All Forum Posts by: Sean Tagge

This picture will answer your question for cap rates in Multis in Memphis this is before leverage. and I don't really go by "cash on cash" because that is all variable on your leverage: down pmt, rate, and length of loan term etc...

@Slocomb Reed Yes there are. 

@Slocomb Reed hmmm great question. 

Let me think about that. 

Lets compare Memphis to lets say Denver...

Memphis 

Avg Price = $118,467 

Avg Rent = $10,906 

Maint can CapEx = $1,635 (fixed since heater costs the same in Memphis as it does in Denver as you are saying...)

All other expenses = 40% of gross rent = $4,362 (I put expenses at 40% just at random and have the 40% fixed for Denver as well)

NOI = $4,909

CAP Rate = 4.1%

Denver 

Avg Price = $364,400 

Avg Rent = $16,932

Maint can CapEx = $1,635

All other expenses = 40% of gross rent = $6,772

NOI = $8525

CAP Rate = 2.3%

So it looks like even with you stating that maintenance and cap ex-numbers cost the same from market to market higher rent to value markets do reflect better cash flow invest ability...by nearly being twice as lucrative in terms of cap rate vs cap rate comparison...

Additionally, the cost of building has increased greatly due to all of the trump tariffs lumber alone increased 13%. So it's really difficult to build a home for under $100k in Memphis. 

Hello @Evan Parker Thanks for the question. Yes the % of homes valued under $100k is decreasing. There is a lack of inventory all over Memphis in all asset classes but it is especially seen in the "starter home/entry level houses" a squeeze because there are no new homes in this area being built. Homes being built in Memphis are generally $275k+ - $350k Mid level to upper end. Where very few starter level 3 bed 2 bath 1200-1400 sqft homes are built. 

I came across an interesting article about Memphis. Interesting to see Memphis is increasing in the % of the population who are renters the quickest but also shows that our average rent is still relatively low compared to other markets showing our rents still have room to increase. 

https://www.bizjournals.com/memphis/news/2018/08/0...

This second stats is an update on how Memphis is doing for July 2018. (Provided By Chandler Reports)

July Real Estate Update

Home Sales

Home sales prices in Memphis and Shelby County continue to accelerate as housing inventory creeps higher.

The average home sale price for the month was $186,292, up 7% from $173,610 in July 2017.

Total home sales were up 8% in July with $340 million recorded for the month compared to $313 million last July.

The median sales price was up 10% from last year to $149,000.

Year-to-date the number of residential units sold is up 2%, average home sales prices are up 9%, and total sales are up 11% from the same period of 2017.

Home sales over $500,000 were up 17% with 83 recorded for the month compared to 71 in July 2017. 35% of home sales in the county were valued under $100,000.

Nice work Coach White !

Hello @Faith Wicks  the answer "depends" on yourself personally etc as Ned mentioned. I good place to have this conversation is with other experienced investors who have been where you have been. and the best places to talk with other people in this setting is at the following: 

#1 Next Tuesday we are having a meet up in Memphis. 

https://www.biggerpockets.com/forums/521/topics/60...

#2 Every Wednesday morning I am at coffee and would be happy to discuss with you what I have done and am currently doing with my $50k in savings. 

https://www.biggerpockets.com/forums/521/topics/592616-coffee-with-investors-every-wednesday-morning

#3 The local REIA

https://www.memphisinvestorsgroup.com/

Best of luck on your journey! 

@Jesse Kerr Check here first

https://www.biggerpockets.com/forums/521-events-and-happenings

But if not go create your own meetup!! 

Hello Darlington, I invest in the area and in the works of doing a BRRRR in Memphis. I would say any market is good for BRRRR as long as you have. I just need to refinance it and repeat...

1-A good deal

2-A good rehab team

3-A good property management team

4-A lender for the back end refiannce

5-Cash/Lender for the front end financing(purchase)

Those are the 5 keys