All Forum Posts by: Sammy Paul

100% on what @AJ Singh said about things changing quickly in Memphis.  My favorite example of this is a street called Highland Park Place.  Google map it and start on the east side and just drive down the street (it's a very short street).  Highland is an area near The University of Memphis. 

On the east side, there are very nice homes.  You see some construction and remodeling.  Once you cross over Holmes, things hold on, it doesn't have as many mature trees and the yards don't look quite as nice, but it still looks fine.  Then you get to the end of the street and there are four dilapidated houses with tires stacked up in front of them.

I was trying to get one of the houses on the good side of Holmes once and got outbid so a realtor took me back to another house on the street that was for sale - it was near those four at the end. We didn't stay long.

Would you have any interest in Desoto County, MS?  It's directly south of Memphis and is a commuter community.

Memphis is a great market for rentals, but in many respects Desoto county is better.  Memphis has some very cheap houses that can get decent rents in rough neighborhoods.  I've had some success at that.  However, outside the rough neighborhoods, Desoto is cheaper than Memphis real estate and has lower property taxes.  Also, Desoto has better public schools compared to Memphis so that is a draw to many renters.

Memphis is great, but check out Horn Lake, Southaven, and Olive Branch in Desoto County as well.  Feel free to contact me if you need any additional information. My wife is a realtor and can help in either Mississippi or Tennessee.  

Yes, I just went and looked at it. My guess is that it would take 3 men 1-2 hours to remove the junk.

It's a smaller house - so I would estimate 2 hours to paint.

Then maybe 2-3 hours for a deep cleaning.

At your rates and 7 hours - that would be $630 plus materials. Based on that - maybe it's not too bad.

$795 to clean out some junk, paint, and generally clean up my property after it was vacated by the tenet.

This is the first time I've been through this; it seems high to me. Does that seem about right to you?

The house is not trashed by any means, it just cleaning up.

My experience is that they are well worth it.

Mine has a full time operation with a staff that leases out homes that he owns as well. They do tenant screening, lease closing, rent collection, eviction, and handle maintenance calls. Obviously, I have to pay for the maintenance, but I don't have to take the call at 10 PM.

1/2 of the first months rent seems a little steep, but it's not so bad when you consider that they probably get your house rented at least that much faster.

I would highly recommend them. However, I wouldn't get some guy that does it out of his house and isn't doing anything that you couldn't do on your own though.

Suzette,

I'm not sure how wise it is to take financial advise from a person that has significantly less money than you do - but I'll give it a shot.

I tend to be more risk adverse than most folks on here seem to be so option 4 is very scary to me. I used to be in banking and have underwritten deals on SFR and the margins/cash flow gets very skinny with just a little vacancy when the houses are highly leveraged. If you would be using most/all of your liquidity, you wouldn't have much buffer if something bad happened.

That said, you could get by the liquidity hurdle with a HELOC on your current house or something like that, but that's not cash, it's more debt.

It sounds like your knocking it out in your current day job, so you might have enough cushion there to overcome some of these issues.

Option 5 would be very appealing to me personally - but it would be a slow approach to building your portfolio. Somewhere in between might be the best way to go - taking on leverage that can be easily covered with cash flow from rents, your current income, or existing liquidity.

Good luck.

Mitch,

Thanks so much for the summary. I think that you and I have similar philosophies. However, I am investing in Memphis, TN - a much more blighted area and, in my opinion at least, without the chance of appreciation that SoCal has. In absence of a chance at appreciation, I think I'm correct in looking for cash flow.

I was in banking in 2002-2007, and in 2002 - 2004 time frame, we knew there was no way the market was going hold. We kept wondering who were these people buying these huge houses. Now, I had no clue it was going to bring down the world financial markets as it did.

Currently, I'm reading The Big Short by Michael Lewis - it is a fascinating look at how the mortgage mess went down.

I say all that to say - I think you could be in line for some big time gains in depressed areas like Southern Cal because they are way over sold.

Thanks for the advice and good luck.

Thanks,

I really don't plan on selling so I would have a long term time frame. I've been focusing almost totally on cash flow, but I just wanted to make sure I wasn't making a big mistake or missing profit because I wasn't considering appreciation.

Of course, with my time frame, we're talking about something that no one could predict with much certainty.

I am relatively new to real estate investing. I just bought my first property. I have a back ground in banking so I've been involved in rentals/construction/development for a while, but this is the first time I've put my money in.

Since my purchase, I've been turned onto this site. I would say that I'm more risk adverse than most on here and cash flow is more important than ROI or any other factor so I bought my first house with cash.

I was able to purchase my first house and get it rehabbed for 2.8x gross rents. Now that it is cash flowing nicely, I'm considering adding another property to my portfolio using leverage.

I was very happy with the gross rent multiplier I was able to get my first house, however, I do not believe I will be able to get much capital appreciation from the property - I do not plan to sell and I think I will be able to get out for what I have in it, but I don't think I would be able to get much more than that.

Here's my question. For you buy and hold guys that have been doing this for a while: Which is more important to you? Gross Rent Multiplier of Purchase Price OR Potential Capital Gains?

Thanks in advance.