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Difficulty selling rental properties at loan amount
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!
@Account Closed The details of the properties, including addresses, are listed on my website under "properties for sale" (see my signature field for the link). Thank you.
Originally posted by @Sabrina Brown:
@Account Closed The details of the properties, including addresses, are listed on my website under "properties for sale" (see my signature field for the link). Thank you.
What is the net income and/or current mortgage payment on each of the rentals? It only list the monthly rent amount and cash flow from each.
Hey there, what if you contacted Memphis invest. They seem to have their finger on the pulse and are connected with investors.
A
@Account Closed
Hi Greg, I just emailed you back. The cash flow is the net income on each of the properties. Hope this helps. Thank you.
Originally posted by @Ashley St. Gelais:
Hey there, what if you contacted Memphis invest. They seem to have their finger on the pulse and are connected with investors.
A
Ashley: I can only assume you didn't read the thread. Memphis Invest is WELL represented in the 7 pages of comments, including details from Chris Clothier about their involvement with the properties and the OP. The OP overpaid for the properties, at least she overpaid for her current exit plan. The properties did and could provide cash flow but will not likely sell for much over current loan value. For a VERY interesting and informative read, I suggest going back and reading the entire thread. Lots of very good info and thinking on TK expectations from everyone, but especially from two Memphis TK providers and PMs, both of whom are familiar with the properties. Destined to become a Best of BP Classic. :)
Originally posted by @Sabrina Brown:@Account Closed
Hi Greg, I just emailed you back. The cash flow is the net income on each of the properties. Hope this helps. Thank you.
To clarify, what is listed on the website defines cash flow (CF) as CF after mortgage payments, taxes insurance etc. The information that I need is/was the net before those expenses on each of the SFH. You may also email it for confidentiality reasons.
Originally posted by @Account Closed:
Originally posted by @Sabrina Brown:
@Account Closed
Hi Greg, I just emailed you back. The cash flow is the net income on each of the properties. Hope this helps. Thank you.
To clarify, what is listed on the website defines cash flow (CF) as CF after mortgage payments, taxes insurance etc. The information that I need is/was the net before those expenses on each of the SFH. You may also email it for confidentiality reasons.
Greg: if you read the thread from beginning to end, there is invaluable income and valuation information provided by those who know the properties and that managed them for the OP. If you are considering making an offer, definitely read the entire thread. It includes agent and TK provider opinions about the specific properties and their pros and cons. One of the properties is considered an untouchable, given location and tenant pool.
@K. marie P. (not sure why your name doesn't pop up to tag you):
Thank you for "promoting" my thread - I appreciate it very much! :-)
The one property that was considered "untouchable" is actually not. It was outdated information when the property was still boarded up. Some people call the area a "war zone" but it is not, it is actually a newer developed area and now most properties in that area are fully rehabbed with tenants in place or with owner occupancy. My property has been made turn key again with a tenant in place who may be interested in a lease option.
Thank you.
Originally posted by @Sabrina Brown:
..... A "TK area" is definitely a higher challenge finding OO or getting closer to retail value. The comps just won't allow it.
Sabrina: This challenge is not specific to "TK areas". There are more non-TK rentals than TK in any neighborhood. TK has not taken over the US rental market, or even Memphis. It's a tiny niche thing comparatively speaking. It's the non-owner-occupied rental nature of a neighborhood that deters OO buyers. If the flavor of the neighborhood is mostly rentals, it doesn't matter who owns them, the lack of homeowners usually shows in and will deter OO home buyers. This is especially true in low income and working class neighborhoods.
Your issue in trying to sell these properties is price, plain and simple. At this point it doesn't matter what you paid, how much you spent on improvements or how much you owe. There is a buyer, likely an investor buyer, at a lower price than your current asking. I think you may be able to get out for loan value, but know that people bring cash to closing every day to get properties sold.
Originally posted by @Sabrina Brown:
@K. marie P. (not sure why your name doesn't pop up to tag you):
Thank you for "promoting" my thread - I appreciate it very much! :-)
The one property that was considered "untouchable" is actually not. It was outdated information when the property was still boarded up. Some people call the area a "war zone" but it is not, it is actually a newer developed area and now most properties in that area are fully rehabbed with tenants in place or with owner occupancy. My property has been made turn key again with a tenant in place who may be interested in a lease option.
Thank you.
If I were a potential out-of-area buyer, I'd take the comments on this thread about that property from local agents, PMs and TK people pretty seriously. Getting it rented does not change the fact that there are local TK providers and PMs who won't work that area or that property.
Even negative advertising is still advertising. IMO, the kind of exposure those properties have had on BP would have gotten you buyer already if there was not something wrong with price, income potential, area or all three.
UPDATE:
I received an offer on one of my properties from my listings on postlets.com which then posts to numerous other sites. It is in escrow now and looks like it is going through. Coincidentally, I received a call this morning regarding an offer on another property of mine, also resulting from my postlets listings. Still early to say if it is going to be a sale.
In the meanwhile, I got the privilege of being referred to one of the best management companies in Memphis that usually only takes on management for their own properties. They take care of things immediately, are honest and responsive. I wish I had known them years ago and I wouldn't be at this stage.
Funny thing is that I received notification from the management company prior to hiring this new management company that McNutt is in jail now. McNutt was the management company before that. Here is the link:
http://wreg.com/2015/11/15/property-management-ceo-jailed-for-bad-rental-properties/McNutt had the guts to still contact one of my tenants to get into the property for showings to a potential buyer, which I am not aware of. I believe that he tried to scam this new buyer because the property couldn't be sold until I gave authorization. Because McNutt did not complete repairs as promised and after paying him, I had lost a potential lease purchase buyer. Furthermore, McNutt owes me several months of rental income for 2 properties that he never forwarded to me (tenants paid in cash).
Ironically, the management company that sent me the McNutt link is now eager to pay me past due rental income! Justice will prevail.
@Sabrina Brown, thanks for the update and glad to see that things look like they will worked out. I haven't been on BP that long but I still think this was one of the most followed posts and opened a few eyes regarding exit strategies.
@Kevin Darrell It sure has been a "ride" and still is. The current management company I use also sells their own properties as turnkey but they are fair and unbelievably responsible! Let me know if you still look new TK properties and I will refer you.
Sabrina, Can you share who was the TK operator who sold these properties to you? Was it McNutt or was he only the PM and could you share who is the new PM you found? Are you still happy with them?
@Olga LevinThe properties were sold to me by Memphis Cash Flow. Later I was asking them to take them back from me and they were again trying to put a huge premium on top of the already overpriced properties that I bought from them. I am still struggling to get offers close to my current mortgage balances.
McNutt "managed" my properties for less than 2 months only to find out that he didn't make the necessary repairs that I paid him for but he also collected rent and never paid me. I filed a lawsuit against him as he also practices without a license. I have had to pay for the same repairs once again that weren't made by him.
My new management company is called MidSouth Best Rentals. They are awesome! They have high standards and are extremely reliable and honest. I can consider myself lucky to have been able to get them as they usually only handle a large portfolio. If you are looking for TK properties, they also offer them under their own name.
At this time, I have two of those properties rented with happy tenants and leases of another year each. My 3rd property has been vandalized for the 3rd time in 2 years and is once again boarded up. The tenant that McNutt "found" (if that tenant wasn't also in the game to screw me over as he stole utilities) abandoned the property upon which my property became another target for vandalism. I never saw rent from this tenant for the 6 months he lived there.
@Sabrina BrownThank you so much for sharing this information. I am currently considering TK operators in Memphis and I read invaluable information in this thread. Is your problem property the one that is not in a great area?
Unfortunately I have experienced all of the property management issues you have had first hand. It is really crucial to find someone reliable. It sounds like you finally have!
Originally posted by @Account Closed:
Originally posted by @Sabrina Brown:Even negative advertising is still advertising. IMO, the kind of exposure those properties have had on BP would have gotten you buyer already if there was not something wrong with price, income potential, area or all three.
So, it's many month later since you started this thread. You still own all three props. You still owe more than they are worth, or perhaps values are up to loan value on the two better ones. The one I called "untouchable" is again vacant, boarded up and vandalized in spite of your opinion that it is not in a bad area and that you had a viable tenant. I'm curious, what's your exit plan now, especially on the untouchable one?
I maybe interested. Can you pm me the addresses?
Originally posted by @Account Closed:
I maybe interested. Can you pm me the addresses?
Read the thread. All the addresses, the condition, opinion of values, rental pool and neighborhoods are given by several agents and PMs. some of whom were involved with the property. This thread is a must for anyone considering these props.
The thread is quite long and I didn't see specific addresses, only areas, zip codes and street names. I am local to Memphis and looking for a certain type of property, this I was trying but to determine if yours fit my niche market. Thanks anyway.
Originally posted by @Jay Hinrichs:
@Curt Davis not exactly a ringing endorsement of buying Memphis properties if you can only sell them by hiring a turn key company for 15k... are you saying no one can sell a rental on the MLS system with you as a broker charging a normal 5 to 6% commission....
Not sure at all these were Multis
- "I own 3 rental properties in Memphis and have been renting them out since I got them."
I would think the issue is specific to the original purchase and or current values in Memphis. I was very disappointed when we went on site in Nashville looking for rentals (too much week-week and paying by cash for me).
Originally posted by @Account Closed:
The thread is quite long and I didn't see specific addresses, only areas, zip codes and street names. I am local to Memphis and looking for a certain type of property, this I was trying but to determine if yours fit my niche market. Thanks anyway.
3381 Kings Arms
3958 Chelsea Hill
9265 Lazzini Cv
The Chelsea Hill property is vacant but needs repairs. The other two are rented with 1 year leases that just started. Please do not disturb occupants, neighbors, management company, etc. Thank you.
Originally posted by @Account Closed:
The thread is quite long and I didn't see specific addresses, only areas, zip codes and street names. I am local to Memphis and looking for a certain type of property, this I was trying but to determine if yours fit my niche market. Thanks anyway.
Indeed the thread is long. I'm going to again suggest that you read every word of it. This thread is a free, detailed analysis, with Memphis professionals weighing in. The thread provided the OP's 3 properties with more exposure and advertising than your average MLS listing. Yet she still owns them, she still can't sell them for loan value, and one of them is boarded up producing no income. If you are a Memphis local, even more reason to read the whole thread. Enjoy!