Midsouth Home Buyers. Should I invest with this Memphis turnkey?

[Richard Bull]

Hi Guys, 

I have been researching this company a lot and heard about Terry Kerr on The Real Estate Guys podcast. I have corresponded with the company a lot and have read up on the site. I am still not sure if it is a good investment. I am a very new investor and like the idea of some cash flow, while I am building equity with very little work or management on my end of things. This is their site: http://midsouthhomebuyers.com/

My research shows that Memphis is a huge rental market and that the home prices really do not appreciate very much. The type of house that I would be looking at is a 3/1 or 3/2 priced around $70k and that will rent for about $725 - $750 a month. This company completely guts the bathroom(s) and kitchen and places a new roof, new HVAC, new carpets, etc... 

Do you recommend this company? Do you think this is a good investment or is Memphis a market that is becoming saturated with OOS investors? Please let me know your thoughts, I am not thinking of making this move until June and you feedback is really appreciated. 

Thank you! 

[Daniel Mills]

Hey guys,

So, I am a big fan of MidSouth Homebuyers. Just a bit of background: I own 9 SFHs in Alabama, Tennessee, and Idaho and an additional 49 doors of multifamily in Huntsville, AL with partners. I've done turnkey, BRRRR, minor repairs before holding etc. The 5 MidSouth properties I own are my most consistent, best cash flow, headache-free investments I own. I have recommended them to my mother, she owns 2 of them and at least 10 friends. So far, I have yet to hear a complaint. Here is a brief overview of the advantages and disadvantages. I would be happy to go into more depth and share spreadsheets, real numbers with anyone interested:

Advantages

1. Price and Cashflow: These are inexpensive properties $55,000 - $100,000 which I bought with 20% down. My first one, I think I bought in 2015, was $55,000 ($11,000 down + $3,000 closing costs) and I don't think I have had a year that I haven't made at least $3,000 in cash flow after all expenses (fixed and surprise). That's almost a 25% return a year.

2. Headache-free: With the prices that low, you would expect high turnover and problem tenants, but that has not been my experience. The gentleman who is in the first house I bought through them is still there almost 5 years later. When someone does move out (I've never had an eviction) the property is turned over in a matter of weeks if not days. Now, that doesn't mean nothing ever happens. I had one property of their's break-even last year after a storm damaged some things and something broke (I'd have to check my records), but better than most of my other experience in this game. 

3. Awesome customer service: The people working at Midsouth are extremely kind and helpful and most importantly, communicative. With my other properties, I almost always have to track down my PMs to find out why I didn't get my payment or what a bill is, but Midsouth communicates all of this when it happens with solutions to address it. They are also the best PMs in the business I believe, consistently able to get tenants to pay what is owed and work with them if they are facing some hardship, hence no evictions (knock on wood). If I send an email or call, I get a response right away.

4. Low cost of repairs and turnover: The cost of repairs and turnovers is much lower than almost all my properties (I do have somewhere I have maintenance people on staff). This is because Midsouth has its own construction company that does the repairs at a very low price. I don't think this is how they make their money.

Disadvantage

1. Turnkey and market: You are buying properties at or maybe slightly above market value with them. You are probably not going to be able to refinance these anytime soon. Also, they are in neighborhoods that are almost all landlord owned, so selling might be an issue because the owner-occupants are few and far between. That being said, demand for these properties is high from investors outside the market and Midsouth can assist in helping you sell to existing customers and market value. These neighborhoods don't appreciate much, but they have a little. I can show numbers on this if you want.

2. It takes forever to get a property: The system they use is to put you on a list and the current wait time for a property is like 8 months. When you get to the top of the list you are sent an email with available properties. They will all be taken within an hour. All you can do is just list your preferences and hope you get one. That being said they all perform similarly so there is no need to run the numbers on each property. They just expanded into Little Rock so hopefully, this will help.

So basically, I've had a great experience and would highly recommend them. I would be happy to share real numbers if anyone is interested.

Daniel