation for all parties involved.