Turnkey Property Analysis in Memphis 38119

[Angelo Wong]

Hi,

So I'm currently analyzing a property I found through Marshall Reddick that is in Memphis, 38119 (I look for the zip code in the forums but didn't turn up much).

Essentially, this looks like it is in a good neighborhood; it was a distressed property bought a week ago @92K, and they are trying to resell it at 149K.

Checked the rent with rentometer/craigslist and it looks like this could be rent for $1500 to $1700, depending.

Here is the .pdf report.

Only thing with Memphis/this particular area is that the education sucks.  But talking to the turnkey company, they said this is in a owner-occupied area and said this was good for value and for easily executing an exit-strategy.

So I guess my question is, in my report is there any assumptions that are terrible?

I did 10% vacancy, 6% on repairs/maintenance (it is newly renovated if I could close this), 11% on property management fees.

Cash flow estimated at $153, but according to this article on CapEx which I assumed to be 0, I would have a negative cash flow of $30/mo. I assumed it to be $0 because these are the things that they are working on currently:

• New 30 year architectural shingle roof
• Exterior wood repair and paint
• Laminate hardwood throughout downstairs
• Smooth all ceilings
• Fill in swimming pool and sod back yard
• New furnace and AC
• New water heater
• New bathroom vanities in all bathrooms
• Pressure wash exterior
• Landscape
• Trim trees
• Ceramic tile in Kitchen
• New kitchen counter tops
• New sink and faucet
• Carpet stairs
• Refinish hardwood up
• Install washer box to prevent future leaks

Seems like they hit everything except for windows/foundation?  I reckon the foundation would be inspected during the home inspection, though.

As a first time investor, my other question is: what questions am I forgetting to ask?

[Alex Craig]

I would not say the schools suck over there, Ridgeway High School is one of only a handful of high schools to offer the International Baccalaureate program in the entire state.  There are 2 other schools in the district that offer that same program. The ratings do not reflect the school.  Check out this link: http://www.memphisparent.com/Memphis-Parent/Living...

It is certainly a retail driven area and deals over there are rare.  I think that rent is obtainable as we manage one of Curt's properties for $1,450 in that area and it is smaller.  We recently rented on at 6617 Stout for $1,395 and it is only a 3 bed 2 bath in a week.

As for value, I think it is worth more then that; Curt mentioned Green Mill. Also, the other house on Kelmscott that sold for $142,000 and it looked like my grandmothers house (green carpet, old lady curtains, green counter tops, 70's lights, etc. If it were fixed up, then mid 160's is realistic. Actually the Starting Point, which is a MLS Realtor tool that comes up with a statistical analysis (not to be confused with appraisal, but it gives a ball park figure far more accurate then Zillow) is $162,000.

I don't know Marshall Reddick, never heard of him, seems odd to go to this guy instead of straight to the owner.  Those guys have a great reputation and the owner was one of the first turnkey providers to open up in the city.  What advantage does Marshal offer?

I am a big fan of "A" type properties as I have a bunch of these in my own portfolio; on paper these returns do not look as good, but in the long run, these properties consistently perform better then the Pro Forma.  In 8 years of being in business, I have only evicted 1 "A" class property.