Can I ask you something?

Question

Do you mind answering a few questions?  I understand that not all investors have the same criteria.  Since I've experienced all types of investors, I want to see if there is a majority or if I'm just an odd ball encountering investors with polar differences!

1.  Is a section 8 property a deal breaker for you? (Recently [in the same week] have dealt with an investor who loves section 8 and stated her reasoning and another who says that section 8 properties are the devil!)

2.  For Memphis investors:  Which zip codes will you absolutely not consider? Why? (Met an investor (also wine store owner :) yesterday who says that he exclusively buys property in very poor areas... where others refuse to buy)

3. What price range are you most comfortable buying?  (just curious)

Jay Hinrichs · Answer

@Jon S.  for sake of argument does not matter if its only 1/3 your buying rentals in the area so it just went from 1/3 to one house more than 1/3rd since your not owner occupying.

And if all investors target home owner areas then those neighborhoods will change because landlords are targeting them .. so anytime you have a predominance of rentals you have these issues does not matter where it is.

And your absolutely correct.. many many cities are seeing their ghetto's turned around.. or other pockets of dilapidated housing.. I am working on a project in The Bay area currently were that is the case.. 10 years ago you would never consider what I am doing.. and its still boarder line.. but I think I am a head of the wave.. I got ahead of the wave in the North of Broad and must off of America and meeting streets in Charelston SC when I first started there 4 years ago. properties and have doubled and tripled in value.. What I sold as new construction 3 years ago for 350k is now 500k.. lots I was buying for 40k are now 120k.. closing on one in sept. that I paid 120k for.. :)

I think this HUGE movement of Average US investor to buy SFR rentals is not going away and is only going to keep feeding on itself and we are simply going to have to be resigned to the fact that unless you buy in areas were the cash FLOW DOES NOT work... those are the only areas that will stay predominantly owner occ and stable long term.. The rental areas will for ever more be that and be valued more like commercial RE  IE what will an investor pay for a cash flow.. the only way values go up appreciably is if rents rise.. ( like what happened in Oakland and Lake Merrit area you speak of)

Alex Craig · Answer

@Dean Letfus, no 38115? I agree, 38115 that is bordering 38118 is crummy, but we have several homes renting for $1,000 +.  Ridgeway South of Mt Moriah is working great.

@Aquila Phillips we no longer take section 8 for the management of the 450 homes we have in Memphis.  In Little Rock, the program works beautiful.   I have heard a couple of very large companies in Memphis no longer accept them either. There are several zip codes I would not touch, but the main one that people still invest in is 38127. It can be fine there, but you must have a ninja as a Property Mgr that specializes in the area. I buy in mostly $70 to $160.

Dean Letfus · Answer

We just don't have it down here Jay. I can't think of one good area gone bad in Auckland in 50 years. PLENTY have gone from bad to good, like heaps but none the other way. And we don't even have terms for blight or slums. We simply don't have them.

I still love Memphis. We have homes and plenty of clients with homes n areas that are great. We just move higher and higher up the food chain into better areas. They seem very stable.

Jay Hinrichs · Answer

@Dean Letfus  yup pretty amazing how areas go from good to bad in Memphis.. I have never in 20 years of loaning money there hear of one going form bad to good.. LOL...

roll of the dice I guess but when you take a city that has over 50% of all their residence are rentals. its only a matter of time that virtually all areas fall down like this.. and only the Owner occ areas if they can indeed stay owner occ remain viable long term.. its an issue nation wide.. as we turn into a country of haves and have nots.. the MAN owns the homes and rents to the people. the people have no respect for the man.. its a scenario you Kiwi's probably don't understand until its too late

Jay Hinrichs · Answer

@Dean Letfus  Dean how does that help those who bought in those zip codes 3 to 5 years ago thinking they were OK .. IE its block to block and all the other stuff you hear..

now all of a sudden those zips are bad.. are you saying that the folks that bought there now own poor assets in bad areas and will soon find out what owning hood properties is all about.

the way your post reads is like a malignant growing tumor.

Dean Letfus · Answer

Yes exactly Craig. That's why we are so careful where we buy. I have seen so many areas we were sold in the early days go bad we stay well away form any area showing signs of degradation now. That's why I have a full time local acquisition manager.

Alex Craig · Answer

@Dean Letfus I thought you were in the business of finding the good areas and putting out of state investors into these areas? ;).

Dean Letfus · Answer

@Alex Craig just giving general advice Alex. Almost any zip has OK parts in it, but unless you are local it's safer to stay out of them.

Ray Dipasupil · Answer

1. Section 8 is no problem with me

2. No outstanding zip codes where I won't invest in Memphis, TN as long as crime rate is C & up

3. Price range open to $0 - $100k

Jay Hinrichs · Answer

my new office is in point richmond

Can I ask you something?

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