4567 TM Henderson Ave

[Eric Prescott]

Investment Info:

Single-family residence buy & hold investment.

Purchase price: $115,500
Cash invested: $28,875

Contributors:
Dean Harris

4/1 SFH flip in 38107 from another investor who had used some local hard money.

What made you interested in investing in this type of deal?

I liked that I could get a rehabbed property a decent price near St. Jude's. I was looking to acquire a relatively cheap property to get me started in Memphis. It wasn't my ideal zip code, but the numbers looked okay based on what I had in front of me when I made the offer. In retrospect, it was a mistake.

How did you find this deal and how did you negotiate it?

Probably saw this one on Redfin. Offered $10k under asking through CrestCore Realty, which was accepted. It was a long story from there. Not long after the offer was accepted, I learned that this price made the loan amount too low for the DSCR program I was using, so I raised the offer contingent upon a 3% seller's credit to get the loan to $75k. So that gave a little more money to the seller, but it was still tolerable after the credit to get the loan. It goes on, but I'm out of space.

How did you finance this deal?

Ended up as conventional loan at 6.625%.

How did you add value to the deal?

Hahaha. I didn't. This was not a great deal.

What was the outcome?

I co-own a property that I intended to own alone through a DSCR program, but because the market rent is lower than projected, I ended up with a conventional loan in order to get the rate and points down for some positive cash flow (thanks to my wife and to SecurityNational Mortgage Co!). We'll see whether this ends up being at least an okay rental.

Lessons learned? Challenges?

Get your rent estimate from a property manager who has many doors in the area and knows for a fact what properties are renting for.

Understand loan products before making offers. Know your minimum loan amount! I didn't even know there was a minimum, though of course it makes sense now that I do. Many Memphis properties require a cage to keep AC condensers from disappearing. Just because a property has been rehabbed and looks nice at first glance doesn't mean they did a particularly good job.