Feedback on a Memphis property. Good area or bad?

Question

Hi all,

First time post! I'm an out of state investor looking to buy my first investment property. I'm working with a turn key company that operates in Memphis. They showed me a property in the area highlighted below. The person I am working with is a local and also mentioned that it is a desirable location with low crime.

However I did some research myself on crime rates, and from 3 different sites, they all suggest that crime is rather high in that area:

https://www.neighborhoodscout.com/tn/memphis/crimehttps://crimegrade.org/safest-places-in-memphis-tn/https://www.memphisdailynews.com/CrimeReport.aspx

Checking city-data.com, the average salary for that median household income is around 39k.

Also, the property value is listed at 145k, which seems like it is on the lower end. And that number is higher because it is a turnkey company charging a premium.

A couple questions:

Having never been to Memphis, I think boots on the ground opinions about neighborhoods is as valuable, if not more, than data I can gather on the internet. However they are conflicting, so I'd like a) to get more opinions on this specific area, and b) get some feedback on what other data points I should be looking at.

Dean Harris · Answer

If you look at crime rates in Memphis, you will never buy here. There is crime everywhere. I own several properties in the 38118 zip code (14) and for the most part, it is a great zip code. The houses are typically brick, 3 bed and ranch style and although there is crime in 38118, it has a strong tenant base and these are some of my better performing houses. However, this little pocket that is south of Knight Arnold and west of Goodlett can be really tough on property owners. Crime is higher, turns are more common and the ROI in this pocket is lower.

I broke down every investment zip code in the city recently on my podcast. I'm happy to share that for free and that info is base don my own personal investing experience in Memphis.

Another piece of advice would be to talk to other investors who actually own real estate in Memphis. To me, it would be hard to speak on an area and form an actual opinion of value if you don't or haven't invested in that specific city or location

Good Luck to you!

James Wachob · Answer

I have a video on my BP profile page that walks you through different areas of Memphis. It's probably time for me to update this video...

Chris Clothier · Answer

Daniel,

You are asking a couple of good questions on here, but I think you need to add a couple of more and take two additional steps before purchasing.

First, the more data you start trying to look at, especially data that is not necessarily relevant, rather than finding clarity, you find confusion.  Crime maps are important, but can tell a confusing story and often cover large areas.  So, a property may be in a "red" area on a map due to proximity to crime in the past year, but the actual location of the home is perfectly fine for a long-term, passive investment.  Crime is relevant, but much more important is house specific data, jobs data, location data and management data.

Two, ask questions about how a turnkey company or management company if that is not provided is going to deliver the results you are seeing on paper and expecting.  HOW?  This is the question.  How well is the property renovated to entice residents to stay longer and hold down their frustrations with issues and your cost to fix them?  How responsive is the management company to resident issues when they occur?  How does the company find new residents?  How are they incentivized to prevent move-outs?  Is there a warranty covering the renovation work?  You can buy property anywhere and your choices of price point, condition, location, literally are endless.  The only difference in most investments is how well the company/ies you choose to work with are at delivering on your expectations.  The house is the house.  The performance depends on the individuals and companies you work with.

Lastly, I don't think you need to see the specific house.  Most likely, you are not going to know what you are seeing.  You can get a feel, but you won't know for 100% if what you are seeing is good or not.  However, you absolutely should meet the people or companies you are going to work with.  If they talk about professionalism and present a very tight, buttoned up presentation, i.e. - good on the phone, great with the answers, everything sounds almost too good to b true, but when you meet in person what you see doesn't match what you heard, then that is an issue.  They should raise your red flags.  A lack of quality office space.  A lack o robust team and systems that you can see and meet.  If every property is presented a low cime areas and B to B+ neighborhoods, but you see run-down areas and clearly blue collar, low to middle income areas, then you know that something is not right and you are being "sold" rather than being led.

After two decades working with investors in the Turnkey space across multiple markets, price points and areas, my advice is at a minimum, meet the people you are going to be doing business with and ask different questions.  You will either confirm that a company is right for you or wrong for you.

Good luck!

Jeff Goodale · Answer

@Daniel Wong

I have 5 or 6 properties in Memphis area (1 is over the line in MS).  The only crime issues I have had are when a property is vacant.  I have had the HVAC stolen multiple times even with a cage.  I try to not let a property get vacant or if it happens then I pay to remove the unit then re-install.  Not worth the worry.  But the return has been good on the properties.  Price to purchase was reasonable and rent rates steadily increase.  It is community that is used to renting and plenty of diversity in the job opportunities.   I have one property for sale right now just because i want to diversify into another opportunity outside of Real Estate and home price is up considerably from where I purchased it about 5 years ago.  I work with a couple of different PMs there to keep options open.  I would recommend the area.   Oh, and I have never seen one of my properties in person.

Jonathan Bock · Answer

@Daniel Wong

Yes, a realtor can get in trouble discussing crime in an area and innocent sounding questions "is this a bad neighborhood" even as a discussion could lead to a lawsuit.

All agents are incentivized to sell it's a transactional business and because you are just starting out and in a low barrier market you will encounter many new agents who need to eat and pay for their gym membership and car that month.

Nicholas L. · Answer

@Daniel Wong

don't buy in a place you've never been to

the turn key company is not taking responsibility for your success

invest locally instead

good luck

Stephen Akindona · Answer

@Daniel Wong I definitely agree with @Jordan Ray. You do not have to buy locally, you need folks you can trust. Like everything, there are both good and bad turnkey companies. There are some companies that will lie to you just to close a sale and others that will be honest knowing that individual buying parameters vary among investors.

Memphis is a great market to invest in but there are places and properties you should avoid. If you decide to buy turnkey at least have someone in Memphis who knows the market that you can run those deals by. If you want more specific feedback on the current deal you’re looking at, feel free to DM me and I can give you my honest thoughts.

Happy investing!

Daniel Wong · Answer

Ok thanks Jordan. I suppose the lesson for me here is to validate across several sources, and to actually visit the area the area I'm planning to buy property in.

James Wachob · Answer

Memphis holds unlimited opportunities. If you need any contacts we would be happy to help.

Feedback on a Memphis property. Good area or bad?

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