Frequently Asked Questions
What is the average property like?
What is your typical renovation like?
Who owns the properties right now?
How much is an initial investment?
How do I get a loan for the property?
How does your rent guarantee work?
Is there a property manager in place?
What happens when the tenant leaves?
When can I sell the property? Do I have to sell back to Meridian?
How many homes have you sold? How long have you been in business?
Who are your typical investors?
Do I have to pay a commission?
When we studied over 366 metropolitan statistical areas for the best investment property criteria, Memphis came out as a top performer in a variety of key areas including:
- Major regional employers and economic forecast
- Strong market fundamentals related to home prices
- Stable market appreciation
- Rents relative to home values (the rent ratio)
- Regional unemployment rates and employment trends
- Home valuations relative to median incomes
- Property tax rates and insurance
- Weather and geographic factors (e.g. tornados, hurricanes, earthquakes, cold weather, flood zone, etc)
What is the average property like?
Meridian Pacific Properties purchases properties close to the median price for the metropolitan area. Our average sales price is between $90- $140K. This is done with an eye for resale. The typical Meridian property is built in the 1980s or newer with three bedrooms, two baths, two car garage, detached single family dwelling. All properties are newly renovated at the highest standards for both structure and aesthetics.
What is your typical renovation like?
All of our properties must meet the highest quality standards in the following areas:
- Cosmetic appearance, inside and out
- Structural integrity: framing, walls, and roof
- Systems: electrical, plumbing, and HVAC
- Painting, flooring, countertops and fixtures
- Landscaping and outdoor structures
Who owns the properties right now?
We buy our properties all cash and own them free and clear. The properties are acquired by Meridian Pacific Properties, or some cases, by a Meridian affiliated partner company in Memphis.
Once purchased from Meridian, the property is owned by you. When the closing process of the sale is complete, the buyer owns the property with clear title and full legal ownership.
Meridian Pacific Properties makes money only between our initial purchase price and the sale to the client, less the renovation and holding costs.
Meridian Pacific Properties does not receive any referral fees from insurers, property management companies, lenders or any preferred vendor Meridian suggests to our clients.
How much is an initial investment?
Our properties range from $90- $140K, requiring 20% down plus closing costs. So the anticipated initial investment is $20-$30K.
How do I get a loan for the property?
Clients obtain financing from lenders recommended by Meridian Pacific Properties or their own lenders. Investors must have high credit scores (680 is minimum; 740 will have the lowest loan fees), meet the debt-to-income ratio (DTI), and provide documentation to the lender to verify all of the numbers.
Most Meridian Pacific clients purchase three to four homes. Most banks allow individual investors to have 10 loans in their portfolio, including their primary residence. Generally lending and underwriting guidelines become more restrictive after the fourth loan.
All Meridian Pacific Properties are tenanted before closing with tenants in place signed to at least one year leases. Additionally, all of our homes come with a rent guarantee.
How does your rent guarantee work?
Meridian Pacific Properties backs each tenanted property with a one-year rent warranty from the closing date on every property sold. This warranty remedies rent payment shortfalls caused by willful or negligent violation or breach of the terms of the lease by the tenant during the first year the property is owned.
Prior to closing, a homeowner’s insurance policy must be obtained by the buyer. Meridian Pacific has extensive experience with insurance companies in the Memphis area. Meridian will provide you with contact numbers for our preferred vendors in order to receive quotes. Alternately, you can purchase insurance via your own preferred provider.
Is there a property manager in place?
Meridian Pacific Properties has worked with a number of local property managers in Memphis. We recommend a select group of property management companies in the area. These property managers manage our personal portfolio as well all of our current Meridian Pacific Property clients.
What happens when the tenant leaves?
Vacancy is part of the investment property process. Meridian Pacific Properties models the vacancy at 5% per year as an average based on our property managers’ history of performance.
Some tenants leave after the first year, some stay several years. Once a tenant leaves, the property management company will assess the state of the property, ensure the proper cleaning and maintenance has been done, re-evaluate the market rent, advertise the home, and put the next tenant(s) in place.
When can I sell the property? Do I have to sell back to Meridian?
Meridian has modeled the investment over a five-year hold period. As the free and clear owner, you may sell as your investment portfolio dictates. At that point, Meridian is happy to make recommendation on realtors, market conditions, contractors, or answer any questions you may have.
Defined, Internal Rate of Return (IRR) is a measure of the total return on investment that considers the timing and amount of annual cash flows, pay-down of the mortgage and net capital gains over the life of the investment. Expressed as a percentage, IRR is stated as an average per-year rate of return.
For example, a Meridian property could have a 20% 5 year IRR, meaning that the investment averaged a return of 20%, every year for 5 years.
IRR is an important calculation used in real estate to compare investments to each other. When investing in real estate, we are typically dealing with properties that provide cash flow streams. The IRR takes into account the benefit and timing of these cash flows and provides us with a measure of our investments performance. This is the best single metric for comparing the total return on an investment, real estate or otherwise.
How many homes have you sold? How long have you been in business?
At of the close of 2010, Meridian has successfully completed over 220 Buy/Sell transactions since our inception in 2006. Meridian’s sales rate for 2010 averaged 3 to 5 unit sales per month, resulting in an annual sales volume of approximately 50+ sales.
Who are your typical investors?
A typical Meridian client fits either one of two profiles depending on their financial and career positions.
One client is a beginner investor looking to start a real estate portfolio with the purchase of their first property. This client has realized the value in real estate investing but has found that their local market does not provide the needed returns and stability and they also do not yet have the expertise to invest alone.
The other client is an experienced professional looking for a passive investment. These clients have an average net worth of $500K - $1 million+. They purchase on average 3-4 homes from Meridian and are looking to supplement their investment portfolio with a high returning, stable assets.
Do I have to pay a commission?
No, there is not a commission involved in a sale of a Meridian property. The homes sold by Meridian are “For Sale by Owner” and as such, there is no real estate agent that is representing either party, and, thus no commissions.
