Can I ask you something?
Wholesaler · Memphis, TN · Member since 2016 · 21 posts · 5 votes
Can I ask you something?
Most Popular Reply
Jay HinrichsBusiness Member
Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes@Jon Q. 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)
18 Replies
- Specialist · Memphis, TN · Member since 2012 · 1k+ posts · 1k+ votes10y
Hey Aquila, we supply homes to overseas investors. Section 8 we have a love hate relationship with. Our clients are split about 50/50. Once they have a bad experience with Section 8 insisting on unnecessary work or forcing rents below market then our investors won't use them again. Others like the more guaranteed rent and are quite happy.
We have dropped several zips in the last year as the areas got worse. So we won't buy in 109, 127, 118, 115 and all of the known bad areas. We find you have to be more adn more selective to avoid transitioning areas. "Go East" is our catch cry.
Can't comment on prices as what clients want varies so much. The dearest home we have flipped we paid 375,000 for but most of our inventory is sold at between 60 and 100K rehabbed.
- 10yJay HinrichsBusiness MemberReal Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
@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.
- Specialist · Memphis, TN · Member since 2012 · 1k+ posts · 1k+ votes10y
It just is what it is Jay. I don't make areas change. I am told a LOT of investors are stuck in some of those areas. Now that we manage all our own acquisition we are just super "fussy" as we kiwis say, about where we invest. I am sure locals can make those areas work fine with aggressive management. And 38118 for example still has some great streets but much of it is now a zoo.
- 10yJay HinrichsBusiness MemberReal Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
@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
- Specialist · Memphis, TN · Member since 2012 · 1k+ posts · 1k+ votes10y
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.
- Investor · Berkeley, CA · Member since 2015 · 1k+ posts · 713 votes10y
Originally posted by @Aquila Phillips:
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)
1. For me YES. I don't rent to section 8. Every investor has a different strategy, different temperament and different lifestyle preferences. Generally of the investor is investing in poor quality housing or in not the best location, they are forced to allow section 8. Others might actually prefer it.
Starting out, I didn't have the best experience with section 8 tenants. I also invest in class B housing in locations in which I can attract very good quality tenants, so I do not accept section 8. For my the cons outweigh the pros and my investment model doesn't require I accept section 8.
2. I don't invest in Memphis, but this question is badly framed. Instead search MLS for deals that might meet your investment requirements, then cross reference these property addresses that with walkscore, and zilpy or some other zipcode demographics website. That will also give you crime rates.
Everyone has a different strategy. That guy likely wont be enjoying much sleep if he's investing in bad areas with high crime.
3. Like I said, my answer or anyone's answer to that question is irrelevant to you. You should start with your own investment goals, then conduct market research and decide on the market that may best meet your needs, then look at listings, once you locate properties, get a rent survey and run a investment analysis using the APOD form (Annual Property Operating Data / free / google it).
If you're asking about SFR, for me $80-$100k for 3/2s and $80-$120K for 4/2s. Again, this is irrelevant without knowing the rental rates and expenses in the market you're considering.
- Investor · Berkeley, CA · Member since 2015 · 1k+ posts · 713 votes10y
Originally posted by @Jay Hinrichs:
@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
Yes, maybe that's true in Memphis...not going from bad to good. But that is happening in several decent markets with absence of supply, most notably the Bay Area and particularly Oakland around Lake Merrit and historically high crime areas of Oakland.
That's a good point about Memphis being 50% rentals. That's one of the reasons I have avoided this market. Based on my experience, there's usually a geographic barrier, highway, waterway etc. that divides the good from bad areas. In Dallas and Fort Worth it's Highway 30 (stay north of it). In San Antonio is also the North, in Austin it's LadyBird Lake, etc.
I only invest on blocks were less than 1/3 of the properties are renters. Otherwise, you'll be at risk that the neighborhood will turn down as renters have no pride of ownership and won't maintain the homes like owners will.
- Real Estate Investor · Richardson, TX · Member since 2012 · 113 posts · 27 votes10y
@Jon Q. How do you quickly check if the blocks are less than 1/3 renters? I know I can go on DCAD and check individual properties, but is there a way to check a whole neighborhood at once?
- 10yDean HarrisBusiness MemberReal Estate Agent · Memphis, TN · Member since 2015 · 1k+ posts · 1k+ votesAquila Phillips I represent investors in 38118, 38116 and many other zip codes where are having ROI's in the teens. Each investor will have their own criteria and areas they will like and dislike. Shoot me an email and I will be happy to answer any questions and also see if any of your inventory will make sense for my clients/buyers. Good luck!
CrestCore Realty4.713 Reviews - 10yJay HinrichsBusiness MemberReal Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
@Jon Q. 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)
- Investor · Berkeley, CA · Member since 2015 · 1k+ posts · 713 votes10y
Originally posted by @Erik Drentlaw:
@Jon Q. How do you quickly check if the blocks are less than 1/3 renters? I know I can go on DCAD and check individual properties, but is there a way to check a whole neighborhood at once?
There's no "quick" way that I've found. But it is absolutely worth your time.
- Investor · Berkeley, CA · Member since 2015 · 1k+ posts · 713 votes10y
Originally posted by @Jay Hinrichs:
@Jon Q. 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)
Are you doing that development in Richmond? They recently passed rent control, but investors got together and had it recalled. It's only a matter of time until it sticks. I've been doing quite a bit of biking from Berkeley to Point Richmond and the waterfront is pretty nice. There are several developments with million dollar homes with ocean views. When is your next planned trip out here? Please get in touch with me on your next trip. It would be good to meet in person, but I think you'll have to first connect to me on BP :-) to get my contact info.
I agree the movement of investors buying SFR nor institutional investors buying SFR are both not going away. Frankly, I'm not sure if that means that the price of SFRs will get further out of reach for families that want to buy a home (institutional investor demand/ownership driving up cost)? Or maybe this is only in the short-run until developers build more supply. I think we should brace for more price volatility though as this very large institutional investors buying and selling can have an impact. While comparing tax records on deals nearby, I've noticed "invitation homes" as the owners on several deals nearby. I've avoided buying those properties.
I don't know if I agree with you fully. I think it has to do more with price points. Rental rates do not rise equivalently with property prices. Meaning, for example, that a 4 bedroom home being sold in Austin for $120K will many times attract the same rental rate as a 4 bedroom home being sold for $170k ~$1,200. So, as properties in an area surpass the $130K mark, there will be significantly less investors buying, because they cannot cash flow over this level generally. So, if prices increase, and surpass the $130/140K level, these areas will lock out long-term buy and hold investors.
- 10yJay HinrichsBusiness MemberReal Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
my new office is in point richmond
- 10yRay DipasupilPro MemberInvestor · Los Angeles, CA · Member since 2016 · 149 posts · 51 votes
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
- 10yAlex CraigBusiness MemberReal Estate Professional · Memphis, TN · Member since 2009 · 1k+ posts · 1k+ votes
@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.
- Specialist · Memphis, TN · Member since 2012 · 1k+ posts · 1k+ votes10y
@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.
- 10yAlex CraigBusiness MemberReal Estate Professional · Memphis, TN · Member since 2009 · 1k+ posts · 1k+ votes
@Dean Letfus I thought you were in the business of finding the good areas and putting out of state investors into these areas? ;).
- Specialist · Memphis, TN · Member since 2012 · 1k+ posts · 1k+ votes10y
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.
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