Revitalization Efforts near Downtown: Safe to Invest there?

Question

Hi BP Community! As the title questions, do you all think it is safe or advisable to begin to (or plan to) invest in areas near the planned revitalization efforts near downtown Memphis?

I'm pretty familiar with the intricacies of how quickly areas change from good to questionable to "war zones". Even with that in mind, I wonder if the coming revitalization could be a prime opportunity to invest now before prices increase? At the same time, I have no idea how long gentrification takes or if it's much too early to look at these areas, which as is, are difficult. By the way, I am a new investor so if there is anything I'm missing or oversimplifying, I welcome the correction!

Derrick Craig · Answer

Account Closed

I will attempt to answer the questions to the best of my abilities...

1) Do you believe only very seasoned RE investors could/should invest in opportunities like this, in "questionable" areas that may soon undergo revitalization? YES I do believe very seasoned investors could/should invest in these opportunities or questionable areas that will/may be going through revitalization because they are more likely to the:

Resolve- To keep going when everything around that particular investment fails, because they have experienced failure before/or a bad investment before. Always plan for the best but be prepared for the WORST - Beginners are not prepared for the Worst!!

Skill Set- To not buy because of the numbers but buy because of the vision they see of the future with the possibility of providing housing for a family and seeing a profit in the end, even if the end is 20 years down the road....Beginners don't have people in place they can trust which comes with time in the business.

Be Prepared- If you have your priorities and finances in order, the process will be far less of an uphill battle, a lot of beginners are not prepared to step into questionable areas that may soon be revitalize like the Foote Holmes areas of Memphis they may feel its too dangerous even though the projects are soon to be demolished they don't have the money to pull it off if they do they will be scared to loose it all..

Here is the difference I am not scared because I Believe in Myself and my Team!!

Also, 2) Personally, what allows you to be comfortable investing in these types of areas if/when many investors may be uncomfortable doing so? LOL!!! Very good Question!! I was born and raised in these types of areas that many investors are uncomfortable investing in and many investors will tell other investors not to invest in because they will fail. I attended an HBCU-Lemoyne-Owen College in the middle of for lack of better words the hood/ghetto 1997-2001 right across the street from the projects Lemoyne Owen Gardens. I guess you can say I am a product of the inner city and I don't mind living, investing, and giving back to the inner city to revitalize my community her in Memphis Tn. At the Same time make a VERY NICE Profit, ROI, CAP Rate, etc etc etc..

I hope I answered your questions, let me know if you have any more questions or concerns... Keep your head in the game REI is a marathon not a sprint you are doing great by asking questions and learning..

Kind Regards,

Derrick

Derrick Craig · Answer

Yes downtown Memphis is spread out we would definitely need to know which part of it, to give you better advice or opinions to help answer your questions...

I can speak about 2 areas downtown that I purchased 2 apartment complexes 1 is in uptown near pyramid Bass Pro Shop which has started a nice gentrification of sorts with all the new construction homes... and the other is less than half a mile from Foote Holmes which is now being closed down to start demolishing and building up the new homes and apartments that are being put in place where the projects used to be... and this apartment is very close to fedex forum as well maybe 1 mile or less from the forum...  But both are located in areas some may not feel comfortable investing which is GREAT!!

1074 N Seventh St Memphis Tn 38107 - 8 unit Apartment

and

306 S Lauderdale St Memphis TN 38126 - 4 unit Apartment

Hadar Orkibi · Answer

@Derrick Craig .   I like the before and after that's very satisfying, what a dog it was - nice job.

do you mined sharing how long did that take? did the roof need any work?

are they all on one title or have separate deeds?

A work like that would have cost over a $100K NZD to complete in New Zealand.

Cheers

Derrick Craig · Answer

Account Closed

This is the Multi-Family 4 Plex that I mentioned to you above, located in downtown Memphis near the Foote Holmes projects, and less than a mile from the Fed-Ex Forum.... 306 S. Lauderdale Memphis TN 38126... I am contemplating keeping this one for my personal portfolio or  selling it as a Turnkey Multi-Unit Property... Perfect example of the title of your forum post... I hope you enjoy the videos...

306 S Lauderdale-Before Rehab

306 S Lauderdale- After Rehab

Account Closed · Answer

Hi Derrick, thanks for contributing! I plan to pull a few examples from the MLS to get more specific; however, your response actually touched on one area I was curious about. Considering the demolition of Foote Holmes and the plans going forward, I was wondering whether investing near that area now would be advantageous. It appears you personally think so. I would like to ask, 1) Do you believe only very seasoned RE investors could/should invest in opportunities like this, in "questionable" areas that may soon undergo revitalization? Also, 2) Personally, what allows you to be comfortable investing in these types of areas if/when many investors may be uncomfortable doing so?

Account Closed · Answer

Hi Alex, thanks for chiming in! I apologize for being vague. I suppose my question should be refined as 1) In general (yes, I know and have read how location is everything in RE but IF there are any overarching trends), is it a strategic or common practice to buy properties right outside gentrification efforts (based on the assumption that revitalization will spread and prices will later rise)? Then my second question would be Memphis specific, referring to Downtown (near the River, Beale Street, etc.) and neighborhoods spreading out from there. I'll need to pull an address for more detailed areas! Off the top of my head, I'm drawing a blank to use as an example.

Hadar Orkibi · Answer

Hi @Derrick Craig,

I read here on BP somewhere that for about $20k you can rehab a 3b/2bath house. Do you mined sharing what could that include?

Ie. new HVAC system and roof?

Also, if doing-up a multi family, say 4 plex to good standard what could that cost? Do you have a $ number per door?

Thanks in advance,

Hadar

Hadar Orkibi · Answer

Thanks for sharing @Derrick Craig, building costs for materials and labor in NZ are very high.

for single level houses, Brick and Tile and Single Garage, say 3-4 bed 2-3 bath you talking $2500-$2800m2 ( per square meters)   that's about $1800m2 - $2000m2 USD.

So unless you are a builder and can cut the margin, 3 bed, 1 bath house, say 1100sqf (which is around 100m2) price will start at $180k USD. To build, slab up.   standard speck.

Small country at the end of the world I guess...

Account Closed · Answer

These are some examples from the MLS as to what I mean. While they are in various different areas, they are all "close" to planned areas of redevelopment.

www.loopnet.com/Listing/19499800/661-St-Pau...

As previously mentioned:

www.loopnet.com/Listing/20021665/1074-N-7th...

www.loopnet.com/Listing/18537788/750-Chelsea-Avenu...

Account Closed · Answer

Absolutely awesome rehab! Thank you for providing videos to demonstrate the extent of the before and after. Did you go in with an idea of how you wanted to modify the property based on your experience, or did the rehab modifications strictly depend on what was minimally necessary and within the budget determined by your deal analysis?

Revitalization Efforts near Downtown: Safe to Invest there?

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