All Forum Posts by: Jeff Adams

Investment Info:

Large multi-family (5+ units) buy & hold investment in Memphis.

Purchase price: $120,000
Cash invested: $57,000

Contributors:
Taylor Adams

Value-add 5 unit property. Plan is to fill the two vacant units, fix the deferred maintenance, and improve the current units so we can double the value of the property in first 12 months.

@Ryan Alacon, there's a lot going on in Memphis all over the city that will affect the MF space. Downtown and Midtown are really hot, but cap rates are very low. There are other parts of the city that are on the rise that may be more interesting to someone looking for a value-add. That's how I invest as well. The area around Overton Park is definitely interesting and appears to be in the path of progress. 

If you're serious about investing there, I do have a property manager in Memphis that I would highly recommend that works with the property sizes that you're talking about. He's a local that knows everyone and does a great job helping me find and manage properties. If you're going into this market, it might be worth connecting with each other. It's always nice to find investors with a similar mindset! PM me if you're interested.

"Best" is really going to depend on your strategy. Are you looking for SFH? Duplexes? Large Multi-family? Do you want an existing B neighborhood, or a C that is on the rise?

If you're looking for a solid B neighborhood with single family homes, it's hard to beat East Memphis. There are very large areas with stable, cash flowing properties, but there's not a lot of inventory there. Midtown has nice homes, but is very pricey. Cooper Young is hot, but it borders a class D area, so you have to be careful about where you buy. Downtown is also hot, but it's mostly commercial and multi family, and has a lot of crime. I could go on about other neighborhoods, but I'm just not sure exactly what you're looking for.

A couple people have alluded to this, but it might be worth coming right out and saying it, it is very hard to find anything that would cash flow positive in the areas you mentioned without putting a whole lot of money down. Most people are making money from flips or condo-ization in the areas that you mentioned. You could house hack and get a break on your mortgage, which is what we do, but our duplex probably wouldn’t ever cash flow positive after we moved out - we would lose money every month, so we will likely condo-ize and sell.

That said, there are secondary markets farther from Boston that will cash flow if you want to buy rentals. It sounds like these aren’t places that you want to live yourself, but they would be places like Worcester, NH, or Fall River. You could also invest remotely in areas of the country that do cash flow positive, like perhaps wherever you’re moving from. 

That might not be exactly the advice you were looking for, but I hope it’s informational at least. 

Hi @Ashley Sliwa,

I think this a great question that varies for everyone based on their goals, but personally, I've found it much easier to do investing part time and supplement my income and down payments with my W2 job. My wife actually became a real estate salesperson recently, on top of her W2 income to further supplement our income. Our plan right now is for both of us to take that and investing full time so we can have more control over our lives while we work on our investment strategy.

Personally, our biggest motivator is to work for ourselves rather than not work at all or work part time, so that may be different than your goals. If you are interested in supplementing your income at any point with your current skills, we have a friend who is a certified special education teacher and she has mentioned that she could conduct testing in her home to properly place special needs students and make quite a bit of money doing that, so that could be an option for you. If you'd like, you could DM me and I can find out more information about that for you.

Best of luck!

Seeking 5-300 unit multifamily properties with value-add opportunities in Memphis, Tennessee. My partners and I prefer properties with deferred maintenance and may be self managed by the owner. We like properties in or near Midtown, East Memphis, Cooper Young, and the Medical District, but we are willing to consider properties in other B class or rising neighborhoods. If you have a property or know of someone who has a property like this and wants to offload it, we would love to help!

It's a good question that's on a lot of people's minds. It depends on your market. Our local market is so high that buy and hold doesn't work anymore because the rents are too low compared to the property values, and if we did take out a loan at 80% LTV in this market, we might be underwater on it in a couple years. So we're looking at remote investing in solid markets that still cash flow. We're making sure that each property will still cash flow or break even if rents dropped 10% (which is a very unlikely scenario in that market anyway). We're also making sure to not over leverage because we don't want to end up in a position where our loans are higher than our property values when the market drops. We figure that as long as we do that, we can continue on investing without worrying to much about a dip.

Hi @Chris Hanisco. Awesome that you're looking into this. My wife and I similarly just bought a duplex just north of Boston that was owner occupied with one tenant. The tenant staying there was paying $900/month, but market rent was about $2000 per month. She had been living there for 13 years and the owner never raised the rent. We knew that raising the rent more than double as soon as we bought the house would not go over well, so our attorney advised us to buy the house contingent on the tenant moving out. She was living month to month and the seller was motivated, so for us, that wasn't too much of a problem. The tenant found a new place and moved out a few weeks before we closed.

I don't know the specifics of your situation, but I hope that at least shows that option is possible! Good luck!

Investment Info:

Single-family residence buy & hold investment in Memphis.

Purchase price: $65,000

Cash invested: $22,250

Contributors:
Taylor Adams

Cute little 3 bedroom house with a carport in desirable East Memphis.

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

We were looking for an easy deal to help us break into the Memphis market. It only needed a small amount of repair, had long term tenants on a two year lease, and had good cash flow compared to he price.

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

We found this deal through an agent on the MLS. We negotiated mostly on price. The seller had recently replaced the roof and had a low tolerance for making more repairs, but was willing to drop $7,500 from the original list price.

How did you finance this deal?

A conventional loan with 25% down.

How did you add value to the deal?

We are adding value by fixing some small cosmetic water damage from a previous roof leak and other minor repairs.

What was the outcome?

We own the home and are collecting rent every month!

Lessons learned? Challenges?

This was not only our first home in Memphis but our first time inheriting tenants. We learned a lot about the pace of how things are done in Memphis and people to know, as well as what to look for in the due diligence process when inheriting a tenant.

Did you work with any real estate professionals (agents, lenders, etc.) that you'd recommend to others?

Ben Reed with Reed and Associates is an excellent agent and property manager. He has outstanding character and hustle and I would recommend him and his company to anyone.