Memphis, TN

[Sean Tagge]

Hello all savvy investors from Memphis, TN. It seems like your buy n hold market is a lot better than where I am currently living. A typical "good deal" that I just witnessed an investor make is purchasing a property for $163,000 putting $7,000 in repairs and renting for $1300/mo. Just using "the 1% rule" you are already starting off on the wrong foot. 

Where in Memphis (and many other places) I see dozens of properties going for $20,000-$60,000 (or even less but need some work) are rents in the $500-$900/mo range. When working the numbers the ROI, Cap rates, and cash on cash returns are 2-4 times better that what I am typically seeing in my area.

I would be interested in seeing some of the numbers of some of the actual buy-n-holds in Memphis if anyone is willing to share (the good, the bad, the ugly). What are you vacancy rates, problems with tenants, repair costs ect? How are you finding the deals if you are out of state, financing, managing ect? 

Your input is greatly appreciated. 

[Alex Craig]

I don't think you have to be a "junk yard" property manager at all.  It makes it sound like the only way to be successful in Memphis is to beat down doors and argue with tenants all day.  I think just like any other business, it needs to be run right.  I own a property management company in Memphis and we are successful through communicating to our tenants and investors, addressing maintenance issues immediately, treating our tenants with respect (tenants may be rude to us, but that does not give us the right to be rude back), providing excellent customer service, hiring good people and paying them well so that I can retain quality talent, creating a positive work place where people want to come to work, having great marketing, adapting to the market changes, organized well and keeping investor cost low through managing our vendors closely and leveraging the amount of business we give them into significant discounts off retail.

The only investors that I know that ended up in bankruptcy court were the $0 down investors who did not know what they were doing and figured real estate was buy a house, rent it out and cash the checks.  While that is the premise of what of do, there is so much more to it.  There are a lot of Memphis PM and landlords on BP and I think all would agree they and their clients are doing well.

As for the laws that are not landlord friendly, I disagree. In most circumstances, tenants can be out in 30 days or less.  I think that is pretty good and while I do not know all the other states landlord laws, I would have to think, outside of Arkansas, TN has some of the most friendly in the US.  Only Arkansas's laws which allow for you to get tenants out in most cases 2 weeks may be better.  Again, I don't know all the states laws, so I could be wrong.  The landlord laws here are written where tenants can't withhold paying rent for any circumstances.  Even if maintenance is not being done on the home, they still have to pay.  Really the only tenant right is the landlord by law has to fix everything that they provided and on the lot if it needs repair.  I know some states the landlord can force the tenant to pay for minor repairs, that is not the case in TN.  I would argue though you would have a much better opportunity to retain your tenant if you fix all their maintenance request, assuming that the repair item was not caused by the tenant.  In that case, the landlord does not have to repair.  There are landlords that will make repairs and tenants are much more likely to stay with those landlords over those that make them fix items under $150.  

@David Van BruntWhile I don't doubt that your friend knows the Memphis market inside and out, I would question his knowledge of the investor market here.  Simply being a Realtor doesn't qualify one to be an expert in this niche of the business.  With the "junk yard" reference, it sounds like if he has any experience at all, it has been in the low income sector of the business, which is challenging if you were expecting to buy houses and collect checks each month without drama. If the Memphis market was as your friend laid it out, then why would so many local people be so heavily invested?  Local guys like Douglas, myself and the several other local owners on here all have large real estate portfolios. Then you have all the out of state owners too who have had very positive experiences in Memphis real estate.  It's not an easy business for sure as it takes hard work and tons of experience to be successful.  Some get into the business thinking it is going to be a piece of cake and find out the challenges and maybe that was not the challenge they were looking for.  Anything that is profitable for the most part is going to be a challenge.