Memphis Tennessee Property On Roofstock

[Tal C.]

Hi everyone. I have never purchased any real estate, so forgive my noobiness. But I recently came across a rental property on Roofstock in Memphis, Tennessee (I linked to it here so you can click to see). They make the numbers seem like I'd be making a nice amount of money if all goes well. However, a few things jump out at me. 

1) From my research this seems like Memphis is a really dangerous city. Does it make sense to invest in a city such as this for a first time owner (I will be taking care of everything remotely through property management companies)? Anything I should look out for?

2) Zillow says it was sold for $19,500 in 2019, and gives it a Zestimate of $48,119. It is being listed on Roofstock for $58,000. Seems quite a bit overpriced. I am wondering what its actual value should be and what I should pay for it if I go for it.

3)When I move the slider for the purchase price to negotiate to pay less, it makes my total return be less as well. Is there any world where this would happen? Pretty sure this is a bug on their website.

4) Any tips for a new investor? 

[Chris Clothier]

@Tal C. - Welcome to BP!  

I would advise not only not buying this property, but also seeking out REI meetings, possibly a mentor locally or someone who has invested out of state before and can help you learn and navigate the ins and outs of investing. You can easily (I guess that is an assumption on my part without knowing where you live) find someone here on BP who you can pick their brain for the cost of a cup of coffee and figure out best steps as you get started.

I have owned about two dozen homes in the area this house is listed and I can tell you that the challenges are real and they are steep to making a passive investment work in this area.  Many of the investors over there who are successful live here in Memphis and they are hands-on, active investors.

I also noticed that in the listing it states the the AC, plumbing, kitchen, attic, exterior and bathrooms all need repairs.  They also make assumptions in the analysis that show this house achieving a value in 30 years over close to $150,000 and you making a $300,000 return between equity and cash flow!!!  There is no way you should pay this price for a property that comes with deferred maintenance that will eat this investment alive and you'll be the next sales data line on this property dumping it for $19,000.  There is no chance of this property reaching that value nor of you making $300,000 in equity and cash flow.  I no longer invest in this area and I am a local.  The challenges were just too time consuming and too costly.

You can take my advice or not, but this is not only not a good deal, simply jumping on Roofstock, whom I actually have no qualms about investors buying from, is not a good idea for you, yet.  Rooftstock does not have control over the data and listings that are put on their site, I don't believe.  So, unfortunately, you are putting faith in a big brand name, but they are not the ones listing this house nor do they claim any responsibility, again to the best of my knowledge, for the accuracy of the information on their site.  A mentor can help you use a resource like Roofstock more effectively and certainly with greater success.

That means that a new investor has to be really careful.  In my opinion, there is no way you need to buy this house and you need to exercise patience.  Spend some time meeting investors who have passively invested out of state, maybe even in Memphis if that is your city of choice, and make a plan to follow the steps of other investors who have been successful.  I can promise you that when you are ready, if you are patient, the right opportunities for you to be a successful investor will be there.

Best of luck to you