What are the benefits of investing in new construction rentals?

[00:00:00 – 00:00:14] Brett: It is five o' Clock Somewhere Real Estate Investor podcast. Thanks for listening today. Today we are going to discuss new construction rentals. It seems to be a hot topic here in Memphis. You can get the 1% on a brand new house and it comes with a one year build a warranty. So stick around.
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[00:00:45 – 00:00:53] Brett: All right, welcome back in studio is Marissa Miller and I don't. I hate saying his name. He's British. His name is Richard. He's a prick.
[00:00:53 – 00:00:55] Marissa: I'm just glad I'm not Alyssa today.
[00:00:56 – 00:00:57] Brett: Alyssa. Yeah.
[00:00:57 – 00:01:00] Richard: I always find it funny that you say I'm a prick and there you are.
[00:01:00 – 00:01:02] Brett: You are a prick. You are a prick.
[00:01:02 – 00:01:03] Richard: A prick?
[00:01:03 – 00:01:14] Brett: British people are asking the best prick anybody that pays taxes to keep the royal family in high end castles and, and their fancy attire and all the hoopla.
[00:01:14 – 00:01:18] Marissa: Yeah. As much as I like you, Richard, I have to agree with Brett on that. I just don't.
[00:01:19 – 00:01:28] Brett: Could you imagine they charge us taxes so that. Well, I guess they do. They charge us taxes to take care of the president, so. But I mean, every four years we can kick that son bitch.
[00:01:28 – 00:01:36] Marissa: But at least some of our taxes really go towards, you know, valuable things and not just some, you know, the royal family, some of them go to.
[00:01:36 – 00:01:39] Brett: Shrimps on treadmills and transgender studies in Zimbabwe.
[00:01:39 – 00:01:40] Marissa: Right.
[00:01:40 – 00:01:43] Richard: I'll just make a point. I don't pay taxes in the uk.
[00:01:43 – 00:01:49] Brett: Thank God, because unlike the United States, I'd really have an issue with you paying your 79 cents a year. What is it, $2 a year?
[00:01:49 – 00:01:52] Marissa: We figured like a dollar and some change.
[00:01:52 – 00:01:58] Richard: Unlike the United States, the UK does not tax its citizens if it lives somewhere else in the world.
[00:01:58 – 00:01:59] Brett: Oh, that's true.
[00:02:00 – 00:02:03] Richard: United States is one of three countries that does that.
[00:02:03 – 00:02:06] Brett: If you don't like it, Richard, go home. How about that?
[00:02:06 – 00:02:07] Marissa: Oh, he would hate it.
[00:02:08 – 00:02:10] Brett: Go back to your bland food and your shitty people.
[00:02:10 – 00:02:11] Richard: We have great food.
[00:02:11 – 00:02:15] Brett: And your pompous king and queen situation you got going over there.
[00:02:15 – 00:02:21] Marissa: On the bright side for, you know, the Britons, I mean, what's a dollar and some change a year, you know.
[00:02:22 – 00:02:25] Brett: I mean, it's nothing. Just to keep the royalty cup of coffee.
[00:02:25 – 00:02:25] Marissa: Royalty.
[00:02:25 – 00:02:36] Brett: So I guess I just, you know, when I turn on the news and I see all the drama with the family and Prince Harry and blah, blah, blah, I'm like, who gives a shit really? Well, noone cares.
[00:02:36 – 00:02:37] Richard: Nobody does.
[00:02:37 – 00:02:45] Brett: Apparently somebody does because it's on the news every day. You got some specialists over in Britain. That's all they do is follow the royal family. That's like, y' all gotta find something else better.
[00:02:46 – 00:02:50] Richard: There's a name for people that follow the royal family, which is Americans.
[00:02:52 – 00:02:55] Brett: Not this American. I couldn't care less. So anyway, all right, let's get to.
[00:02:55 – 00:02:56] Richard: Our this American either.
[00:02:57 – 00:03:24] Brett: Let's get to this topic of new construction. So we do a number of brand new construction homes here in the Memphis market. We have one particular builder that Marisa is working with, Mario. And we have different levels of these new construction. We've got some that are kind of a plain Jane. We got some that are in between. And we got Mario, who actually steps his up a bit. So let's talk about Mario's. Let's take one of the properties that we just recently sold. Let's talk about that one.
[00:03:24 – 00:03:44] Marissa: So we sold one of our Burr properties at 3852 Burr. One thing about Mario, when he builds these homes, he does the granite countertops. And one thing that I really like with his primary bedrooms, the bathroom, he has a separate shower from the tub. Whereas a lot of these new builds are combining them.
[00:03:45 – 00:03:46] Brett: Tub shower combo.
[00:03:46 – 00:04:06] Marissa: Yeah, tub shower combo. Which is fine. I mean, I'm. I'm not against that either. Probably will save like some cost on the, you know, front end and you can have wiggle room on the back end to accommodate the buyer or your agent or whatever it is. But I do like that he takes into consideration, you know, some people just want a shower and some people just want a bath.
[00:04:07 – 00:04:08] Brett: So, yeah, I don't take bath.
[00:04:08 – 00:04:12] Marissa: And he has great finishes on him. So, I mean, I don't see a.
[00:04:12 – 00:04:14] Richard: Reason to have a bathtub in my house anymore.
[00:04:14 – 00:04:17] Brett: My wife is a bath person. She loves taking baths.
[00:04:17 – 00:04:21] Marissa: So she likes one of those tubs that has the jacuzzi, the jets and all the filter.
[00:04:21 – 00:04:24] Richard: You can have a she shed at the end of the yard, can't you, with a bath?
[00:04:24 – 00:04:29] Brett: I could, yeah, I could, but it's going to be expensive. I just assume her use a tub.
[00:04:29 – 00:04:30] Richard: In the house right next to make.
[00:04:30 – 00:04:33] Brett: It easy, and I'll go in with a straw and blow bubbles in the water for her.
[00:04:35 – 00:04:36] Marissa: Anything for your woman.
[00:04:36 – 00:04:36] Richard: Right?
[00:04:36 – 00:04:57] Brett: But I, you know, I would say that if I, I ran a tough mudder 7 years ago or 4 years ago last time I ran it, and I ain't gonna lie, when I was done with that, that's the first thing I did. I filled up a tub full of, I mean, scalding hot water. And I got in and I laid in there for two hours and didn't move my body hurts so bad. So there is a time for it, but it's not really common anymore. Most people take showers.
[00:04:57 – 00:04:57] Marissa: Yeah, they do.
[00:04:57 – 00:05:01] Brett: I know British people only. What, they shower once every seven days or something, I think.
[00:05:01 – 00:05:05] Richard: Oh, you're being very generous. The ones I know, maybe once a month.
[00:05:06 – 00:05:07] Marissa: No. Are you joking?
[00:05:07 – 00:05:08] Richard: I am joking.
[00:05:08 – 00:05:09] Marissa: Oh, okay.
[00:05:10 – 00:05:29] Brett: Thank God. I did have a teacher in high school from Britain. And on Monday he always looked really good, like clean hair combed. By Friday, he literally looks like he slept upside down in a tree, smelled bad because he didn't take a shower once a week on Sundays. I never understood why, but I don't get it. True story.
[00:05:30 – 00:05:32] Richard: I used to get bullied at school actually, because I smelt good.
[00:05:34 – 00:05:39] Brett: Only British people would bully a kid for smelling good. All right, so let's get back to the houses.
[00:05:40 – 00:05:48] Marissa: So, yeah, he, he's, he does more of the, I don't want to say high end, but it's not low end. It's a nice, happy medium.
[00:05:49 – 00:05:50] Brett: I mean, they're really nice homes.
[00:05:50 – 00:06:29] Marissa: Yeah, no, they, they are like, the finishes are great. I think they're priced very well for what you're getting, considering some of these builders obviously want to put in the cheapest thing to get the biggest profit, which I understand we all want, you know, something for nothing basically. But I like that Mario really takes his time. And for him, honestly, he's used to dealing with owner occupant homes. So that's probably where his mindset is. But I think it's great for people to be able to have that affordability and also kind of have the happy medium luxury, you know, I mean, it's not a million dollar home, but it's not, you know, the bottom of the barrel.
[00:06:29 – 00:06:30] Brett: They're really nice homes.
[00:06:30 – 00:07:13] Marissa: Yeah, they are well decorated, him and his workers. Like I said, I really like the idea of the separate shower from the path. The finishes around like they, they, they, they look good. He does a good job. You can tell that he puts the money into, you know, giving it that little bit of extra oomph to it. So I do like that. I think they're reasonably priced as well. So that's obviously a plus. Especially being in the Memphis market. A lot of people don't know, but Memphis, it's not going to be one of your top 10 most luxury cities. So you gotta accommodate the people for what they can afford and also build it to where you can make a profit as well. So everyone's happy.
[00:07:13 – 00:07:17] Richard: Are they mostly building three twos? Four twos? What, what's the configuration?
[00:07:17 – 00:07:31] Marissa: Three twos? Four twos, I would say are probably your standard for new builds. Well, for Mario, he builds a lot of three twos, probably four twos. We try to get a lot of MHA tenants in those, which for the most part works out very well.
[00:07:31 – 00:07:52] Brett: Yeah, and just for. We've said this many times before, but people need to realize inside the city limits of Memphis, 52% of the that live inside the city work in distribution and rent, and most of them rent their entire lives. So there's a huge demand for rental properties and the new construction. MHA and their tenants absolutely love them. They pay over market rent for those properties.
[00:07:52 – 00:07:56] Richard: I looked up the official number. It's actually 43%.
[00:07:56 – 00:08:04] Brett: 43% now rent, yeah. Okay, so well, that's good. That means some people moved off the MHA rent rolls and went. Probably got a job in self pay.
[00:08:04 – 00:08:17] Marissa: Yeah. And even with MHA rent, you know, some people may not know. You know, you, you hear MHA and you think, oh, the government's going to cover the full amount of rent. But it doesn't always work like that. Some of these MHA tenants, they, a.
[00:08:17 – 00:08:18] Brett: Lot of them have jobs.
[00:08:18 – 00:08:54] Marissa: Yeah, some of these MHA tenants, they work. So the government kind of calculates based off of that. You know, MHA may cover $1,000 of their rent and then the tenant has to pay the remainder, which may be 400 bucks or 600, just depending on what, you know, it's renting for. So I do think that that is for the tenants on their side because you're living in something that's a little better than what you can afford, but you're not paying the full amount. So that's obviously a big help. And like I said, that happy medium, finding that balance for the seller, the buyer, the tenants to where everyone is happy.
[00:08:55 – 00:08:59] Richard: Now, the house you were just talking about was that sold with a tenant already placed.
[00:09:00 – 00:11:01] Marissa: So it just depends on how the contracts are. But specifically for these deals that I'm speaking on, we do have it in place to where the buyer wants tenants in place, which is doable. It's not like, out of the norm, but you also have times where the buyer is like, hey, I just want to buy these homes. And then they place the tenant themselves. Or they go through a property management company, obviously, and they get someone to place an MHA tenant. And honestly, they don't all have to be mha. It can be a regular tenant as long as they can afford, you know, the house. And they meet those requirements, which are typically three times the rent, obviously a certain amount of a credit score, you know, so if you are a tenant and you're paying out of pocket, you will have other requirements you have to meet. More so than someone that may be an MHA tenant because they're paying a little less out of pocket. Or for those MHA tenants that don't have a job at all, MHA, I think will cover up to 1300. So even that is a great amount for someone that has no job or no income. So that helps the tenant a lot as well. But yeah, Mario, he. He does a great job, him and his team, obviously, because he's not doing it alone. But there are people like Terry. Terry Brown, I think is his last name, who he does new builds, and he does a little bit more. A little more conservative with his cost, A little more cost efficient to where he's making his homes, like, tenant proof, in a sense. Like I said, the concrete floors versus Mario does the. I think LVP floors. Concrete lvp. Do you want to replace LVP every so often, or do you want to do concrete where you can just polish it back over and, you know, make it look brand new and call it a day? It's less wear and tear for the maintenance people and for the owner of the home now. But LVP is obviously fine, too. It's kind of what's in style right now.
[00:11:01 – 00:11:10] Richard: And all those things equal cost along the way. So. So what did that house actually sell for and what do the numbers look like?
[00:11:10 – 00:11:19] Marissa: So we did 165 was the sale price. We did a $5,000 credit to the seller. So in the books, it really would look as if.
[00:11:19 – 00:11:20] Brett: Net sale 160.
[00:11:20 – 00:11:21] Marissa: Yeah, exactly.
[00:11:21 – 00:11:32] Brett: But that gives the buyer, of course, he bought seven. So that gives him $35,000 cash back from the seller to put toward his closing costs and prepays whenever he closes on the property.
[00:11:32 – 00:11:32] Marissa: Yep.
[00:11:32 – 00:11:35] Brett: So great way to get into a property with less money out of pocket.
[00:11:35 – 00:11:37] Richard: Yeah. And went to mha.
[00:11:37 – 00:12:14] Marissa: Yes, they did go to mha, but like I said, a lot of investors are open to regular Tenants as well, they just really want to meet that quota. Every investor has a bottom line number that they don't want to go below. So as long as you're getting that, whether you're MHA tenant or, or a regular tenant, I don't really think they mind as long as they're meeting that, you know, Mark, because we all know investors, they're not, they're never going to live in the home. They just want to meet that quota and make sure they have a tenant in there that's somewhat taking care of the property, you know, not just trashing it or anything like that. Because they obviously cost the owner on the back end when they get a new tenant.
[00:12:14 – 00:12:18] Richard: So 160 of the sale. Do we know what their rent yields?
[00:12:18 – 00:13:02] Marissa: So I have, me and Brett, we have a seven deal package going on right now. So far, three of those are already rented. Two of them got rented for 1500 and one of them for 1600. So the 1600 obviously meets that 1% rule that we always speak about. And then the other two are for 15. But again, as a buyer turning into an owner of that property, you kind of have to be considerate. Again, like I said, mha, those that have a job, they're covering a certain portion. So you probably can't get the 18, 17, you know, 1600. You kind of have to work with them a little bit, especially in this Memphis market. So most of them hit that 1% most times.
[00:13:02 – 00:13:04] Brett: What was the rent on that one again?
[00:13:04 – 00:13:08] Marissa: So we got three of them rented. One of them is for 16, which hits the 3%.
[00:13:08 – 00:13:09] Brett: Okay.
[00:13:09 – 00:13:10] Marissa: And then the other two are for.
[00:13:10 – 00:13:20] Brett: 15, 12 months, 19,002 annual gross, 160,000 net purchase. That puts you right at 12%, right.
[00:13:20 – 00:13:22] Marissa: At the 1%, which is great.
[00:13:22 – 00:13:34] Brett: But you're getting that with a brand new home from the ground up with the one year build, a warranty and either a portion of or all of the rent guaranteed. So that's hard. That's a hard, hard deal to replace.
[00:13:34 – 00:13:42] Marissa: Yeah. And it is. And even though a few of those are like a tad bit under that 1%, it's still a great deal.
[00:13:42 – 00:13:44] Brett: Let's talk about. You said one was 15.05.
[00:13:45 – 00:13:45] Marissa: Yep.
[00:13:45 – 00:13:48] Brett: Okay, so let's do that one too. Let's see where that lands.
[00:13:49 – 00:13:55] Marissa: So two of them got rented for 1505. And I honestly still feel like you would come out good as an investor.
[00:13:56 – 00:14:15] Brett: That's $18,000 a year annual gross. And you divide that into 160, that's 11.3%. So you're just shy of the 1% on a brand new home though. I keep saying that. It's not like you're, you know, you're buying a rehabbed home or a home you got to put money into. You're picking up almost 12% out of the gate on a brand new property.
[00:14:15 – 00:14:35] Marissa: So that's why I said even though it's right at the 1% it's right under, which still isn't bad because as an investor their goal is to have cash flow, obviously. And you still can do that. If you rent it at 1500 even though you sold it at 160, it's just going to take a tad bit longer to see because MHA will do.
[00:14:36 – 00:14:38] Brett: Typically an automatic increase every year.
[00:14:39 – 00:14:39] Marissa: Yep.
[00:14:39 – 00:14:55] Brett: As long as you don't exceed. I forgot what the number is. But as long as you're staying within the market range. So that if rent comps are 1500 for a 3, 2 in that neighborhood you can go to 1550, maybe 1575 with MHA.
[00:14:55 – 00:15:27] Marissa: So I spoke with one of our property managers, Amisha, and she gave us a little insight that you know, in a year those properties that did rent for 1505, that the owner could boost it up some and then they will be meeting that 1% mark. I forgot exactly what number she said, but it's, it was definitely where they will meet that 1% mark. So you know, you sacrifice a year of a little under the 1% and then after that year you're probably going to be above your 1%.
[00:15:27 – 00:15:50] Brett: I think the greatest trade off though is that you have a one year build of warranty. So your first year your maintenance is pretty much zero unless a tenant breaks something then, but that should be the tenant's responsibility to take care of. An MHA will make them, will be holding them responsible for that. So you could trade off that 8/10 of a point difference on your return for the fact that you're not going to spend any money on maintenance and so you can build your own shit fund really quick.
[00:15:50 – 00:16:49] Marissa: So I haven't worked with a lot of property management companies, but one thing that I do like about Amisha is that she took it upon herself to say, hey, I want to get my people out here to come look at these houses every three to four months. You know, she's doing a one man job, so obviously it's only so much she can do. But she tries her best to get her team or someone out there every three to four months just to kind of do a walkthrough the property make sure that it's in good condition, which I feel like helps the owner or investor on the back end when it comes to the upkeep, the maintenance, the repairs, you know, that kind of gives them an idea of how the tenant is, are they cleanly, you know, etc. So I think that's great for her to take that initiative to get her people to come out, do their own inspections and make sure that the tenant is staying up to a reasonable standard so that on the back end when the tenant moves well, now the investor's not coming out of thousands of dollars unknowingly.
[00:16:49 – 00:17:08] Brett: Yep, that's, that's a plus law. Management companies don't do that. They claim and do their inspections and they do the inspection, but they don't hold the tenant accountable for what's going on with the property. And if more management companies would do that, less investors would have, or investors would have less money on rent turns, but they just don't. So it's good that Amisha does that.
[00:17:08 – 00:17:57] Marissa: Actually what I just said is what I learned today from her. I thought that was an MHA thing, but that was just a her thing. So I want to say she said mha, they only do it once every six months. So just once a year. And it's like once a year really isn't enough. You have 12 months in a year. It's, it's so many things that can go wrong within a 12 month, six month period, you know, versus every three to four months. We're kind of on top of you a little bit more that would make a tenant want to have their together a little more. Do you want to get evicted and be kicked out of this MHA for you or your kids or whatever it is that's, you know, going on the home, or do you want to try to keep it up as best as possible to stay where you are for a good price, brand new build? Like Brett was saying, I mean, I wouldn't want to give that up.
[00:17:57 – 00:18:06] Richard: Yeah, that's come up in conversation multiple times over the last few weeks that we've been recording that the MHA tenants, once they get it, they want to keep it.
[00:18:06 – 00:18:20] Brett: They typically stick around longer because it's a real pain in the ass to go through MHA to move and transfer and, and redo your voucher. So a lot of times they get right from the beginning and they just stay. Unless of course, the house is, you know, falling apart or this bad neighborhood.
[00:18:21 – 00:18:39] Marissa: If I was an MHA tenant and I was getting a brand new Build. Whether I had 10 kids or two kids, I would definitely do my best to keep it up to par because it's not often that you're coming across brand new builds, you know what I'm saying? That look nice or modern looking.
[00:18:40 – 00:18:56] Brett: You know, for years, MHA tenants got the worst of the worst. Basically. They basically had slumlords to rent from, and they were just crappy homes and disrepair and bad, horrible neighborhoods. So. So MHA loves the new construction. I mean, they really do. Anytime we get new construction, they're much easier to rent.
[00:18:56 – 00:19:03] Marissa: And like I said, I think that's a great, happy place for the buyer, the seller, and the tenant. It's kind of like everyone wins. So.
[00:19:03 – 00:19:09] Richard: So are Mario and Terry both building in the same zip codes or are they in slightly different areas?
[00:19:09 – 00:19:20] Marissa: I think Mario just goes where he can find a good lot for a good deal. So I don't think he's too far focused on, like, let me only stay in the Frazier area, for example, because.
[00:19:20 – 00:19:26] Brett: He has homes in 3811411, 411-8115.
[00:19:26 – 00:19:28] Marissa: Yeah, he's a little. He's kind of just.
[00:19:28 – 00:19:29] Brett: He's. He's all over the place.
[00:19:29 – 00:19:37] Marissa: Yep. But like I said, he's coming from strictly doing owner occupants, so he probably is a little more diverse in going to different areas.
[00:19:37 – 00:20:03] Brett: Right. I know Terry is built primarily in Phil. Phil and Terry both in 3127, but now Terry's picking up lots in 114-107-116, 109. So he's starting to spread around a little bit. And there's certain markets where those homes are going to sell for $240,000, 225,000. So those aren't rentals. Those are something that he's going to market to owner occupants when, when and if the rates change and the market picks back up on owner side.
[00:20:04 – 00:20:57] Marissa: I think that. Again, I spoke with Amisha this morning. She's a property manager, and she does mostly MHA tenants. She does take regular tenants, too, but mostly mha. So she's been doing it for a while. And I spoke with her this morning, and she gave me a little insight. Frasier is a good area, but White Haven is also an area that's coming up. And you know, a lot of these tenants before their mha, like, they're kind of already in Frasier. Some of them want to go to a different area, try something new. And White Haven is kind of like the new wave, I guess, so to speak. So Frazier, Whitehaven. I know for sure those are areas that are picking up great for MHA tenants. The ones that are already in Frazier, moving to Whitehaven just want a little change of, you know, diversity. Just try something different. It's like going from your Toyota to a Altima or something, you know, like just, just kind of change and see what else is out there.
[00:20:58 – 00:21:42] Brett: When these builders originally came to us, they were all referred to us by someone. I think Terry came to me via epm. Mario was referred to us by Misha. Phil was referred to us by. I forgot who referred him. Kenny was referred to Jeff by someone. So these builders are coming to us because we have a reputation for volume, working in the investment world, working with investors around the world and across the country. So because of that, the way we lay our system out for our investors, it has attracted investors and it's attracting builders and rehabbers because we do a one stop shop kind of thing. So investor calls us and we're the last call they make. They don't have to call multiple agents, they don't have to call inspectors and contractors and mha and they don't do any of that. We do it for them.
[00:21:43 – 00:21:45] Richard: So save some time. Here's Brett's number.
[00:21:45 – 00:21:48] Brett: 901-692-7401.
[00:21:48 – 00:21:49] Richard: Call him now.
[00:21:49 – 00:21:51] Brett: Call me now. Yeah, I got my phone on vibrate.
[00:21:51 – 00:21:53] Richard: You just sound like Ms. Cleo. Call me.
[00:21:54 – 00:22:09] Brett: Call me now and I'll tell you your future. The relationship with the builders that we have is extremely important because guess what? They're supplying the, the product that a lot of our investors want. And everybody's like, well, why are people, why are so many people so hot on the new construction? Cost of money. Think about it.
[00:22:09 – 00:22:17] Marissa: But not only that. Our investors want what our tenants need, like you said. Would you say 43%, Richard?
[00:22:17 – 00:22:19] Richard: 43% rent in Memphis?
[00:22:19 – 00:22:24] Marissa: 43% renters in Memphis, which is almost half.
[00:22:24 – 00:22:24] Brett: Yep.
[00:22:24 – 00:22:31] Marissa: You know, so it's not just pretty simple, but what the tenants need as well to fulfill the investors need.
[00:22:31 – 00:22:57] Brett: If you got a street full of rehab properties and two brand new constructions that are all available, the first one they're going to pick is a new construction. Oh, they are easier to rent. You do get higher rent. So if a 4:2 on Suncrest rehab is going to rent for probably 1450amonth, an MHA on Suncrest, brand new, is going to rent for 1650. I've seen them as high as 1695, so.
[00:22:57 – 00:22:58] Marissa: And it should work.
[00:22:58 – 00:23:12] Brett: You get more rent. The house is brand new, you got A builder warranty, no maintenance for the first year. So it's a much better situation. And you're going to get the appreciation because again, new construction is going to appreciate at a faster pace than a house built in 1945 or 1950.
[00:23:12 – 00:23:46] Marissa: In all honesty, for the listeners or new investors out there, I'm a realtor, but I'm working. Like I said, this is my second year in real estate. So once I get my income flowing consistently, my goal is, to which me and Brett talked about previously, is get my income in rolling consistently and buy a new build and buy it under my personal and then quick claim it to my LLC and start building my LLC from there. So I think the new build is a great avenue, a great way to.
[00:23:46 – 00:23:48] Brett: And we've sold a lot of them.
[00:23:48 – 00:24:18] Marissa: Do the new build because you're going to spend if not the same amount more doing renovations and you know, all the other stuff that you have to put into a home. When you can just buy something that's already built, it's already up to code because the city obviously has to come out and make sure that it's up to code before you can sell it or do anything with it. So why not save yourself that hassle of putting the work into it and, you know, getting contractors and all this.
[00:24:18 – 00:24:40] Brett: Well, there's, there's some advantages of rehab and we talked about last episode, we got an episode coming out with a meet and he bought turnkey and new construction first and then he did a couple rehabs and they were a little bit more. Bigger pain in the ass than he expected. But once they're finished, he came out really well on a cash flow and equity. But you've got to have the time, you got to have the patience, you've got to have the money to do those projects.
[00:24:40 – 00:24:42] Marissa: Exactly. So it just depends on how you can do.
[00:24:42 – 00:24:52] Brett: New construction is the best turnkey you can buy. You get a loan, you buy it, you start collecting cash flow, period. You don't have a whole lot to do with rehabbing and fixing and taking care of stuff.
[00:24:52 – 00:25:08] Marissa: So if you can afford for the new build, I think it's a. For lack of better words because I can't find a better word, an easier route or more of. Not as time consuming as the Reno's, but those risky. Yeah, it is risky, but those no.
[00:25:08 – 00:25:09] Brett: Less risky on a new construction.
[00:25:10 – 00:25:23] Marissa: Yeah, less risky on, on. On a new construction. Yes. So I just really think it comes down to what your real estate goals are, how much money you have to, you know, back yourself Up. What your end goal is is what it really comes down to, you know, with the.
[00:25:23 – 00:25:55] Brett: When it comes to the relationship with our builders, there's a lot. We're working with our newest builder, Mario. It's a process. You know, you got to bring them along. When we first met Mario, he was dead set on doing things this way, and that's it. So we said, well, fine, then here's what we're going to do. You give us some homes. If we can sell them, then we'll talk further. Well, guess What? We sold 10 in 30 days. So we sold more than any other agent in town. And so now he's slowly becoming part of our group. He's leaning on us more and more.
[00:25:55 – 00:26:01] Marissa: We'll have a second package of homes from him. That'll be later on, obviously, down the road.
[00:26:02 – 00:26:49] Brett: So what we're doing with Mario is once he sees that we're the real deal, right? We didn't just BS him to get a listing. We sold them. He didn't give us a listing. Actually, believe it or not, we sold properties he had listed with a different agent, and he took them away from that agent and gave them to us. But now that we're at the point, I'm able to have that conversation with say, all right, Mario, I know you like putting granite in, right? But it's $1,500 you don't have to spend. It's a rental property. So why don't we save that money and why don't you do this a little different? Make it more tenant proof instead of owner occupant style. And then if you're going to save that money, guess what you can do? You can put seller credits out there and say, look, 165, $4,000 seller credit. Then you can move these in volume to investors. And that's what Terry Brown does. Terry just sent me 22 homes. He's starting in the next 60 days.
[00:26:49 – 00:26:53] Richard: I mean, you're absolutely right about the granite. I mean, as a Brit, I would settle for marble.
[00:26:55 – 00:26:58] Brett: One marble. The whole bag of marbles.
[00:26:58 – 00:26:59] Marissa: The whole bag of marbles.
[00:26:59 – 00:26:59] Brett: Just.
[00:27:00 – 00:27:01] Richard: You lost yours, didn't you?
[00:27:01 – 00:27:16] Marissa: Hit him upside down a long time ago. But this isn't to say that Mario can't still build owner occupant homes. He definitely can, but we just wanted to give him another avenue to make income elsewhere versus waiting on owners to come around.
[00:27:17 – 00:28:17] Brett: What I noticed is the new builders that we've brought in this year, middle of 24, Kenny and those guys, they've been home builders for years, right? They've been building five 300 $400,000 homes for people for years. So they build an excellent product. But I don't think they realized when they got into doing what they're doing that 42% of people are renting. Therefore there's a huge rental market, therefore there's a huge need for rental properties. And if you can provide a new product to a tenant, you're going to come out way further ahead than buying some piece of crap in 38106, putting 30 grand into it and trying to get $1,000 a month for it in a bad neighborhood. So I believe that's why our new builds side of our business has really taken off. I mean I sold probably 32 of them last year. This year we've already sold 10, Jeff sold four, so that's 14 and I think Nick sold one or two. So we, we've probably sold 15, between 15 and 18 properties brand new construction this year alone. As a team it sounds like you.
[00:28:17 – 00:28:19] Richard: Can sell them quicker than they can supply them.
[00:28:19 – 00:28:22] Brett: Well it all comes down to how you promote them, right.
[00:28:22 – 00:28:36] Marissa: And it, I do feel like it comes down to what the tenants needs are and their commute. You know people want to be close to their children's school and you know, so those I do feel like play a factor as well.
[00:28:36 – 00:28:38] Brett: Big factor. And we know we can get anywhere.
[00:28:38 – 00:28:41] Marissa: In Memphis Frazier when their kids school is in White Haven.
[00:28:41 – 00:28:43] Brett: But we can get anywhere in Memphis in 20 minutes, right?
[00:28:43 – 00:28:45] Marissa: Yep. 20, 30 minutes definitely.
[00:28:45 – 00:29:04] Brett: But these folks want to live two minutes from their job. So I, so let's take Raleigh as an example. When Nike and Amazon built their facilities right on the Fraser Raleigh line down on New Island Road, 8,000 people moved to Raleigh and Frazier to be right down the street from work. Even though where they lived before it takes them 10 minutes to get to work, they still moved.
[00:29:04 – 00:29:12] Marissa: And I'd rather no longer commute and have a brand new build, you know and take an extra 10 minutes to get to my kids school or my job.
[00:29:12 – 00:30:01] Brett: But that's what, that's what spurred this huge development in Raleigh and Frazier in 381-273-8128. That's what got the ball rolling and is why Frazier is booming now and that's why there's so many new constructions. I mean just on Terry's list alone between Terry, Phil and I would say Kenny and Charles, they're gonna have 30 houses going up in the next 90 days starting to go up. And a majority, all of these this 20 they're in Frazier. A handful of them are in 38114. A handful of them are in38128. A couple of 38109. But the majority of them are in 38127 because that's the best market that's got the biggest rise coming. Most of the other markets are kind of doing well and they're growing, but Fraser is poised to just take off because every time they drop a new construction home, that whole street gets bought up by investors. Everything gets rehabbed, rented and flipped and values go up.
[00:30:02 – 00:30:13] Marissa: So just side note, I have a question for you, Britt, because I know you worked in the Raleigh area when it was coming up. How much time do you think the Frazier area has before it reaches its cap?
[00:30:13 – 00:31:18] Brett: It's a little slower than Raleigh took off in 2017. And then it was booming. And then we had Covid and Covid ended and all of a sudden it just. I mean, it went to the moon overnight. I know in 2021 we were writing 100 offers a week and getting one. It was so competitive, so many people were buying. But what Frazier's dealing with is a good push right now. But the good news is for people that want to get into Fraser is that we dealt with three years of economic issues which slowed things down. Had that not happened, Frazier would be well above where it's at now. But I think that slowdown, which is now about the end, is going to take Frazier and start kicking it up at a much faster pace. So anybody want to get into a market that's going about to boom, now's the time to do it. If you wait till 2026, you're going to get in probably when you're about 70% to the point where it's not going to cap out, but it's going to slow way down on its annual growth. So if you want to get into it, 3127 is a place to put your money where you can get good 1% and you can gain some great equity in a property and ride the wave up.
[00:31:18 – 00:31:40] Marissa: Right? And do you have any idea of what zip code may be the next booming. Let me hop on it right now, like how Raleigh, now we're dealing with Frazier. Do you know what zip or not even do you know? Because no one really knows. But do you have an idea or a theory of what the next zip code is that's going to just take off?
[00:31:40 – 00:32:00] Brett: Me and Toto are going to take the yellow brick road and go see the wizard and Once he tells me, I'll report to everybody. The next hotspot, I really don't know. I mean, it's. I will tell you that Raleigh was identified by Glenn Green early on. I didn't really buy into it at first, and then I saw the Nike Amazon deal going down. I'm like, oh, crap. So we started dumping investors in there as fast as we could.
[00:32:00 – 00:32:01] Marissa: And they helped Raleigh, Every one of.
[00:32:01 – 00:33:09] Brett: Them, every investor I have that we put into Raleigh, they're in these homes for 70 and 80,000. They're all valued at 140, 150, and you're talking only five years later and they're getting 14, $1,500 in rent for something they've got 80 grand into. So if Fraser does take off, we're going to see that happen. I believe as we get into the first quarter, second quarter, 2026, it's going to probably be too late to really capitalize on that. It'd be still a good time to invest, but you're not going to get that meteoric rise in value that you're going to get if you buy them now and ride that wave into 2026. All right, well, we appreciate you listening. Remember, just go to our channel, subscribe. We'd love to hear from you. If you want to send us a message, go to our website at my MemphisInvestmentProperties.com and send us a message. We'd love to talk to you. Or give us a call at 901-692-7401. If you have any questions about new construction or what we got going on in Memphis, just pick up the phone and call us. You don't have to use us. We're not going to twist your arm and force you to use us as your investment agents. But we'd love to talk to you. I'm assuming once you're done talking to us, you probably won't hire anybody else, but we'll leave that up to you. Thanks for listening.
[00:33:11 – 00:33:25] Marissa: For more common sense real estate tips, listen and subscribe at Five O' Clock Somewhere podcast.com the Five O' Clock Somewhere Real estate Investor podcast is a sound ideas group production.