Is Memphis a good place for Multifamily investing??

Question

High Crime rate, high unemployment, great CAPS!.....

If anyone has experience with Multifamily in Memphis I'd love to hear your take. I'm tempted to invest there but don't want to end up in a war zone or fighting monthly to collect payments.

Is Memphis worthwhile looking into?

I appreciate your input.

Stephen

Todd Dexheimer · Answer

@Stephen Kleyn to get access to any good deals you will need to talk with the commercial real state broker's directly.

Jay Hinrichs · Answer

@Todd Dexheimer I am hot on number one and two on your list. !!! I think with the new tax laws if enacted that take away state tax deductions Vegas could see some pretty good flow in form high states like OR and CA.. I know I just bought a place in Vegas to shift state residency.. and I am just one guy LOL.but seriously high wage earners will start looking at this closer. If your income is not directly tied to the state you live in like mine is. plus nothing beats the sun and 70's in the winter LOL... I have done a lot in Detroit.. I think the suburbs are fine I would still be quesy with Wayne county though in general..

Jay Hinrichs · Answer

@Stephen Kleyn I am by no means an expert in this.. but if I was going shopping.. for a multi I would ONLY be dealing with the top commercial brokers in the market place.it seems by the time property gets to loop net those are the one's the pro's passed on..from my limited experience great commercial brokers double end everything.. and when they get a great property the property is sent to their KNOWN buyers list.. no need to send it out on the internet or loop net or anything else like that.to me its the old boys school at work.. and can be a tough one to crack if you cant show absolute ability to close and know what your doing.. not a lot of hand holding goes on there.I brokered two B class props in Oregon a 80 unit and a 40 unit.. 5 mil and 3.5 mil respectively and that's how it went.. I had to literally stop in the offices and talk the agents into letting me make offers on their listings.. but even then.. If they can sell them to their clients first and double end the commish that is what they will do. And of course I am all for being corrected on my thought process here .. but just my limited experience.I have a ton of experience in the Mississippi valley though and can flat tell you the tenant base on the lower end high cap properties are a HUGE risk to an out of state investor or someone who is not a TRUE PROFESSIONAL in the space.. @Brian Burke hunts for multi from the west coast if you could get him to give you some hints that would be helpful... and again those are just my very LIMITED experienced in the space.

Todd Dexheimer · Answer

Memphis is one my list of sleepers, but there are a lot of "what if's." Look for solid B areas if you do invest there. I wrote about this recently. Check out the post: https://www.biggerpockets.com/blogs/10145/68178-to...

Joel Owens · Answer

Stephen if you are interested in Memphis maybe you invest a small amount with a syndicator there for MF. If your investment tanks it is a smaller blip.That might be better than buying a larger property yourself and having much more to lose.Buying the worst place in the best areas tend to give better results if the price is right. In a bad area even if you make the place nice people tend to have many life issues and live hard in the units. That makes the properties much tougher to perform and more work.Talk to Chris Clothier. Memphis InvestHe has tons of houses over there and can expand on the MF market. On the outside looking in you have an IDEA of how things might be there but talking to locals will help get the reality.

Caleb Heimsoth · Answer

I️ own one rental in Memphis and am looking at another now. From what I’ve seen multifamily in Memphis is tougher than other cities. This is one of the reasons I’ve also invested in another market. Even residential multifamily is taxed as a commercial property in Memphis. You can be very successful in Memphis with single family but multifamily (from what I’ve seen) gets more iffy. If you do multifamily there I’d recommend making sure rents are above 650. Hope this helps.

Jay Hinrichs · Answer

every city ( or most cities) have their A B C quality units.. or D and F.if you buy CDF you better live there and understand what your getting into.. you should go look at @James Wachob C D projects they know what they are doing.to make those high cap rates work the properties are surrounded by fencing... there is security.. no single males allowed on the property.. I have a friend that bought a cheap 60 unit their for 8k a door and dump 600k into rehab.. he thought if he just made it nice it would workwell long story short.. management stealing.. murder other crimes.. vacancy got up to 85% then got down to 50% and places were going to pot again.. they sold lost over 500k all in 18 months.. and I told them don't do it.If you buy the A and B in any city and you can keep top end tenants then it does not matter what city.. what matters is what tenants.cap rate is adjusting for Risk.. why is prime Multi trading for 3 to 5 caps.. when you can see 10 to 15 caps in those markets.. what is the reasoning for this everything being the same... its the tenants and the ability to actually manage them... James took me to his unit and it was an eye opener for SURE.... Highly secured environment that unless you live there and understand what your dealing with your going to get your clock cleaned financially speaking

Sean Tagge · Answer

Hello @Stephen Kleyn my partner has owned several multifamily complexes here in Memphis TN and property manages a few others. Recently I just sold a 58 unit for him. It is in a C+ class neighborhood we sold it at a 8.5% CAP. He bought it completely crime-ridden 40% occupied and completely turned around the complex got it up to 95% occupied with 97% collected rent. The trick is your management he hired a full-time on-site manager for the complex and another one nearby to watch the place like a bulldog. Additionally is the strict tenant screening he did. Good management is key. Sean

Sean Tagge · Answer

Also for anyone looking for some multifamily/commercial CAP rate data Click Here to see a recent report provided by the Shelby county assessor.

Todd Dexheimer · Answer

@Stephen Kleyn I should have said most good deals. I found a deal on loopnet in 2017 as well. They are on there, but mostly it is a good research tool.