Frequently Asked Questions
Q: Isn’t real estate a bad investment right now?
A: No, real estate is a great investment right now. Real estate has a long-term proven track record and right now it’s on sale. Based on your investment objectives, real estate can provide substantial returns while making a secure investment.
Q: If these are such great deals, why don’t you keep them yourself?
A: All of the principals in our firm own rental property and we are always looking to add properties to our investment portfolio but because of the sheer number of foreclosures hitting the market there are plenty of opportunities for investors like you.
Q: I have no desire to manage rental properties or deal with tenants. Why should I buy real estate rentals?
A: Property management is part of our turn-key solution. We have been managing properties since 1997 and can handle all elements associated with managing your property. Many owners do not have the desire or the experience to deal with tenants, leasing, repairs, rent collections, marketing, evictions, etc. We have the staff in place to handle all of these elements of property management.
Q: Can you give me an example of a typical “turnkey” transaction?
Q: What sort of returns can I achieve with your properties?
A: On average our Leverage buyers (financed process) can achieve a ROI of 20% or higher and Cash Buyers (cash process) are achieving a Capitalization Rate of 10% or higher.
Q: I have been doing my own research and learned that in some cities, I can buy a house for $1000 to $3000.
A: That is true and there are properties in Memphis available in these price ranges. Many of them are in areas of town in which our company does not have a demand for rental housing. Many of these houses are a “shell” of a house and in a state of disrepair. We prefer for our investors to be invested in newer homes, built since 1978.
Q: What is the difference between your company and some of the other large ones that seem to do much more business?
A: There are companies in every major city in the US buying and selling properties to investors. Some are smaller than others, like us. In our opinion, you have to find a company that matches your personality and has similar investment strategies. A company that you can communicate with, doesn’t hype themselves, doesn’t disappear after closing, has a staff and property management company that can handle all aspects of managing rental properties and will give it to you straight. We feel we meet these characteristics and if you feel the same way we would love to work with you.
Q: What is the average house like?
A: The average house has a minimum of 3 bedrooms, 2 bathrooms, living room, kitchen, mainly brick, newer than 1978.
Q: What is your typical renovation like?
A typical renovation includes repairing or replacing the following items:
- Roofs, gutters, & sifts
- Fixtures, plumbing, & electrical items
- Trim, doors, & hardware
- Dry wall & ceilings
- Kitchen & baths
- Carpets, tiling, & flooring
- Cabinets & sinks
- HVAC & furnaces
- Hot water tanks
- Smoke detectors
- Garage doors & motors
- Plus we provide a 1 year American Home Shield warranty on all properties.
Q: Who owns the properties right now?
For new acquisitions:
A. For a leverage purchase (finance process), the property’s are bought and held by us until your financing is lined up and you have closed.
B. For a cash purchase (cash process), you would be buying the house from us soon after we have bought it from the bank. Then we will complete the renovations and leasing.
* Properties already in our existing inventory were either purchased by Reed and Associates or one of our clients
Q: How does Reed & Associates make money?
A: Your purchase price covers the cost of our acquiring the property, rehab, and holding costs. The difference in these amounts is our profit. Our goal is to buy the property for as small of an initial investment as possible; allowing us to pass on to you a rehabbed and rented Turn-Key Cash Flow Producing Investment Property that meets your investment goals.
Q: How much is an initial investment?
A: Your initial investment will depend on whether you buy the property using cash or mortgage. A cash purchase requires a larger initial investment, a little longer payback ratio, more positive monthly cash flow and NO debt. A leverage purchase requires a smaller initial investment (20-25% down), quicker payback ratio and provides positive cash flows. In acquiring properties, we analyze them to insure that your investment goals are achieved, regardless of whether you purchase using cash or leverage.
Q: How do I get a loan for the property?
A: We have lenders that we can refer you to that are accustomed to handling the process of financing properties for investors.
Q: How many properties can I buy?
A: Using leverage through a traditional bank, you are generally limited to 10 properties financed at a time. Using cash, you are only limited by the amount of your capital and the amount of your portfolio you plan to invest in real estate.
Q: Are your properties tenant occupied?
A: Most of the time we try to have them leased before you close if not shortly after but we guarantee the first 3 months’ rent whether or not there is a tenant in place.
Q: How does your renter guarantee work?
A: When using leverage, we will guarantee the first 3 months’ rent. When paying cash, we guarantee the first 3 months rents beginning 60 days after purchase.
Q: Are the properties insured?
A: We maintain hazard insurance on the property during the time in which we own it. Hazard insurance is your responsibility upon your purchase of the property. It is required to be setup at the time of purchase, if you are buying with leverage. We have insurance agents that we can refer you to for price comparison.
Q: Is there a property management in place?
A: Yes, we have been managing properties since 1997 and can handle all elements associated with managing your property. You remain responsible for your finances on the property: debt service, property taxes and insurance. Our staff will handle the marketing/leasing, tenants negotiations, lease signing, move-in process, lease enforcement, rent collection, evictions, repairs/inspection, and anything else that may come up.
Q: What happens when the tenants move out?
A: We will notify you when it becomes vacant and provide you with a repairs estimate to get it back on the market and start the marketing to secure a new tenant. Also, we handle the collection process to recover any unpaid charges left by the previous tenant.
Q: Do I have to pay a commission?
A: No. Any commission paid to Reed & Associates is covered by the property seller, not the buyer.