All Forum Posts by: Joseph S.

I’m currently focused on A- and B+ properties in Memphis because of the better tenant pool, vacancy, repairs, etc. however, I’ve heard that my overall returns may be better if I focused on a few C properties (comparisons were made between the risk and return of large and small cap stocks). However I’m hesitant because of all the challenges I’ve seen on BiggerPockets. What I (and probably others in a similar position would be interested in seeing) are some actual real life numbers (not fluffy opinions) from experienced property management companies who work in those areas (I'm looking at you @Douglas Skipworth, @alex craig, @James Wachob, @Chris Clothier, @James Martin, @Curt Davis).

Most of you are using professional property management software (such as PropertyWare, Appfolio, yardi, buildium, etc.) that makes finding this information about your portfolio fairly straight forward. I know that these kinds of numbers may be considered competitive intelligence so there may be some reservations about posting. However, as BP is a sharing space some of you may be open to it – and it would certainly go a long way to making me (and probably others) open to investing in those neighborhoods.

I think it would be great if you could filter down to a given zip code (37127, Frayser, in this case) and provide the following information:

• Zip Code: 37127
• Time Period (please filter your results for a three year time period, if possible, otherwise please state the period of time used)
• Number of Properties Currently Under Management (if possible, please remove any of the properties owned by you to remove any bias; also, include properties that were held in your management for any period during this time – not just those that were held the full period)
• Total Potential Monthly Rent (the value of rent that would have been brought in if there was no vacancy)
• Total Contracted Monthly Rent
• Total Rents Received
• Total Late Fees Assessed
• Total Late Fees Received
• Total Deposits Collected (initially provided by tenant)
• Total Amount of Deposits Retained (not returned to tenant due to damages, etc.)
• Total Maintenance/Repairs/Make Ready/Expenses Paid
• Total Number of Evictions

I’ll leave out Cost of Evictions, Utilities, Property Management Expenses, Property Insurance, financing, and Property Taxes as these may vary widely per property and may not be paid through the Property Management Company. After I get some responses I’ll make some reasonable assumptions for these and include those when I repost with the summary findings.

An example response may look like:

• Zip Code: 37127
• Time Period: 36 months
• Number of Properties Under Management During This Time: 150
• Total Potential Monthly Rent: $2,970,000
• Total Contracted Monthly Rent: $2,673,000
• Total Rents Received: $2,138,400
• Total Number of Late Fees Assessed: 1,350
• Total Amount of Late Fees Assessed: $67,500
• Total Amount of Late Fees Received: $50,000
• Total Deposits Collected (initially provided by tenant): $200,000
• Total Amount of Deposits Retained (not returned to tenant due to damages, etc.): $150,000
• Total Maintenance/Repairs/Make Ready/Expenses Paid: $400,000
• Total Number of Evictions: 30

If you can provide the information in this format, we can get a really good picture of the investment profile for these neighborhoods. Thanks for considering it!

I'm an out-of-state investor from CA investing in Memphis, TN and have come across a townhome without an HOA (something I've never seen before in CA). In speaking with my agent and property manager they advised that it's fairly common for Memphis townhomes not to have HOAs (about a 50/50 split). The property meets all of my investment requirements (A- neighborhood - 38125, strong cashflow, purchasing 10%+ below market value, no HOA), but since the property is a townhome I'm hesitant to pull the trigger. Here are some things that've come to mind:

Neighbor Issues - If the folks in the attached townhome are not quality neighbors there could be some real problems. What if they don't keep their property well maintained? I suppose you could run into the same problem anywhere with a traditional SFR, but having the property attached could make things far worse. What if they don't want to get a new roof at the same time as I do (so I end up just having mine done and then the others look even worse)? There isn't any required uniformity in paint color or landscaping so if the other owner wants to show their artistic flare I may have a very odd looking shared property. Again, something that could happen a detached house next door, but it seems to me the risk is amplified when the property is attached.

Vacancy - The property manager I'm working with advised me that in his experience he has seen that townhomes actually have equal to or less vacancy than a detached property because they typically require less yardwork.

Rental Value - I think we're safe on this one because it's part of a subdivision that has a number of townhomes that are rented and we're basing our expected rental value on their rental history.

Market for Resell - I would imagine that there is less demand for a townhome than there is for a detached SFR, however, the appraisal of nearby recent townhomes sales show that we are paying below market value so we should be ok here, right?

These are the thoughts I've had so far. I'd appreciate all of you folks with experience in the Memphis market to let me know how you approach non-HOA townhomes. Thanks!

Hi @Brandon Turner,

I'm an out-of-stater (from CA) investing in Memphis, TN and I'd love to attend! Would it be possible to setup a Webx or GoToMeeting for those of us that can't be there in person?

@Alex CraigI agree with David. Having this type of information would be exceptionally valuable to us owners.

I'm new to the Memphis and have been looking at B+ to A- properties that meet my cashflow requirements. I have one under contract and a number of offers out there. I know with that property class I will attract better tenants, deal with less costly maintenance, have a lower vacancy rate, and be able to sell the property much easier if it came to it (an important consideration since I'm an out-of-state investor), so I'm effectively reducing my risk. However, I know I may be giving up higher returns with this approach. I asked my soon-to-be property manager (once I close on this first property) if they would be willing to share their dataset so I could do some analysis and develop this information (even offered to sign an NDA). Understandably, they said no. They were of course able to provide rent expectations (which for the most part I can determine myself), but the real value comes in knowing expected vacancy/maintenance/etc. on these B- and C class properties. So since I don't know what to expect I'm very wary of purchasing any of them and feel like I could be giving up a better return.

Whats interesting is that property managers have huge data sets to work with and could be using this information to create tools to help owners know what to expect when purchasing property. This type of knowledge could put a lot of owners at ease and set better expectations which could lead to additional value creation for the PM. You're the first person I have seen on BP analyze their history and share it for others (in a more specific data-driven, less generic way). I think that's great and hope it continues!

I'm currently searching for property management software to keep track of my properties. I'm just starting out and am not looking to break the bank on some of the powerhouse services like Appfolio. I actually just heard of TenantCloud earlier today, see that they do tenant screening, ACH payments, and basic accounting and thought I'd try it out. A feature that a few of their competitors offer is electronic lease signing and renewals. They don't appear to have that, but it'd be a great addition.

By the way Joe, as the owner I would expect that you would know the business model... care to share?

Thanks for replying Steve!

I was thinking about getting rental income, maintenance totals, taxes, etc.

Is there a better way to get this information? Am I trying to go too deep in this vein? Should I just assume that 50% of the income will go towards expenses/vacancy?

Hey all,

I'm preparing to purchase my first 3/4-plex and have read a few books so I have a good grip on the fundamentals, but not much "street knowledge". One of the keys that all the books push is confirming maintenance, vacancy, and expenses through the sellers tax returns. They stressed the importance of pro-forma information vs. actual data. In fact, the biggerpockets Introduction to Real Estate Investment Deal Analysis ([url]http://www.biggerpockets.com/renewsblog/2010/06/30/introduction-to-real-estate-analysis-investing/[url]) page talks about this importance.

However, when I contacted a real estate agent to get me started he advised that in his experience it is highly unlikely to actually get tax returns on 3/4-plex properties and this usually only happens on larger multi-unit or commercial properties.

Is this true? In your experience is it rare to actually get tax returns or is this just a lazy real estate agent?

Thanks for any help you can provide!