All Forum Posts by: Sabrina Brown

The cash flows that I mentioned are after PITI and management fees so if these other issues had not incurred, I should have had built up a lot of cash in theory. It was going well for about 1 1/2 years until tenants started moving out, the other property became vacant with the end result of being vandalized by punks a couple of times and boarded up, involving realtors, etc. yadda yadda yadda.

@Frank:  I have a different MFH strategy with multiple commercial loan and non-recourse options in CA.  That would be a different topic.  I hope you saw my responses to others regarding the bad pictures/marketing, and not having had any luck in finding qualified management companies, even though they are well known in the Memphis area and consider themselves professional.  That by itself is one of the biggest challenges.

I forgot to mention:  ALL of these 3 properties are cash flowing with about $200-$350/month each.  They probably generate even more now because interest rates have dropped drastically since I purchased them.  I cannot refinance because I am no longer a W-2 earner and/or don't want to lose my excellent credit rating hence the loans are all current.

@Derek : yes, that was the case. Nobody could have predicted that I would get into this situation. The market was strong holding up at 75% LTV. The market has slightly declined mostly caused by so many investors purchasing from foreclosures and short sales (caused by those investors that were sold on these properties at around the same time).

@Alexander: I did exactly that...numerous times over the years with different realtors.  Of course, most didn't do anything hoping that in the end I would give up and just sell to any of their connections.  Realtors' best advise is always to sell at a lower the price because they are still making their commissions.  If I lived there, I would stage the property or at least use a "woman's eye and touch" to make them inviting.  I have done this a few times with my personal properties and made huge profits that way.  I take good care of all of my properties and belongings.  

@Curt:  You are very close in your assumptions as well as market values I have determined.  If that is the case, why would I "walk" away from these properties and not get what I should be getting?  Whether I bought them at zero down or whatever in 2010, I should still be able to get the market value but was willing to discount the sales prices.  Yes, Chelsea has always been a challenge, except the area improved drastically since last year.  There is a possible lease purchase tenant in the property right now, however, I would want to get the loan out of my name.

@Michael: I actually put a lot more repairs into these properties since I purchased them. The 20K was just this year to get them up to par. The MLS listings I had did not include some of these repairs and as @Curt noticed, the pictures don't do the properties any justice as they were taking during the rainy season. There was also another time where one of my properties was vacant and boarded up for almost 2 years because a management company told me to take it out of Section8 to get higher rents, although they should have known that this area did not call for higher rents. In the meanwhile, Memphis city no longer accepts new Section8 applications. Besides these issues, it is normal to have had times between a tenant moving out, making the property rent ready (spending usually 2K on average - and charged at markup by these management companies), and getting a new tenant in. Keep in mind that usually the first month rent is either 50% or less because management takes that as tenant placement fee. This sucks up a lot of cash. At one time it was great to have 3 properties to balance out another property cash losses but then it just started getting worse with all of them, mainly caused by management companies and lack of communication on their part and them making the wrong decisions that I was not informed about until it was too late.

@curtdavis : could you name the reason/s why this type of buying model is almost distinct?  Thank you.

Properties were listed with a realtor at a discount when all 3 properties were vacant for about 9 months.  I now have invested more money to fix these properties up but had to put tenants in it to get some sort of income. Then I got ripped off by yet another management company that I had to fire last week for not sending me rent payments and doing repairs in time while I then found out they don't even have a license (will get attorney involved to recover damages).

Here is the scoop about these properties, which I all bought in 2010 at zero down with 25% equity at the time:

zip code 38128: paid 49K (not including other repairs after purchase), low income area, rents $750-800, value 65k (has possible lease purchase tenant in place)

zip code 38115: paid 84K (not including other repairs after purchase), medium income area, rents $1,050-1,200, value 125K (currently rented)

zip code 38016: paid 82K, prime area, rents $1,050-$1,150, value 100K (ready for sale and/or rent)

Yes, the problem is that the calculations given to the investor do not include the profit the TK provider makes, or it is somehow worded so it is very difficult to find the accurate information.  TK Providers are very slick sales people and know how to word it with all the bells and whistles.  Or, if you have a bad experience with one group, they let another group know that contacts you without even realizing they are somehow working together and/or bouncing investor off each other.

It also comes down to having a great management company and a terrific tenant but we know, this is just very rare (like I have at one of my other properties in IN).  Usually the TK provider also has their own management company (often in a different name), which they refer so they make multi fold on your investment. I have tried giving the properties back to the TK provider but it would have been a pure ripoff!  It appeared as if they were trying to make another huge profit like they did when selling the property to me.

Surprisingly, nobody has asked me to delete this post - quite the opposite actually.  

I have also tried lease purchase options, which are usually offered to OO with less than ideal credit. A lot of Memphis people don't seem to have the drive to truly care for someone else's possessions so that the lease purchase cost doesn't cover the damage they may have done to the house (who knows, this may have only happened to my property but with "regular" tenants I experienced the same). It is known to Memphis people that going after them legally isn't going to do much: they just switch employers over and over or move from one property to another (and with the owner's risk once again to run into unprofessional services "trying to help the owner" in this situation).

I was raised in Europe to be honest and reliable and will not switch to the bad side just because it now seems to be the norm to also be taken advantage of "professionals".  It appears that there are less and less companies one can trust here in the US and many are just out to "get" someone.  

Aaron, you pointed out perfectly what takes place in fine print.  When I purchased these properties 5 years ago, I was an executive in the corporate world and worked very hard to put money aside while sacrificing my health, only to be robbed by some of these companies and ungrateful people.

Okay, I think I have expressed enough of my personal thoughts.  I am still looking for ways to get them sold professionally! :-)

Thank you everyone for your valuable information.  I am glad all of you caught the writing in between my lines.  I was "screwed over" (for a lack of a better term but still not strong enough to really express what I truly feel about it) by many so called "professional companies" that are circling in the same areas (just to name one example, the prior closing attorney is in jail!).  

One of my major problems is that I do not have W-2 income, thus, I cannot refinance through conventional lending (while they are giving me the run around to take the properties out of LLC without even giving me options to begin with). In addition, I cannot jeopardize my excellent credit rating or I will never be able to do business in finance or real estate again. All loans have been current.

Jay Hinrichs understands the market correctly and I am glad he pointed out a few things that are happening in Memphis and what has happened to me as well.

There is nothing wrong with the properties or the areas. One needs to understand the different needs in each of these areas (low income vs. prime, family home vs. starter home, investment property vs owning, etc.) They are great properties with only cosmetic issues on one of the properties. I have had these properties for 5 years and even though prices have dipped a bit, the values/sales prices are still strong enough for an OO buyer to be able to finance them through conventional loans. Most OO buyers in Memphis don't seem to have the credit but some cash but even after having tried out lease purchase options, it always comes back to the same: they are not better than any tenant, costly repairs have to be made after move-out because deposit doesn't cover the damage so one invests in repairs once again, and the list just goes on with not being able to rely on management companies, contractors, realtors, etc. telling you the truth (yes, I have tried out numerous that were even in different circles!). One of the challenges is being an out of state owner. As soon as these companies know about it, one gets the short end of the stick.

Because I couldn't sell these properties in almost a year as OO, I started the cycle over by putting tenants in it, now having another challenge to not being able to sell to possible OO buyers, hence dealing with investors/TK providers, etc. once again.

So this is truly a catch22!  Please feel free to use this thread as an example as I know many other investors having the same issues (most of them having done business in the same circle of providers).  They are just not comfortable openly talking about it because a couple of them had to file bankruptcy or mess up their credit rating.

Hello everyone:

I purchased these properties at zero down through a TK provider, which at that time were appraised and financed through a smaller lender at 75% LTV after rehab was completed. The loans were then sold to Chase. There is DEFINITELY a different price system through TK providers and it is NOT in the favor or in a fair consideration of the investor, even if the investor asks the properties to be taken back by the TK provider in better shape than it was taken over.

The reasons why I received less than loan value offers was because INVESTORS, not retail home owners, are making these offers.  They are mostly wholesalers or part of TK providers.  The properties are meant to be held for long term investment and are already fully rehabbed but these investors make offers as if they were distressed properties.  The condition of my properties are turn key/fully rehabbed/move in ready...no major repairs are needed, only cosmetic, if one chooses so, but they are in the standard of Memphis "styles".

These 3 properties are in 3 different locations: 1 in zip code 38128, which is a newly developed area, which used to be a challenge but has now been mostly fully occupied and either purchased by new home owners or rented.  The 2nd property is in zip code 38115, close to a golf course and well respected school around the corner, perfect for a larger family.  The 3rd on is in zip code 38016, a prime area and the property is on a cul-de-sac.

There is nothing wrong with the properties and they provide great returns but I would like to move on to buying commercial MFHs and get out of renting SFHs.

Any additional advise or information is greatly appreciated.

Thank you.

Sabrina

I own 3 rental properties in Memphis and have been renting them out since I got them.  However, last year I tried to sell them at 25% below market value and still only got offers for less than the loan amount.  I ended up having to put tenants in it again after not receiving any income for a year in addition to putting in another 20K to fix these properties up to make them turn key.  I can't refi because I am self employed and I can't do a short sale or approach the banks as to not to jeopardize my excellent credit rating.  

I would like to sell these properties as a package. They generate at least 1K/month in net profits (after PITI and management fees) and don't need any repairs.

Is there any other strategy I could use to offload these properties at a minimum of breaking even or just a tiny bit of a profit?  

I am currently looking for MFH's in CA and would also consider an exchange or other unique options.  Please advise!