New to RE in Memphis, would love to connect

[Kamran Pirwani]

Hey folks!

I just wanted to quickly introduce myself, my name is Kamran and I've lived in the suburban areas on and off for a handful of years. My background is in tech, I own a few different businesses in that space. After a ton of passive learning the last two years, I'm ready to finally jump in and make some magic happen. My goal for this year is to purchase 2-3 SFH or 2 MFH's, priced between $120k-$285k in the Memphis area, 50% down or all cash depending on the property. I'm looking to optimize more for CAC vs. appreciation for the first few pieces in the portfolio, interested in some of the other peoples strategies in the area. I'm still really navigating which areas/neighborhoods to look in vs. stay away from, any thoughts here would be really helpful!

I'd love to connect and get to know some lenders, investor oriented real-estate agents and contractors familiar with the rehabbing process, really anyone and everyone who's excited about RE in Memphis and wants to chat!

[Eric Prescott]

Be very, very careful. There are people, including people on these forums, who do not have your best interests in mind, who are looking to close deals above all else, and who will give you incorrect information along the way (it is assumes the best intentions not to say they are misleading you intentionally). 

Learn the market well before you make any offers. Do no be eager to buy property in Memphis because you've been told Memphis is a great market to invest in real property. Take the advice you've received to visit in person and get to know the various areas. I'm not sure two days will do it, but after many conversations with a variety of people in a variety of real estate-related (and perhaps even other) fields, then maybe a couple days of uninterrupted driving and note-taking might be sufficient, along with developing a thorough understanding of pricing, rehabs, and rents in the areas you're looking at.

A cautionary tale: My wife and I bought a property 12/20/23 that my agent said would rent for $1100/month. After some time on the market and lowered rents, it finally rented for $850 on 3/10/23 (as of today, May rent is overdue). So, lots of vacancy there, and thus a fair amount of money out of pocket to cover the mortgage, some due also to the initially lower rent passed on after the fee PMs charge to get a tenant into the property (as well as thousands required to bring the property up to their standards before they would put it on market). To be clear, I had been explicit with my agent about wanting to avoid D neighborhoods, or even C-, but this property is clearly not in a C or better neighborhood. What's deeply frustrating is that my agent couldn't have not known this and he couldn't have not known it was not a good deal for us. He gave me bad rent numbers (that I admittedly did not properly vet), he pressured me into going through with the deal because he did not want to look bad to the listing agent (and I let him), and now my wife and I are the sucker out-of-town investors who bought the property off another investor who was trying to unload it in a weakening market so he could pay off his local hard money loan and pocket a decent chunk of change in the process. Don't be a chump like me.

Having spent a fair amount of time looking into Memphis now, I still haven't found another property I'd go after aggressively, though I've tapered off a bit as I invest in other cities lately. Part of it is having been burned previously, sure, but honestly the numbers don't pencil out so great on nearly everything I've seen, not at 20%, not in better neighborhoods, and not in the price range we were looking for. I am seeing listings that meet the 1% rule before rehab (which often can exceed $30K), and seeing turnkey properties that cash flow negatively if you analyze the property responsibly (factoring in maintenance, vacancies, and Capex) unless you put down 30%. Plus, refinancing isn't what it used to be, so if you are BRRRRing, beware and make sure you have multiple exit strategies. Make sure it will sell for enough to pay back your lenders if you can't appraise high enough to cash out and pay back your lenders. Or if you are going turnkey and are able to afford a property in a neighborhood with good appreciation, be prepared to put down more money at closing to make it cash flow positively (if you are prepared to tie up that much money for a while). 

I don't want to be a downer, but after 9 months trying to make moves in that market, the best thing I've learned is that it's picked over, the experienced investors and the local investors get the best deals, and the out-of-state investors are at greater risk of being taken advantage of. I keep my eye on the market in the unlikely event I somehow get an edge over others in that market and can lock up a good deal, but lately I've been more interested in seeing what's going in in Nashville, Knoxville, and other towns.