Real Estate Investing Podcast
Posted Thursday, January 5th, 2023 by Richard Roy
This podcast episode is about real estate investing and why Memphis is a stable market for investing. Brett Bernard talks about how Memphis has been one of the most stable markets in the country, even during the 2008 crash. He explains that this is because of the large number of renters in the area, who work in the service industry in places like FedEx, St. Jude, the Memphis Airport, Amazon, and Nike. These people continue to go to work, even during economic downturns, which keeps the rental market and real estate market stable.
We also discuss a case study regarding a couple who live in California and wanted to invest in, and ultimately move to, Memphis. After a rough start with another agent, they contacted Brett and bought a package of 7 properties, quickly expanding their rental portfolio to 11 properties. They are now making $7,800 a month in rental income and are planning to sell their house in California and buy a “mini mansion” in Collierville, Tennessee with the money. This story shows that with hard work and smart investing, it is possible to make a lot of money and move to a better lifestyle.
Are You Afraid of the Market Stabilization?
Memphis Real Estate 2023
Brett Bernard: Welcome to Behind the Curtain Real Estate Podcast. Final episode of the. 2022. Today we’re gonna talk a good bit about what this past year has been like talking about some case studies, some investors that have done some things that have been very successful in this market. I also wanna get in depth about why Memphis is so stable. I get that question so many times from out of town investors who are wondering why Memphis continues to do so well, even with inflation and high interest rates. I also wanna talk about some new growth areas that we saw this year. There’s some areas that. Thought were gonna come up eventually. And this year they really started popping. Yep. Let’s just get into it. So obviously this year Glen, you went on about a five month vacation, so you didn’t work for a while, ? Yes, I did. Glen is back with us though. . Thank you. Thank you. But this year has been a. I would consider a banner year for me. I probably did more in the summer of this year than I did all of last year, so that, I’m not gonna tell you that because then people might think I’ve made a crap load of money, but I’ve also spent a crap load of money. So it’s a wash. But this year alone, the market just got to the point where it was just outta control. It got to the point where I would put an offer in on a property. Five grand over asking with an escalation clause up to another five grand and for cash closing three weeks. And I would lose it. And it baffled me why I was losing these deals because we were right. We were so aggressive in writing these you’re like me, you’re an aggressive agent. You like to get the deal done, but you also don’t wanna be irresponsible to your investor That’s right. And not put them in a good finance situation. The end result was, is that you had a lot of these hedge fund groups across the country that were seeing real estate as a safe, stable investment versus what was happening in the stock market. At that time it was bouncing like a ping pong ball, so they started going out and just buying lots of properties, sight unseen. Over asking cash. The downside of that was they were beating up the sellers after inspection and trying to, they were their idea was an old trick that the old, dirty agents used to use, throw a highball offer at it, lock it up, and then beat it down after inspection. But they were successful in that process. I couldn’t figure out why they were doing it, but as I dove into the. and trying to understand why I keep losing these deals. It didn’t dawn on me. Real estate is probably. It’s not a massive growth industry. It’s not something you’re gonna put your money in and become a millionaire overnight, but it’s always stable. Your money’s always safe. What goes down in real estate.
Glenn Greene: It’s kind of like buying gold. It’s a good hedge.
Brett Bernard: Exactly. It’s a good hedge. As I worked my way through this insanity this summer I literally thought that Joe Biden had passed a bill saying we’d never gonna cut down another tree or build another house, cuz people were buying them like they were about to be gone. And there were, there was never gonna be another house to buy. So as I thought through this, I started researching the real estate market nationally as a whole, and I noticed that there are areas of this country that rocket up extremely. California, Nashville, New York, mul, lot of areas of most of Florida.
Glenn Greene: I think Austin is starting to do that.
Brett Bernard: Austin. and they take off like rockets. Like when they go up in value, they go up 200, 300, 400%. But the negative side of that is when the economy changes and the slightest bit, they drop like stones. They don’t
Glenn Greene: What goes up must come down.
Brett Bernard: They do not hold their value. But as I went through this and I looked at Little Rock and started comparing Little Rock in Memphis and some of these smaller markets that have very heavy numbers of renters, Memphis for once is 48, 40 9% of the people inside of Sea Limits rent. So I started doing, Look at these numbers, and then it dawned on me, I understand why hedge fund groups were buying property in Memphis as fast as they could, because Memphis, believe it or not, has been one of the most stable markets in the country. Not the most stable, but one of the most, and I couldn’t figure out why I was so stable. I was kept asking myself why would Memphis be so stable? 2008, big crash. Everybody’s seeing 40, 50, 60% reduction in values. Memphis saw 18. 20, maybe 21. But by 2010 we were level 2011. We were exceeding our previous numbers. The numbers dictate that because there’s such a large renter pool, that renter pool props up and keeps moving the rental market, which in turn, Keeps the real estate market stable here, keeps it from crashing, because most of those renters work in the service industry or work at FedEx or St. Jude or the airport, or Amazon, Nike, one of these facilities. They don’t make a ton of money, but they rent. And guess what? During covid, during the crash, during any other catastrophe hitting the country with the economy, FedEx, Nike, Amazon, the airport, they all still have to keep functioning. So these people continue to go to work.
Glenn Greene: It’d be interesting to know how much it is that they actually pay these folks that work at Amazon and Nike, because it can’t be that bad. You’re talking about distribution labor, basically. And I have to imagine that they’re making at least nine or 10 bucks an hour.
Brett Bernard: I know some that are making up to 18 bucks an hour. Yeah. So you get a family that makes $30,000 a. They’re renting because their credit’s kind of banged up. They probably hadn’t kept up with their bills the way most of ’em should, so they rent. And because of that large rental pool that keeps the values of rental properties up, which in turn keeps the, which bleeds out into the standard owner occupant market and keeps those markets stable. So between 2008 and 2022, so we’re talking 14. The values of real estate in Memphis have in have increased 100%. They’ve exceeded where we were when all this started. Way over. Yeah. Way over California. I just talked to one of my, my, my good investors in California. Michael. He’s a California seeing 30, 40. Upwards to 60% reduction in values across the board. I have investors, and we’re gonna talk about them shortly as a case study that is actually living they live in California, but they’ve bought property here. They’re actually selling their property in California, moving here. When they came here to visit, they described the neighborhood to me that they live in it, it’s a version of Frasier, and these folks own 15 rental proper. But that’s all, that’s because that house is worth four or $500,000. So we’ll talk about that in our next our next topic. So it, one of my point was, is that everybody that calls me, everybody that emails me, always asks the same question. Why Memphis? It’s simple. The market’s stable. You buy a hundred thousand dollars house, it may drop to 95,000 because of inflation or the economy this year, but what it’s gonna be worth next year, a what’s gonna be worth the year after that? 102.
Glenn Greene: I’ve been surprised some of the changes, the positive changes that are seen in property values in the last two or three years. Sears Crosstown, Cordova. Yeah. I’ve been in, in some cases astounded because I was on the los losing end of a couple of those deals, and I had listings where I got 12 and 14 offers in a single day for a and then it’s who’s got the best offer? And a lot of ’em were cash.
Brett Bernard: Yeah. I can tell you, I thought the hedge fund groups had just finally lost their mind. Their program, their thinking their numbers were just insane. That there’s no way someone stealing money. Dumping into real estate and they’re stealing it, or someone’s embezzling or something. Something’s going on. But if you look at the numbers, a smart hedge fund guy realized that if I put money into real estate, I’m not gonna lose anything and there’s a much greater chance I’m gonna gain, which is way better than what’s happening. The stock market is down overall this year, what, 38% that you calculate that amount? The amount of money. That’s that. You’re talking over 6 billion in losses in the stock market. Wow. You haven’t seen that in real estate. Not in Memphis. No. If you had a billion dollars of real estate in Memphis, it may be worth $995 million. I You may have lost a little lately, but not much.
Glenn Greene: They talk a lot about whether or not we’re going into a recession. Number one, we’re in a recession. Number two, are we gonna see a, cuz I think some folks have been like looking at it from my perspective, I think I would love to see a little bit of a correction in some of the property values.
Brett Bernard: We’re seeing that, I wouldn’t say a correction, prices aren’t dropping, but properties are staying on the market a little longer. There are less buyers. because of the interest rate. So the only buyers that I’m still getting guys that are getting mortgages, but they understand that I can buy this house for $80,000 today, and I may only break even this year, but next year when rents go up, I’ll make money. Next year when the values go up, I’ll gain equity. They’re not buying today for immediate gain. They’re buying for gains next year and the year after. And that’s a smart way to do it. , if you’re only buying for gains today, You’re setting yourself up for a huge disappointment. Yeah, but I haven’t really seen values drop that much. I see a little bit of area, like in Raleigh area. Those areas have stabilized and actually come down a little bit. White Haven, an up and coming market that’s hitting hot right now is Frasier. Five years ago, I wouldn’t have taken a house in Frasier if you gave it to me. Because I’d add beta taxes on it.
Glenn Greene: Then they put in an Amazon fulfillment center, easily a million square feet, if not twice that.
Brett Bernard: Then right next door, Nike Fulfillment Center.
Glenn Greene: Yep. And that’s another huge, they take multi hundred thousand.
Brett Bernard: I measured it cause I always drove by it and I wanted to know how much property that was. It is literally one. From the beginning of the Nike property to the end of the Amazon property. That’s how much real estate they take up now that those plants separate Raleigh and Frasier. So Raleigh got overbuilt. Or not overbuilt, but over bought. And, you’re gonna buy a average rental house in Raleigh for a hundred thousand dollars. So the smart investors went into Frasier on the other side of the plants and started buying, rehabbing and flipping. And now we’re seeing that upward trajectory in Fraser. An example of what’s happening in Fraser here’s what happened in Raleigh. I have one particular investor that I put into Raleigh three years ago, maybe two or three years ago, he bought three properties. I think we paid about 70,000, 65, 70,000 a piece for ’em. He put about 15 in each one of them, rented them out. They’re all renting for, 8 95 to 9 95 a month. This past year when the market topped out, he decided he wanted to sell. So I ran some CMA and said we, you probably got about 8,000 equity in each one, which is really good for three years. So he threw ’em out on the. 2 0 1 0 5, and one at 1 0 7. We sold them for 1 10, 1 11, and one 15. . Wow. So he pulled about 18 grand per property outta that, and less than three years on top of the cash flow that he created during this three year period. Those are the opportunities that I’m looking for. I know that’s what you’re looking for your investors, and that’s what I tell my investors. Don’t be afraid of certain markets. If there’s an upper trajectory, you get into it early, the early entries are the most risky, but also the most. But even if you buy a house that’s 60,000 in Fraser and it doesn’t take off, next year is still gonna be worth 65 next year is still gonna be renting cash flow, and next year we can sell it and get you out of it. It’s a lot different than the stock market. What are you seeing lately at the end of the year?
Glenn Greene: With the end of the year, things got well. Things started to really just get quiet at the end of the very end of the summer when the Fed kept raising interest rates, which we don’t know what they’re gonna do about that. I think they could raise ’em still.
Brett Bernard: As long as you can cash flow or even break even on a property that’s gonna appreciate, if I told you today, buy at and t stock, you’re not gonna make a dime for three. , but on the fourth year, it’s gonna go up two or 3% the fifth year, and sixth year. And every year after that, it’s gonna, it’s gonna grow two to 3%. Would you do that?
Glenn Greene: You know what I always say? And that’s, there’s always somebody buying and always somebody selling. And people always ask me, donate at some point Dundee and the market becomes saturated with investors. And the answer to that is no. People get into the market and get out of the market at will., and so you have people that bought houses 15 years ago and they’ve gotten to that place in their life where they’re ready to cut back and sell some of their assets and start living on the money they’ve made. And so that’s when they start releasing those properties for sale. And I think that’s what the big hedge funds will do. But certainly there’s, it’s changed dynamically from a seller’s market to a buyer’s market in the last four months.
Brett Bernard: Yeah. But I will say I’ve written five offers this week. Actually. I wrote three on Christmas Eve, and I wrote two on Monday. I got one and they were all cash at asking.
Glenn Greene: And that’s a pretty good close rate.
Brett Bernard: It’s a pretty good close rate, but not when people assume the economy’s trash and this is a buyer’s market! No, sellers are still getting market for their properties. They’re still able to get multiple offers, at least here in Memphis. And I think smart sellers understand one thing, Memphis is a hot market. There’s a ton of renters here. You can always rent a property. So if you can always rent a property, your chances of loss diminish greatly. Where you fail to do well in real estate is when you buy and markets that are oversaturated with low amounts of renters where your property sits there for three months or four months vacant. Obviously things are slow now for renters, people don’t move during the holiday. Soon as November hits, things die off until about January when they start thinking about moving to a new neighborhood next year. Other than that, Memphis stays pretty steady on the rental side.
Brett Bernard: 2022 was a banner year for real estate. I have never seen a year, like this year before. I’ve never seen the oddities and what I thought at the moment was complete insanity of buyers, but there was a method to their insanity. After researching I began to realize that, and then I started going and saying myself and doing the same stuff and preaching the same message about buying real estate. But compared this year to 2021, I would say that I doubled my business this year. I can’t tell you what drove that other than I’m a damn good agent and people like me. That’s maybe one reason. Another reason is my partner was on vacation for five months, so I had to pick up some of the slack. But I think mostly the difference between this year and last year was the optimism that people had in buying real estate. It’s very different this year than it’s been any other previous year. People have always been skeptical of the real estate market and walking on eggshells and trying to make sure they don’t make any mistakes. But this year it was Katy bar the door. If you had a house with windows on the door and you put it for sale, sign out, boom. It was gone. They bought it. , I still don’t understand why that happened. I’m sure the, in the near future we’ll begin to, that’ll begin to unfold and we’ll realize. But in 2021, I had a successful year, had 2020 at a successful, even during Covid had a great year. People were stuck at home and they were buying real estate.
Glenn Greene: There was a lot of different things laying on top of each other with interest rates and with, inflation and unemployment, and we don’t know what the outcome of that’s gonna be. That’s why I say we don’t know how soft the landing we’re gonna have whenever it does land. But I’m not afraid of it cuz it just means more opportunities for investors.
Brett Bernard: There is plenty of opportunity. Now, here’s a theory that I was given in full disclosure. This guy is a conservative, he’s a Republican and he rightly so bought and then shut off the spigot. He cashed through cash. Bought, and turned off the spigot. Last time him and I spoke. I’m like you just quit buying. I You bought 12 properties and you just quit buying. He goes, I’m not buying right now. I’m like, why? He goes, why do you think I bought all those at the beginning of the year? I said, I honestly don’t know. You bought 12 properties and then you just quit. He’s got plenty of cash. He said in, in December of last year, he was at a conference and a guy told him that based on what he’s watching and seeing with Biden’s policies, interest rates are gonna have to go up and we’re gonna get into an inflationary period. So he bought all of this stuff in advance because here’s what’s gonna happen. He assumes he’s gonna lose value in those properties. He’s not concerned about it, but he says, every time we get into an inflationary period or a possible recession, when we come outta that recession, whether it’s next year, two years, or three years from now, he goes, what happened? Go back and research the real estate market, the stock market, and anything of type of investment takes off like somebody just put fuel rocket under it so he’s not buying now. He bought everything ahead of time because he was told and believed that because of Biden’s policies, that inflation and other factors in the market, were gonna slow things down and stabilize it. Not kill it, but level it off. . So he got into properties that he probably owes the same amount on or is worth what he paid for it, but he’s banking on the fact that it’s gonna be worth 15, 20, 30% more here in the next three to five years. I thought that was a smart way to approach it. He’s not blaming Biden, right? He’s not knocking Biden for what he is doing. He’s not, he didn’t say that to down Biden. He just said people saw the writing on the wall. He goes, you go back and look at Jimmy Carter, you look at George Bush, you look at certain things they’ve done and what happened, proceeding what they, their policies, and you can predict what’s gonna come 12 months, 18 months, 24 months from now. He goes so far, he goes, I banked, and I thought it was smart.
Brett Bernard: So let me give you a case study, and this just gives you a full picture of the real estate market investing, what certain markets are like compared to other markets. So I have a couple, just wonderful couple that I helped started working with ’em about two or three years ago. They live in ca. I think in Los Angeles County, they bought a couple of properties. They had a rough run at the beginning cuz they bought one that, I met them actually cuz they bought a property from an agent and ended up being just an absolute disaster. And that’s how they got in touch with me and we of got it straightened out, got it done, and got a tenant in it and got ’em rolling. So anyway, I sold ’em a package of seven this past summer. And in my conversation with them, they kept saying we want to, we’re moving to Memphis, we wanna buy a house in Collierville. And I’m like, okay, fine. When you get ready to move, just let me know and we’ll find you a house in Collierville. And then one day I just out the top of my head, I said, why are y’all leaving California? Because I was curious if they were leaving because of the policies. If they’re leaving because of the government, if they’re leaving Bec whatever reason they’re leaving for he goes, Brady goes and we came to visit you in Memphis. We spent one afternoon in the town square in Collierville and ate at Dyers Burgers and we began looking around Carllier. And then the next day you drove us through Raleigh Frasier, white Haven, and we realized that where our rental properties are better neighborhoods than where we currently live in a half million dollar house in Los Angeles County. He says every single night there’s gunshots. Every single night, there’s robberies, there’s break-ins, cars getting stolen. Goes, this is right in my own neighborhood and I have a house that’s worth $500,000. He goes, but Frasier, . Most of the neighborhoods in Frasier are nicer than the neighborhood me and my family live in. And I make plenty of money. So they are now 12, 11 properties. And this next year they’re gonna wait now cause the market’s changed dramatically in, in California. They’re gonna wait until the market shifts. They’re gonna sell their house and they’re gonna be able to come from California. The half million dollars and buy what most people would consider a mini mansion in Collierville, a McMansion, and pay in cash, and now have their 12 properties producing cash flow for them. And that’s a case study. The reason I brought that up is, again, to differentiate the markets, differentiate what’s happening in California versus what’s happening in Memphis, what’s happening in New York versus Llittle Rock, what’s happening in parts of the country that are dramatically changing. They are producing now on their 11 properties, I think he said, as gross as 13 five. Gross. He’s netting about $7,800 a month right now. He said, knock on wood, I’ve been lucky. He goes, I haven’t had a lot of repair issues and I got good tenants. They’re paying rent. He’s done this in three years. But anyway, this case study was important for several reasons, because it is a true success story of a, they just have regular jobs. They’re not wealthy people. They’re not lawyers or doctors, right? They just have regular jobs, make regular income. But they were smart. They bought a. They’ve doubled payments on it and whatever and paid it off in 15 years. So they have a asset worth half million dollars. And if you met these folks, they’re just average people you know, you would never know that they had that kind of cash laying around. They’ve been so smart with their money, but the biggest success of them is this package and these properties that they purchased. I’ve got a lot of good investment stories and good investors that have been very successful to me. This is one, most of these guys that have been successful have money to play with. right? They have a couple hundred grand sitting in a bank that they could spend and pay cash for. These folks didn’t have that. They worked hard to pay off that house and with a plan that they were then gonna start buying real estate, which then that real estate was gonna be their derivative of income for them to relocate to another part. They didn’t realize it would be Tennessee at that time and eventually get into a better lifestyle, which they are one, two years away from doing, and think it’s a phenomenal story. I’m not gonna attribute their success to me, although I think I did a pretty damn good job of guiding them.
Glenn Greene: If he must say so himself.
Brett Bernard: Of course. I got a couple horns. I’ll toot ’em all.
Brett Bernard: if you’re interested in discussing just cuz you call us and talk to us or email us does not mean you have to use this as agents. I’ve had investors tell me they didn’t like, So it’s, I won’t hurt my feelings. I’m a big boy, but you can contact me directly at 901-692-7401, or Glenn at
Glenn Greene: 901-301-8368.
Brett Bernard: That’s right. Or you can go to e p n real estate.com. And if you go there and go to the investment section, you’ll see a nice, beautiful picture of all of us. Each one of us has a little bio and our cell phone number in there. Our email address is in there if you’re interested in real estate. Interested in talking about it and learning more about it, understanding how to get into it. If you’re not in it already or if you’re in it but you, you’re thinking maybe I should change my strategy. I’m not as successful as I want to be. Just pick up the phone and call us or shoot us an email. We’d love to talk to you. We have helped. I think we’ve helped a lot of investors that we are not our investors. We’ve helped ’em out of bad deals. We’ve helped ’em launch their real estate buying careers.
Glenn Greene: We’ve helped ’em sell properties that they shouldn’t have purchased in the first place.
Brett Bernard: Yeah, we spent a lot of time helping investors get out of assets that were upside down so we understand the game, we understand the market, we understand investment side of this and again, I have another horn I’m gonna toot. We’re damn good at it.
Glenn Greene: And I love talking to investors on the phone. I can have a good 20 or 30 minute conversation and pretty much tell an investor what to expect if they wanna start investing in Memphis. And it’s a good time to do that because everything we got going on here.
Brett Bernard: And it’s also a great educational source for me personally, when I talk to other investors, whether they’re my investors. I learn a lot from them. Different strategies, different mindsets, different theories. Everybody’s got great ideas. Some work better for others. And I’ve learned a wealth of knowledge from other investors this past two years that I think is invaluable. The guys that have been around the business a long time, guys that have seen the crash, the ups, the downs, the sideways they’ve seen it all. They’ve bought in high interest rate markets, they’ve bought in low interest rate markets. And learning from those guys have has been a invaluable piece of information for me. So don’t be afraid to call me and don’t be afraid to share your ideas with me because I’m always looking to learn.Be Social:
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