Seth: Hey there, how's it going? Welcome to the REtipster podcast. This is Seth Williams, and you're listening to episode 221. And today I'm talking with Liz Nowlin and Terry Kerr of Mid-South Homebuyers, a turnkey real estate provider specializing in rental properties in Memphis, Tennessee.

Seth: Now, why are we talking about turnkey rentals? Because as land investors, it's important for us to always be thinking about what's next. Because let's be honest, the land business is a little bit of a hamster wheel. It's a hamster wheel that pays extremely well, but it's still a hamster wheel.

Seth: And if you want to stay on the hamster wheel for the rest of your life, then great. Keep doing what you're doing. But if you want a few different exit ramps you can take at some point in the future, it's important to always be thinking about where you can put your money so that it creates sources of income that are truly passive and, more importantly, permanent.

Seth: And there are obviously many ways you can do this. And one such way is through opportunities like what Mid-South Homebuyers has to offer. Mid-South Homebuyers has been around since 2001, and it's one of the oldest turnkey providers in the country.

Seth: They're known for buying and thoroughly renovating single-family houses and also providing efficient property management so their investors can enjoy reliable, low-maintenance rentals. And I wanted to interview Liz and Terry to understand what sets Mid-South Homebuyers apart and what makes Memphis such an attractive market for turnkey rentals.

Seth: And also why anyone would want to get into this investment strategy in the first place, and if they do, how they can succeed in this space. Liz and Terry have a unique perspective on market cycles because they've spent decades refining their business model.

Seth: If you've ever wanted to hear from someone who knows what they're talking about in this space, these are the two people you want to talk to. So Liz and Terry, welcome to the show. How's it going?

Liz: Great. Thanks so much, Seth.

Terry: Seth, a pleasure to be here.

Seth: Yeah, absolutely. So in case anybody's listening to this, in case they don't know what exactly a turnkey rental property is. Maybe we should start there. What is this for those who are not familiar?

Liz: Yeah. So a turnkey rental property is a property that an investor can buy that has already been completely renovated, has a resident already in the property, and has a property management company in place.

Liz: So it's a completely passive investment. Buy the property and hit the mailbox once a month for the checks.

Terry: Absolutely. And if you're doing it right, you're working with people that are going to be your experts on the ground. You know, you can't just make any part of town work as a rental.

Terry: It needs to be a safe, stable neighborhood with low purchase prices, low property taxes.

Seth: When buying a turnkey rental like this, my understanding correct that there should be nothing else I have to do to fix it up. It's good to go. Money should start coming in almost immediately. Is that accurate?

Liz: Absolutely.

Terry: Yeah, that's it. And there's lots of ways to skin the cat, right? You can buy a house, fix it up yourself and manage it yourself, or you could hit up an outfit to locate a property for you that needs a lot of repairs and then contract with that outfit to make the repairs for you.

Terry: Or you can purchase a property that has already been completely renovated with a resident already in the property that's cash flowing from the day of purchase. And that's what we specialize in.

Seth: Have you both been in this company since 2001?

Liz: I'm the newbie, having only been here about 16 years. So I joined in 2009. And so it's really unusual that we've been in business that long. I mean, you want to take a 20-year snippet and cover every real estate cycle that has been.

Liz: I mean, you're talking about bubbles, crashes, and everything in between pandemic. And Memphis has proved itself incredibly recession-proof, resilient, durable, slow and steady in appreciation and sometimes rapid appreciation.

Liz: And it's given us 20 years to figure out the brand of ceiling fan and paint and the strictest renter criteria that still functions, you know, lots of different things.

Seth: Terry, did you like start this company or how did you get into this?

Terry: I did. I did.

Terry: I didn't set out to have the company. The goal was to, you know, buy them and hold them. And then I bumped into a buddy of mine I hadn't seen in years who had 10 rental properties that he had bought fixed up himself. And he asked if he could buy one from me.

Terry: And I said, why would you want to do that? And he said, well, I don't have time to fix them up myself. And the numbers work for me if I just buy it from you as is, or not as is, after you fix it all up.

Terry: And so I sold one house to my old buddy, Steve. He's like, dude, this is awesome. And I sold him 10 more. And so the business was born of passing bargains onto bargain hunters and turnkey was kind of invented there for us.

Liz: Yeah. I think his exact quote was, my wife is tired of me not being home on nights and weekends. So you're talking about that hamster wheel. We get to send some really large checks every month to people whose total involvement is opening a report once a month and cruising it saying, oh, they paid rent again and then going on.

Liz: And I love businesses that start so organically. Terry often says he's been lucky to be born in a city that lends itself to investment property the way that Memphis does.

Liz: And then after a couple of years of selling houses to other investors locally, and then less locally, and then less locally as really the word started to spread.

Liz: Terry was always creating and accumulating these houses for himself. I myself buy houses from the company. We drink the Kool-Aid, I'll put it that way. And Terry's houses were outperforming some of his friends' houses that he bought from us. And the only difference was the management.

Liz: We built our management company around managing Terry's houses. It wasn't about, oh, let's create a third-party property management company that's going to have this great profitable success as a property management company.

Liz: The whole thing was working backwards from managing Terry's houses. And when it became clear he needed to manage for the people that we were selling, we didn't restructure. We didn't change how we charge, what we charge, what we cover.

Liz: And I think it's really unique on the management side, what we would call an owner focused management style. We don't manage Terry's properties any different than we manage for our owners in Japan, Australia, China, you name it.

Seth: Is this unique for the turnkey rental property provider to also be the property manager?

Liz: Yes.

Liz: Most folks that are buying from a turnkey provider are buying from someone who rehabbed the house, put a resident in the property and is going to retain management.

Terry: Yeah. And it really keeps your accountability all in one place. And I think that's really important. A story, something that will come up over and over again is a turnkey purchaser buys a house elsewhere.

Terry: They're told that the rent is quite high and that the condition of the house is that there's no deferred maintenance. And then a different third-party property management company is involved and the seller walks away. The house isn't renting. The house isn't renting.

Terry: Oh, it looks like we need to rent it for a hundred bucks less than what you thought. And then, okay, well, we got a renter in there and now there's repair after repair after repair.

Terry: And when the people that are managing the house are the ones like with us, we've already taken a deposit on every house I offer my investors that rent couldn't be more real. And then we're the ones servicing and repairing the house. We're the ones offering the total one-year warranty.

Terry: And so everything that is told to you on the front end is tied up with the people on the other side.

Seth: Since you're on both sides of renovating it and managing it, like it doesn't serve you in any way to cheap out on the renovation, right? Because like, you're just going to have to deal with it later if you don't actually handle the problems, right?

Liz: Absolutely.

Terry: Yeah. And the thing is, is the name of the game is to keep the property rented, right? And if the resident has got a really nice quality property to move into, and then when something does end up breaking down the road, if it's addressed quickly, we pride ourselves on super quick repairs.

Terry: When something does happen, you keep the residents happy. The residents renew their leases, and that's the only way a property is going to perform. So we're super duper resident focused as well, because they're what make the whole thing work.

Liz: And it doesn't even you hit the nail on the head with repairs, you know, whereas an independent seller might want to pocket a little extra by spending less on the rehab and then they get to walk away.

Liz: That goes into location, too. We don't want to manage in unsafe neighborhoods. We don't want to manage undesirable floor plans or houses that are under flight paths or our property management company.

Liz: Well, our friends are our coworkers. They're going to get mad at us. We want to manage properties that are easy to manage. I always say we've had a small wait list for our properties for years.

Liz: We're very selective on what we buy, very selective on what we will manage and renovate and offer to our investors.

Liz: And slowly over these 20 years, the word has gotten out. But I always say even at the longest of our wait list times, our acquisitions team was not thinking about me and my wait list.

Liz: They're thinking about Terry's mandate that we don't put out a house that he would not personally and proudly own in his own portfolio. And that we want every house we serve up to one of our beloved investors to be an asset in their portfolio that they would want to hold indefinitely because of the performance.

Liz: And so it's not just having a pulse and a roof, there's a lot that goes into it. We walk away from more deals than we buy.

Seth: What do those numbers look like? Like how many do you look at versus how many do you actually close on?

Terry: Well, thousands to one. Yeah, we'll take a look at thousands of properties in our marketplace and then we may buy one. And that's for many, many reasons. The location, the layout, the pricing.

Terry: You know, we've been doing this long enough that we have figured the formula to the to the umpteenth degree. And so we know exactly what we need to pay going in to make sure it makes sense to the investors coming out.

Seth: And can you break down a little bit more clearly? Like when you say location, I think I get the basics of that, but is there like some specific thing you're looking at? Like, so the layout, like what is an undesirable versus a desirable layout? Is it square footage? Like what are you looking at that? Like that's a good layout or that's a bad layout.

Terry: We'll start with the layout. You know, we're buying typically in the second bedroom. It's easy to rent a one-bedroom. It's really difficult to sell it to an investor.

Terry: So it's a three-bedroom, two-bath, split floor plan with a little bit of land. And it's in a safe neighborhood near good schools and restaurants. You know, they're not all the same. You'll have some variation. But the basic premise is safe neighborhoods where folks can safely raise a family.

Terry: And then as far as layout goes, you've got to have a carport or a garage. You need a laundry room inside the house. It's going to have a larger living space. You know, the days of the shotgun small living spaces are difficult to rent.

Seth: Cool. So you're only looking at single-family houses, not apartment buildings or anything like that.

Terry: Single-family houses. Single-family houses. We've done literally thousands of them since 2001.

Terry: That's our wheelhouse. We know all the moving parts inside and out. It's what we do best.

Seth: And I got to imagine Memphis is a huge market. Like how much of Memphis are we talking about here? And is there like a defined area where you're like, I'm only going to be in this neighborhood or do you go all over the city?

Liz: So the number one thing that when folks call me, they want to tour the city. They're coming in from out of state and they say, I want to tour. And I'm always, you know, enthusiastic to do that.

Liz: But I'll always kind of caution folks. Memphis is pretty socioeconomically integrated. Block to block changes can be pretty significant. And so I warn folks, please don't drive into Memphis and just think that you can like roll around and just know if you see a bad intersection or a bad looking building.

Liz: You can't make assumptions. You just have to look at the individual house and look at who lives around that house. Are you looking at neighbors that own their own homes? You can check the property records and look at that.

Liz: But really, we're pickier than the average investor could be themselves coming into the city because we're trying to achieve this broad formula. And I would say if someone picked a house themselves that wanted to be a turnkey, we would walk away from one out of five of their picks.

Liz: So that's to give you an idea of kind of how picky we're being.

Seth: That's interesting. So why is it that an investor coming in can't just easily find what you're looking for? Like what's the special thing you guys bring to the table? Why are you different?

Terry: Experience. You know, a couple decades of managing these properties and knowing exactly what performs and what doesn't. So we know what to avoid and we know what to seek out and what makes them shine and what makes them more difficult.

Liz: And we have our tried and true management team to thank. I mean, they're seeing what the complaints and repairs are. You know, managing 1,700 houses for 20 years, we have thousands and thousands of data points.

Liz: And what I'd say is when you're buying a turnkey property anywhere, are you buying from a company that has built a management company around what's right for them, or are they using a third-party property management company that's just trying to maximize profits and manage as many properties as they can?

Seth: So like this management company, the people there are salaried employees and not like commissioned off of the properties or how does that work? Is there a financial disincentive to do too much or not enough?

Liz: We charge a flat 8% of rent and 50% of first month's rent for placement. And that's kind of been our deal from the start. Fairly standard kind of third-party rates. We've never budged on that.

Liz: And then, you know, we can get a kickback from a contractor on a repair or we could, you know, but where that's in our favor, we're literally the seller of these houses. So we're standing behind the quality of our product and we have a total one-year warranty on every house.

Liz: And so any major repair for the entire first year, we cover. So we're extremely incentivized to get it right, because if we didn't, we'd be losing money. And that's kind of how we've always structured everything is what's right for the people buying from us.

Seth: So this one-year warranty, like does that extend to like appliances that break or the air conditioning goes out or the roof starts leaking, like you're on the hook for all that?

Terry: Yes. Any major system.

Liz: Any major system. So, you know, if a cabinet handle comes off, we're not going to cover that. But an HVAC system, the plumbing, the electrical. We just don't miss any of that. The roof.

Liz: So our rehabs are pretty thorough. And so we really need to make sure that we're not going to have big expenses in the first year and that we're not going to have expensive turnovers in the first two to three years.

Liz: Like I bought my first house from us in 2009 and it is still on its original tenant. Like that's what we're going for. You know, we want tenants that are going to be there and are taking care of these houses as their own.

Seth: Wow. So it's just one continuous lease. Like they never even like sign a new one or is it like a month to month at this point?

Liz: No, they've signed many leases, but no turnover. You know, that's the term we're talking about is turnover. You have a year lease and then the lease goes month to month and then they renew for a year or they renew for six months. You can do all kinds of different arrangements.

Seth: Gotcha. Okay. So when we say there's no turnover, it's not that they're still on the same legal contract. It's just the same tenant has been there the whole time.

Liz: Yes. Different tenant, new lease. That's a turnover. We have to paint, clean the carpets, replace damaged things, advertise the house, place a new tenant. You know, there's a decent amount of cost involved in a turnover.

Seth: Oh, yeah. So this 8% management fee, like how does that stack up to other places? Like if I were to just find some random property management company in Memphis, like are they pretty much all 8% or is that high or low or what?

Liz: So I would say that it's never apples to apples. I know there's many different flavors. You know, some places are 10%. Terry probably is aware of more national management companies.

Liz: And so the thing to figure out is what's actually included. You know, you could say 8% and then we also charge you for every time we're mowing the lawn. We also charge you for every time we're coordinating with a contractor to come out.

Liz: We also charge you when we're putting out a sign in the yard or meeting a tenant or showing the property. You know, there's different ways to structure it. We have found that when we structure it as a flat rate, it's much simpler.

Liz: And we had an owner years ago, this really cracked me up, who said, your 8% is worth my 10% anywhere else. And I think that kind of echoes what our other owners have said.

Liz: There's a lot that we do that I don't think even our investors are aware of that really sets us apart from others.

Seth: Do you happen to know what it would cost somebody to set up their own turnkey rental property? Like if they went and bought a house in Memphis and fixed it up themselves and had to go find their own property management company and get all that set up, what would that cost?

Liz: Well, if you're doing it apples to apples, like to our inventory, and you're buying like the best house in the best neighborhood, fully renovated down to the light switch plates, most people, when they're looking at doing it themselves, they're going to go, you know, a little bit more economical on the finishes.

Liz: And so in that case, it could cost a good bit less. But if you're talking about the same product, the reality is that if you bought the house, it wouldn't be the same price because we're able to buy at a discount.

Liz: And then if you renovated the house, it wouldn't be the same price because we are using in-house contractors. So we're paying cost for materials. We have crews that are very efficient and have been with us for years and years and years.

Liz: So when I price a house, I look at, okay, how much did we pay? How much did we put into it? And then a thin profit margin. Not thin, but I mean, like, you know, it's very transparent. We're happy to justify our numbers.

Liz: And so if somebody wanted to buy a house and do it themselves, they'd probably pay more to acquire the house and they'd probably pay more to renovate it. So in most cases, they're actually coming out ahead.

Seth: Is there a certain demographic or type of investor you think is like the ideal candidate for what you do? And I'm thinking like, I don't know, maybe, I mean, you mentioned like Amish investors. Like who does this make sense for?

Terry: You know, the answer is it makes sense if you got money to invest. You know, we've got investors that have one house with us and they're retired and that money subsidizes their retirement and we've got billionaires that own hundreds of houses.

Terry: So the demographics on one end is that you've got savings and you're looking for a return. And then what that number is for you is going to fluctuate.

Terry: And obviously if someone's looking to buy half a dozen or more houses at a time, they're going to be a little bit more sophisticated when it comes to investing. But we've got someone that saved their money for years and years, wants to buy one house and hold it for the long term.

Terry: Then we've got folks that buy every year and they're looking to build a portfolio. So the one category is you're an active investor, but you don't want to do the work.

Terry: But the second category is you're a passive investor. You just want to deploy cash and you want to hold it for a long period of time.

Seth: So when you say active versus passive investors, an active investor would be like a flipper who buys cheap and sells high? Is that what you mean?

Terry: Active would be doing their own rehab work, active in acquiring. You know, they're out there with a driving for dollars, trying to find houses, negotiate with people, doing direct mail campaigns.

Terry: That's kind of the active side. And on the passive side, again, it's you know what the cash on cash returns look like and you just want to deploy and sit on it.

Seth: Gotcha. So an active investor would be a person who's used to doing a lot of work, but in this case they don't have to. They could just kind of plug into you guys to get this done with no effort.

Terry: Exactly. I mean, we've got folks that are house flippers, wholesalers and such. They want to buy rental properties, but they don't have time. They're doing their own active work. So we're basically the turnkey for them to have some of that buy and hold.

Seth: Gotcha. As you guys like look back at your history of all the investors you've worked with, like who's been the most successful? What do you think is a common trait of those people who just like crush it year after year when they work with you guys?

Liz: They buy and hold. I mean, truly, that's the answer. It sounds really simple. Terry was talking about this 10-year hold minimum for turnkey as an industry. And I would say I would bump it up a little higher than that.

Liz: You know, I have investors that purchased from us in 2012, 2013, and if they sold today, they would have doubled their money. You know, but the longer you're willing to hold, and truly there's a tax benefit to holding indefinitely and passing this along to your kids and their kids.

Liz: And I mean, there's a little bit of a philosophical approach to it, but when I talk to people that are, you know, wanting to make their money work, what's your alternative?

Liz: You know, you could buy bonds, you could do the stock market. But the reality is, we all need housing. And I just think that there's something really wise about betting on America's need for housing.

Liz: And so if you look at it as you're willing to buy and hold for years, you're going to outperform on every metric. And if you're looking to, you know, make a quick buck and buy and sell in four years, this is not the product for you at all, whether it's us or anyone else.

Seth: Yeah. That's a really good point. So when somebody buys property like this in Memphis, like what kind of returns should they expect to see? Like what does that look like on a typical house?

Terry: Well, it depends on how they're buying it. But if they pay cash, we're talking anywhere from an 8% cash on cash return to, you know, as high as 12, 13%. You know, we recently sold a house for $85,000 that's renting for $950.

Terry: So if you took $85,000 divided it by $950, you're going to come up with your cash on cash return. And we've got a proforma on our website that does all the math for you.

Terry: You know, it accounts for taxes, insurance, management fees. So you can actually look in real time and see what we're putting out. And we also include actual rent amounts, you know, so not only does it have an appraisal, it also has what we call the rent comp.

Terry: So it's got a chart of comps for the neighborhood showing what they're renting for. And then it also has a disclosure with actual comparable rents within like a half mile of that property. All the proof is there on every house so folks can feel really comfortable.

Seth: Is there any advantage to financing versus paying cash? Like let's say I want to borrow 80% and put 20% down. Like, does that amplify my returns?

Terry: Absolutely. I mean, you know, if you borrow 80%, you're going to get 80% or 75% and only put 20 or 25% down, your returns are much, much higher. You know, they can exceed 20% in that scenario.

Terry: And then also you get the tax deduction on the interest. So depending on your tax bracket, that plays into your favor. And depreciation plays into it. We just sold a bunch of houses to a high net worth couple. They bought them not for the returns, but for the depreciation.

Seth: Really?

Terry: Yeah, absolutely. So there's a lot of moving parts. You mentioned appreciation earlier. There are several forces at play that make a really great investment. You got the cash flow, you've got the depreciation, you got the appreciation, you got the debt pay down if you got a mortgage.

Terry: And so you're using other people's money to amplify your returns. And then eventually the property is paid for by other people.

Seth: Yeah, wow. That's huge. What kind of interest rate would they be paying if they financed a property like this?

Liz: Well, it depends on DSCR versus owner-occupied. A lot of folks will owner occupy and get a lower rate. But right now with DSCR, they're in the high sixes.

Liz: And so, you know, that impacts kind of what your cash flow looks like. But again, it's not just about cash flow. I have investors that don't even make cash flow when they're financing them. They're completely fine with that because they're getting such a massive tax benefit.

Liz: And so I always say a great CPA is a necessary part of the equation for folks that are doing several investment properties.

Seth: When you say DSCR, what does that mean?

Liz: Debt service coverage ratio. So it's a non-owner-occupied loan. And so it looks at the rent covering the mortgage payment. And for a long time, it was that you had to have 1.25 coverage.

Liz: Meaning if your mortgage payment is a thousand dollars, the rent needs to be $1,250. But in the past, you know, maybe three, four, five years, many lenders have gone to a one-to-one ratio. So the rent just needs to cover the mortgage payment.

Seth: Gotcha. And is it pretty easy to get these kinds of loans for people? Like, is it difficult, or is it pretty straightforward?

Liz: I mean, it's much simpler than in the past. A few years ago, you had to kind of pull teeth to find a DSCR lender. And today we have many people to refer folks to. It's very turnkey.

Liz: You know, you give them your last two years tax returns and, you know, the loan application. And there's no employment verification. There's no debt to income. It's literally about, can you put down the 20 or 25%? And does the rent cover the mortgage payment?

Liz: It's very quick and pretty darn easy.

Seth: Cool. So if somebody is an investor and they're working with you guys and getting one of these properties, like how hands-on are they after that point? Like how much do they need to stay involved or can they literally just sit back and wait for money to show up?

Terry: They can sit back. You know, they, I mean, they'll get a statement once a month that gives them a breakdown of, here's what the owner paid. Here's what we collected. Here's what we paid out in repairs or whatever. And then here's what your profit is. And then we send them a check.

Terry: Or if they're financing it, they pay the mortgage directly. So we set it up to where they take care of the mortgage. We collect the rent and then we send them whatever's left. So they can be as hands-on or as hands-off as they want. Most are hands-off.

Seth: Yeah. And like when a tenant moves out eventually, I know you mentioned like some of them are still there 10 years later, but like say if that does happen, are you guys just automatically taking care of getting a new tenant in there? Like the investor doesn't have to do anything?

Liz: Absolutely. Yeah. So we send our team out to the house. We assess what needs to happen. And then we give the owner an invoice and say, okay, you need new carpet, you need paint.

Liz: You know, depending on the condition, it varies widely. And then we collect, we have a network of vendors and in-house staff to handle all those repairs. And then we advertise, we show it, we place a tenant and they sign the lease with us.

Seth: Is there any maintenance that the property owner should be doing? Like the idea of like preventative maintenance, like flushing out the hot water heater every year or cleaning out the gutters or anything like that? Like, is that something they got to remember to do or do you guys do all that?

Liz: We make recommendations. So anytime we're at the property and we notice that the roof looks like it's aging or the HVAC looks like it's aging, we alert the owners. We send them photos. We give them the opportunity to be proactive.

Liz: But we don't do preventative maintenance without them directing us to. We'll say, hey, we think you should do this. And then they say yes or no. Because some owners are more proactive than others. You know, some want to squeeze every dime and they'll say, you know what, let it break and then I'll fix it.

Liz: Other people will say, I want you to change the filter every three months. I want you to, you know, whatever. So we give them the option.

Seth: Gotcha. So like for an investor who wants to be somewhat involved, they can be. But for somebody who just wants it to be totally hands-off, that's also an option.

Liz: Yeah. And I would say the beautiful thing is there's a whole category of folks that are like, I am checking my statement every month and I have questions and I want updates. And then there's this massive contingent that they might look at the statement, you know, three times a year.

Liz: I have owners that bought houses 15 years ago and I'm like, do you realize how much your property is worth now? And they're like, I don't even think about it. You know, it's like they set it and forget it.

Seth: That's amazing. So when you guys look at like turnkey properties and you look at Memphis as a market, like why Memphis? Like what is it that makes Memphis specifically a good place for this?

Liz: Terry alluded to it a little bit earlier. You know, I think our economy is centered around distribution. And distribution is about geography. You cannot outsource the geography of Memphis.

Liz: You know, we're within a day's drive of half the US population. The Mississippi River, which was so important before air travel, really put Memphis on the map. But then when you think about FedEx choosing Memphis for its hub and what that's done for the city.

Liz: There's no way that China or India or Mexico can take those jobs, you know. And I think that's really significant. The infrastructure that has been built around distribution is extensive. We have major interstates. We are a major rail hub.

Liz: You cannot drive around Memphis without seeing trains and planes and trucks. And it's fascinating when you come here how much you see it. And so that really translates to job stability. And I think that's a huge part of why Memphis works so well as a rental market.

Seth: So you keep talking about distribution. I'm assuming you mean like shipping and receiving stuff, like packages and freight and that kind of thing?

Liz: Yes. So cotton before the Civil War, you know, all cotton grown in the US went through Memphis. And today, all cotton grown in the US goes through Memphis. FedEx is obviously the big gorilla.

Liz: But, you know, we have many, many, many distribution centers for all kinds of national brands. Nike, Pfizer, Electrolux, you name it. Like, if a brand needs to get product across the United States, they have a distribution center in Memphis. And those are really good jobs.

Seth: So with all this going on in Memphis, like how does that affect you guys specifically as like a turnkey provider? Does it make it easier to find properties? Does it make prices go up? Like how does all this stuff play into what you do?

Liz: I would say that the impact is more on the demand side. You know, we have stable rental demand. And that is because you have people moving here for work. We're not a boom and bust city. You're not going to see rapid, rapid appreciation or rapid depreciation.

Liz: It's just this nice slow and steady. And I think that that is honestly ideal for long-term buy and hold. You don't want a market that's incredibly volatile. You want a market that you can count on year after year after year.

Seth: Makes sense. So if I'm an investor and I'm looking at maybe Memphis versus like some other market, I don't know, like Kansas City or Cleveland or whatever. Like, what makes Memphis stand out compared to these other markets where there's other turnkey providers?

Liz: Well, I can tell you what Terry and I are investing in, which is Memphis. You know, I think that if you look at, Terry, I don't know how many houses you own now, but like several hundred, right? And then I own, you know, I've got about 20.

Liz: And the reality is, like, we're putting our money where our mouth is. We believe that Memphis is it. Now, is Kansas City great? I have no doubt. There's great folks doing turnkey there. I just don't know it.

Liz: So it's hard for me to say, oh, it's better than this or that. But I will say we're so confident in our market that we're continuing to invest heavily here.

Seth: Yeah, that makes sense. So I know you've been around for a long time, you've been through many real estate cycles. Have you seen any major shifts or changes in the turnkey rental space over the past couple decades?

Liz: Yeah. So I would say the biggest shift is awareness. You know, when I started in 2009, I feel like very few people knew about turnkey rentals. And now it's become much more mainstream.

Liz: There's many more providers. There's many more investors that are seeking this out. And I think that's been driven partly by the internet, but also just, you know, real estate education in general has become much more accessible.

Liz: So I'd say the biggest change is just awareness and the number of folks that are doing this.

Terry: And I'll add on to that. I think one of the biggest changes is, you know, folks are wiser now, right? I mean, the crash happened, folks lost their shirts on, you know, bad investments in 2008.

Terry: And so now when people are looking to invest, they're asking much better questions. They're much more educated. And they're looking for providers that have a track record.

Terry: And so I think that's been a really positive shift for the industry is that there's been some cleansing, if you will, of folks that maybe weren't doing it the right way. And now investors are much more educated on what to look for.

Seth: What are some of those questions you think people should be asking when they're evaluating a turnkey provider?

Terry: You know, I think the most important question is, how long have you been in business? You know, if someone just started in the last couple of years, they haven't been through a cycle. They don't know what it's like when things get tough.

Terry: You know, ask about their management. Are they managing in-house or are they using third-party? Ask about their warranty. What do they stand behind? Ask about their acquisition criteria. What are they buying? Where are they buying?

Terry: And then I think it's really important to ask for references. Talk to their investors. See what their experience has been. And I think those are probably the most important questions.

Liz: And I'd add to that, you know, ask about their rehab process. Who's doing the work? Are these licensed contractors? What are the specs? You know, I think it's really easy for providers to cut corners on the rehab.

Liz: And then you're inheriting deferred maintenance. So I think understanding what their standards are for renovations is really critical.

Seth: Yeah, those are great questions. So it sounds like longevity is a big deal. Like you want somebody who's been around long enough to have been through at least one full market cycle, preferably more than that.

Liz: Absolutely. I mean, anyone can make money in an up market, right? Like, it's easy when everything's going up. But what happens when things get tough? That's when you really see who knows what they're doing.

Liz: And we've been through 2008, we've been through COVID, we've been through all kinds of challenges. And we're still here and we're still performing for our investors.

Seth: So I'm curious, you mentioned COVID. Like how did that affect your business? Did you see a lot of tenants not paying rent or were there a lot of issues during that time?

Terry: You know, it was interesting. We obviously were concerned when COVID hit, like everyone was. But what we found was that, you know, our residents still needed housing. And the government stepped in with stimulus and unemployment benefits.

Terry: And so we actually didn't see a huge impact on rent collection. I mean, we had a few folks that struggled, but for the most part, people kept paying rent. And then, you know, as Terry mentioned earlier, FedEx went crazy hiring during COVID because of all the online shopping.

Terry: So Memphis actually did really well during that time. And I think that's a testament to our economy being distribution-based. You know, people were ordering more stuff online, which meant more packages, which meant more work for FedEx and other distribution companies.

Liz: Yeah. And I'll add to that, you know, we worked really closely with any residents that were struggling. We set up payment plans. We tried to be as flexible as we could. And I think that helped a lot.

Liz: And then the eviction moratorium, which was obviously a challenge for landlords across the country, you know, we just had to navigate that. But again, most of our residents were able to keep paying.

Seth: That's really impressive. So it sounds like even during a really challenging time like COVID, you guys were able to weather the storm pretty well because of the strength of the Memphis market and your relationships with your tenants.

Terry: Absolutely. And I think that goes back to what we were saying earlier about being selective on who we rent to and maintaining quality properties. You know, if you take care of your residents and you give them a nice place to live, they're going to take care of you.

Seth: Makes sense. So I'm curious, as you guys look forward, like what do you see as the biggest opportunities or challenges in the turnkey rental space over the next few years?

Liz: Well, I think interest rates are obviously a big factor right now. You know, with rates being higher than they've been in a while, it does impact affordability for investors who are financing. But I also think that creates opportunity.

Liz: You know, when rates were super low, there was a lot of competition. A lot of investors were buying. And now with rates higher, some folks are sitting on the sidelines. And I think that creates opportunity for folks who can still make the numbers work.

Terry: And I'll add to that, I think one of the biggest challenges is just inventory. You know, finding quality properties to buy is harder than it's ever been. The competition is fierce. And so that's something we're constantly working on.

Terry: But I think the opportunity is that, you know, Memphis is still affordable compared to a lot of markets. And I think as more folks realize that, there's going to be continued demand for what we do.

Liz: And I think also, you know, we're seeing a shift in the workforce where more and more people are able to work remotely. And that means they can invest from anywhere. And I think that's going to continue to drive demand for turnkey rentals.

Liz: Because people are realizing they don't have to invest in their backyard. They can invest in markets that make sense financially, like Memphis.

Seth: Yeah, that's a really good point. So with everything changing right now, you know, whether it's interest rates or the economy or whatever, do you guys feel pretty confident about the next few years? Or are you concerned about anything?

Terry: You know, I'm always cautiously optimistic. I think, you know, we've been through a lot of ups and downs. And we've learned to just stay focused on what we do well, which is providing quality properties and quality management.

Terry: And as long as people need housing, we're going to be in business. So I feel good about the future.

Liz: Yeah. And I'd say, you know, the beautiful thing about real estate, especially in a market like Memphis, is that it's a tangible asset. You know, it's not crypto, it's not stocks. It's a house that someone's living in and paying you rent for.

Liz: And I just think there's something really comforting about that. And as long as you're buying in the right market and working with the right people and holding for the long term, you're going to do well.

Seth: So you mentioned earlier about being able to continue to provide value. When you're looking at all the changes happening in our country right now and the government seems like every day there's some huge upheaval I'm reading about in the news, whether it's tariffs or immigration or something else.

Seth: Do you think any of these things are going to have an impact on the turnkey rental market for better or worse? Like I know, for example, a lot of stuff I think is imported through Memphis or it's a big shipping hub and there's a lot of new tariffs out there and tariffs coming. I don't know, stuff like that. Does that have any foreseen impact in your opinion or is it not really going to make any difference?

Liz: I mean, the beautiful thing is that the heartbeat of our business is providing people something that is literally in Maslow's hierarchy of needs. I mean, we're in the business of shelter.

Liz: What we've seen with these big swings, like even in the crash that we were speaking of before and stuff is people just need housing. You know, I mean, we're going to fluctuate a little bit.

Liz: So, for example, we had the second busiest cargo airport on planet Earth for the first half of my career. And then COVID, which I know a lot of us were afraid of what that was going to do, caused such an increase in shipping that we became the busiest cargo airport in the world.

Liz: FedEx was hiring 500 people a week for like six weeks. And the requirement was that you be able to lift a 50 pound box. One thing I love about distribution as the heartbeat of our economy here, there's no way that China or Mexico or anywhere else can take the job of getting a package from New York to L.A.

Liz: And do it better or faster than Memphis. It is hundreds of years old as an industry. Distribution in Memphis predates the Civil War. So before the Civil War, all cotton grown in the U.S. came through Memphis. And today, all cotton grown in the U.S. comes through Memphis.

Liz: Tides as they rise and as they lower, they affect everybody. They affect us too, but goods will need to be moved for all of time. And I just like that it's literally about our geography and the infrastructure here.

Liz: Highway 40 runs coast to coast and right through town. We are the third largest confluence of rail in the US.

Liz: If some of your folks do come and come on our tours, I mean, we're driving over railroad tracks, driving over railroad tracks, semis all around you, FedEx planes in the sky.

Liz: And so of course, these upheavals and stuff. They can affect everything, but we're talking about housing not going away and an industry that is pretty permanent.

Seth: I'm curious if somebody's listened to this and they're thinking, maybe this sounds good, but I don't know if it's for me.

Seth: What kind of person do you think should not be investing in turnkey rentals like what you offer? Is there a certain profile of person that makes the most sense for this and certain people? It's like, no, look somewhere else.

Liz: Absolutely. If someone's looking to buy and sell quickly, turnkey, regardless of Mid-South Homebuyers, is not the place.

Liz: It's a buy and hold strategy. It costs money to buy. It costs money to sell. We tell folks, look, if you're not into it for 10 years, look elsewhere. It's a buy and hold gig.

Terry: Anybody who's looking to do some flipping, you talked about the hamster wheel with dirt. This is the opposite of that.

Seth: If somebody does want to learn more or start working with Mid-South Homebuyers, what should they be doing? Where's the best place to go and get started?

Liz: The website is it.

Liz: All roads on the website lead to me and my team. I am Liz, three letters, L-I-Z at midsouthhomebuyers.com. You can request a call with me. It's really just, it's me and my right-hand guy, Bill, and my wonderful team member, Kristen.

Liz: And we set aside a full hour for every person that calls and schedules with us. And I'm not looking at my keyboard, like I really sit down and I learn about what their goals are, what they're looking to do, answer questions.

Liz: It's folks' jobs to poke holes, ask the hard questions. We welcome, I love them. You know, I do calls with spouses. One spouse is worried and one spouse is raring to go. And I just welcome it.

Liz: As Terry mentioned, we have everything kind of there. So if you want to do this on your nights and weekends and just read about us, but I just really encourage folks to call and learn about it.

Liz: We have, I mean, surgeons and pilots. I have a large sect of Amish investors, just kind of every type of individual, every employment type that you can think of. But the running theme is that they're making money while they spend time with their family. And we'd love to get to visit with folks.

Liz: We wish the percentage was more than 5%. So please come visit us if you can.

Seth: Head over to midsouthhomebuyers.com. You'll see what they're talking about. Their website is awesome. Just look at the property listings. It kind of gets me excited. It makes me want to go buy one too. I never really would have even thought about this, but it's like, oh, I kind of get it. I see why people do this.

Seth: So props to both of you for running such a good operation here. I know you've got a great reputation in the industry. A lot of people know about you and buy from you. So thanks again. And again, if people want to check out the show notes for this episode, you can find those at retipster.com/221. Terry and Liz, thanks again.

Terry: Seth, it was a pleasure.

Liz: Thanks so much, Seth.

Seth: You bet.