Which communities in the Memphis area are the best for purchasing rental property?
There are several factors to consider, including:
- What are the investors specific goals for purchase?
- Are they looking to sell the house again in 5 years or 15 or long term buy and hold?
- How risk averse is the buyer?
- Is the buyer wanting a house in a completely safe suburban neighborhood to limit the possibility of crime and ensure stronger monthly performance, or is the buyer willing to take a little more risk for the purpose of having a little higher monthly ROI, by purchasing an older property in cash?
- Is the buyer willing to get a deal by purchasing a house needing minor to moderate rehab before it can be rented?
Answers to questions like these will assist a member of the EPM Real Estate sales team in recommending the best strategy for purchase and help guide an investor toward successful purchases of rental property in the Memphis area. We advise that you contact us through our website by email or by phone to set up a consultation to discuss your goals with a sales agent.
How will property age factor into purchase decisions?
Easier aged properties 40 years and newer, Class A properties, can be found in newer but more expensive neighborhoods, such as Cordova, Bartlett, and parts of Memphis, TN.
Medium aged properties 40 years or older, Class B properties, can be found in the Raleigh, Whitehaven, East Memphis, and University of Memphis areas. These neighborhoods will rent for a little less than a Cordova, TN house, but the cash to purchase should be less. You can also find deals in these areas requiring some rehabilitation and repair, which will afford a homeowner expenses toward their taxes. Tenants love these areas and management companies often rely on these neighborhoods as strong and dependably renting communities.
Older communities are often very popular with buyers, however EPM Real Estate Realtors® and property managers have a strong opinion on how often and where in these communities a buyer should purchase. These houses are older and will require some modernization and possible rehab. Sales consultants can advise on specific properties and their qualifications for purchase and potential higher monthly ROI. These communities include: older parts of Whitehaven, Parkway Village, Eastern Frayser area, West Raleigh, and new communities we continue to discover, as the city of Memphis improves and invests in older areas of the city. We would consider these areas to be Class B- to C level investments.
Do you have internal listings?
YES! In house investors often come to EPM Real Estate with the goal of selling improved and already rehabilitated, and often currently tenant occupied and cash flowing, property to investors from INSIDE the EPM Real Estate range of influence. They know that EPM Real Estate has contacts which could allow them to sell their occupied houses inexpensively to the buyer and seller and to do so without bothering the tenant, or asking them to leave. Contact the Realtor® to have your name placed on our email list and coordinate with a EPM Real Estate consultant for purchase. BEST THING about this process is that EPM already has an history on repairs and improvements to the properties for sale AND years of tenant payment history on hand for your review!
May I list my property with EPM Real Estate?
Please do! There are several sales services listing which will list your properties for sale and attach needless extra fees and mark-ups in order to sell your house with their premier online services and advertising. We believe that this is simply a cash grab in order to make more money to provide to the seller the same level of service which every seller deserves. These sales services will charge both the buyer and the seller for the use of your system, but EPM Real Estate relies on our own proven systems to perform for our clients, WITHOUT charging extra fees for advertising and negotiation between buyers and sellers. In fact,. EPM Real Estate has a long list of buyers on an email list and will work with both the buyer and the seller to make sure that the transaction is fair and beneficial to both parties. We are Realtors®, and not wholesalers or Real Estate resellers. Realtors® know how to get the job done, and rely on our commission as a means of compensation and not a series of fees and dues to give both buyers and sellers access to the MLS, property lists for potential purchase, proper advice on specific property information and quality negotiation skills to insure a personal experience, every time. Before listing your property with an online resale service, give one of our sales consultants a call to see what an EPM Real Estate Realtor® can do for you!
Are there tools available to investors to make search more accurate and lessen search time?
YES. Our Realtors® use Realtor® ONLY tools called RPR and Paragon to set up a Collaboration Center by which you can determine the communities, the price ranges and amenities of the properties you are looking to acquire. You will have LOGIN information and so will your agent- like you’re looking at each other through a window. Using the Collaboration Center is like going to a popular shopping website, applying filters and searches to determine the TYPE of property you are interested in and marking any property you like as your favorite Realtor® you choose to work with will see and help research your choices as possible acquisitions they be able monitor each every step there answer any questions may have can also send us properties discover on zillow.com, redfin.com, other sites where you can view for sale properties.
What kind of tenants may I expect?
Your tenant experience will be determined by several different factors, not the least of which will be geography of your purchase. Different areas of the city draw the attention of different professions and provide different levels of affordability to Memphis’ diverse tenant base. As stated in general property levels described in the community type discussion above, the different levels of the city will vary and generally cater to people interested in specific communities. Some communities will encourage the rental of properties by young professionals, some to families with school aged children, and some to college students, merely by the factor of convenience and proximity to areas of interest to the resident. For instance, university students are LIKELY to stay in neighborhoods close to the range of universities in Memphis. People who stay in Raleigh are quite likely to work in nearby commercial centers or at our local Navy Installation in Millington, TN. Cordova often attracts families and young professionals, but so does all of our communities. School quality, as rated by different non-profit rating groups, will often influence families decision as to where to lease a property. Certain neighborhoods in the midtown and downtown areas are of high interest to young professionals and roommates seeking to stay close to nightlife. Regardless of the property of your choosing, Enterprise Property Management, Inc. (“EPM”) will employ a stringent and thorough application process to make the best possible effort to assure the investor that the applicant(s) are properly qualified, can afford the monthly rent amount with room to spare, are free of criminal behavior, and have shown a past behavior of on time rent and debt service payment. EPM will do everything within its power to set every investor up to succeed in their rental experience.
How will Enterprise Property Management, Inc. interact with EPM Real Estate to provide advice for buyers?
EPM Real Estate is a “division” of Enterprise Property Management, Inc. (“EPM”), a licensed real estate brokerage, thereby being well versed in investment properties, their needs and behaviors, and the intricacies of determining if a subject property is going to be a good investment or a poor one. EPM and EPM Real Estate work together in concert to evaluate properties and communities to help determine the probable success of possible property acquisition. When an investor comes to EPM with possible property for acquisition, EPM helps evaluate the strength of the neighborhood, quality of the subject property and makes predictions on future performance of both the property and neighborhood before or during the purchase process. IF a house or community is clearly deemed to be a challenge, an EPM representative will convey that information. EPM and EPM Real Estate Realtors® are trained to spot the trouble properties and will give their complete honest advice on a property before the transaction is closed. Aaron Ivey, Principal Broker of EPM has spent more than 18 years of his career keeping buyers out of trouble by conveying if a property is in a low performing community, or if the house itself seems like too much work to rehab in order for the buyer to make a profit. Realtors® Glenn Greene and Brett Bernard are in various communities regularly, and bring to Aaron attention to subject properties for discussion. We always come out of the discussions agreeing on a certain course of action. BEST OF ALL, EPM and EPM Real Estate will evaluate property for FREE without requiring a contract! This may not always mean an onsite inspection, but we know Memphis, and can give insight through the advice of Realtor® only tools and our own experience as to if a subject property is likely to be a winner or a handful!
What rate of return should I expect by investing in the Memphis market?
The answer to ROI comes down to several factors, which our Realtors® will happily discuss with you! There is Annual ROI, Monthly Simple ROI and length of ownership Resale ROI. These evaluations must be performed with specific factors in mind, by posing a few of the following questions:
- What is the risk level of a neighborhood, community, and property to which the buyer is willing to commit?
- What are the short term and long term goals of the buyer in acquiring property?
- What is the minimum and maximum amount of cash flow required of the buyer, monthly, annually and over the life of the investment?
- Will the buyer be financing the property in part or whole?
EPM Real Estate recommends that a buyer consider a 1% Simple Monthly ROI as a standard for property evaluation prior to purchasing. For example, if a house is purchased for $100,000.00, then the investor should expect to make at least $1000.00 per month on the monthly rent. Some investors have been able to achieve as much as 1.20% Simple Monthly ROI. Ask a Realtor® about this factor to see if we can help you purchase property with a high rate of return!
How much should I keep in reserve for each investment property?
Every investor views their investment differently, but traditional cash reserves are set at about 10% of purchase price in cash reserves. More aggressive investors may hold less cash and rely on low interest financing for property maintenance and vacancies. One factor to consider is financing the property in part or whole. The more an investor finances, the more cash they should be keeping in reserves, as a rule.
Should I pay cash, or finance part of the purchase and what are the benefits of cash over financing?
You’ve really got to understand the performance of a property before determining if it should be purchased for cash or financed in part. Our opinion is that purchasing a property in Cash is the best the way to go, thereby freeing up monthly cash flow for more investments or to replenish reserves. As more investors pursue financing to purchase undervalued properties, then they should speak to a Realtor® with EPM Real Estate for more advice on cash offers or financing. Another important point is that a cash offer is much more attractive to a seller, when they are considering multiple offers. For investors interested in purchasing several properties over a 2-4 year time frame, the BRRRR Method is a smart way to go.
What is the BRRRR Method?
BRRRR stands for Buy, Rehab, Rent, Refinance, and Repeat. This method is a popular and often used conventional manner to buy rental properties. You may have less cash flow after refinancing a property with this method, but you have more cash to buy more properties. At Biggerpockets.com you will fined more information: Buy, Rehab, Rent, Refinance, and Repeat!
Do we completely back the BRRRR method?
EPM Real Estate Realtors® never back one specific method as a means for large scale real estate acquisition, but this popular method is used often by our investor buyers. Each subject property for purchase must be considered as a specific case. Often buyers using the BRRRR Method will finance a house from the very beginning, to scoop up a good deal, and save their cash for other means, such as rehab. Each investor must be flexible in their desire to acquire large amounts of real estate and must also be comfortable with and understand each method before employing it! No method is completely foolproof, but we will give you all of the facts you need to make the best decision.
How do I obtain financing?
Talk to one of our Realtors. There are several different manners of financing available to those who ask, including, Traditional Financing through one of our lending partners, Traditional lending through your own bank, Commercial Line of Credit which can be obtained here locally through a trusted lending partner, and, if you’re in a pinch for time or have a large project in mind, a short term Hard Money loan to get your project off the ground in a short period of time.
What is a Hard Money Loan?
Sometimes referred to as bridge loans, a hard money loan is a short-term lending instruments that real estate investors can use to finance an investment projects. This type of loan is often a tool for house flippers or real estate developers whose goal is to renovate or develop a property, then sell it for a profit, quickly.
Can I purchase a house with 20% down?
At the time this BLOG was written, the answer would be YES. Lenders are lending for properties capable of appraising for the loan amount with 20% cash down from the buyer. The economy is always changing, as are federal requirements and restrictions for Fannie Mae and Freddie Mac backed loans, so check with your lender before assuming that this traditional lending vehicle is still relevant in the current marketplace and time.
Can EPM Real Estate help an investor with other real estate services, such as contractor services and real estate attorney recommendations?
Call an EPM RE Realtor® for more information on whom we trust for funding in Memphis, TN. We have special connections with lenders, closing attorneys, home inspectors, property managers and contractors. We’re here to help and to save you money!
Should I purchase a property in good condition, now, or purchase a house which requires make ready or rehabilitation?
This may vary according to the individual investor and their goals and risk tolerance. Certain investors will only purchase DEALS, which are undervalued properties needing work and rehabilitation, in order to insure significant equity in the property which they acquire. Other investors with lower risk tolerance only want to purchase properties in good condition so that the level of complexity is low and the time to lease is very short. Call an Realtor® to better understand all of the options when purchasing property in Memphis. Performance is everything, but satisfaction of the buyer is based on understanding the factors at play and setting appropriate expectations for each subject property and its capability to return on investment. Every buyer has different goals and expectations., If we understand the buyers goals, then we can guide them to the most desirable outcome.
Will EPM Real Estate provide assistance for flip work?
Yes. EPM Real Estate has helped dozens of investors purchase, rehab and flip houses to the public. Although this is not the most common money making strategy provided by EPM Real Estate, we have experience in assisting buyers in the acquisition, rehabilitation, and resale of flip housing. We’ll even provide several competitive estimates for the work to make the house sale ready again, thereby saving you money during the rehab!