Build Passive Income with Memphis Rental Properties with James Jones

James Jones (00:00)
So we have a lot of virtual assistance to kind of like handle a lot of tasks for us So we had a good property was amazing. It was a great portfolio ⁓ You know, we had insurance on everything but the day before closing unfortunately ⁓ We didn’t go check it like normal. So the whole entire property burnt down ⁓ Luckily, we always have the insurance in place 48 hours prior But it was a headache just trying to have the insurance company pay out since we didn’t actually own

the property technically at time of the fire but you know it took a few weeks to you know fight that battle you know luckily we did win

Scott Bursey (02:05)
Hi everyone and welcome to the Real Estate Pros podcast. I’m your host Scott Bursey. And today in studio we’re joined by a person I’ve been counting the days to chat with. James Jones, who is a big player in the real estate investing space. James is the CEO of Memphis Passive and a co-founder of the Real Estate Guys. James built the portfolio of over 200 plus rental properties and has spent more than two decades mastering real estate investing. From Burr.

to create a finance, his mission is simple, help investors build real wealth while scaling Memphis passive into the largest real estate company in Memphis. Welcome to the show, James.

James Jones (02:45)
Thanks for having me.

Scott Bursey (02:46)
It is a pleasure having you here. So please give us the back story. How did you start your career and what are you focused on now?

James Jones (02:55)
Okay.

So I started back in 2003, I was working a warehouse job, $9 an hour, had a little baby just born, I was 18, just trying to make it. I was up late at night, I saw an infomercial, it’s like these ads we used to have late at night before new technology, and there was a guy named Carlton Sheets had a flip paper, it’s now called Whole Selling, so I bought that course for like two payments of like 29 bucks or whatever, came in the mail, had a VHS and a DVD, like old technology too, but it was good, popped it

and kind of gave the nuts and bolts to how to go to your local courthouse and you know get a list and go door knocking nowadays whole sounds a lot easier but you know did that about two weeks later had a property locked up and I sold it to a management company back then we had a whole lot less cash buyers it was harder to find these guys so I made like $17,000 and once I did that I just kind of went all in real estate and never you know looked back

buying

properties too along the way. Had a great run up to 2008 and then unfortunately lost about 500 properties because I do on sell clause. Back then we didn’t have DSCR programs like we did now so I was just using conventional loans to get properties. Then I was cleaning my credit, put them in LLC through a quit claim and kept on rocking and rolling.

And, you know, kind of like it hit me hard in 2008. So took a few years off, then got back heavy again in real estate in 2013 and, you know, kept on pushing and, you know, just buying and, you know, just trying to help people not make the mistakes I did.

Scott Bursey (04:28)
That sounds like a really incredible, eventful journey. What markets are you operating in?

James Jones (05:22)
So right now we’re in Memphis, Nashville, St. Louis, and then some other pockets of like ⁓ small communities like Kingsport, Tennessee, suburbs outside of like Lexington, small cities in like Ohio, but our main focus is where I live is in Memphis, Tennessee.

Scott Bursey (05:38)
Okay, nice. James, what caught my attention about you was the way you’ve been able to simplify the path to passive income for everyday investors, taking the guesswork out of the Memphis market. Curious, with everything shifting in real estate, what’s the one thing that shouldn’t change in your view?

James Jones (05:55)
The best thing is just the solid rents. I said, Memphis, why is that I love it the most is like we have FedEx, UPS, there’s so many companies here. And unfortunately, those companies don’t pay great. So there’s tons of people living below poverty. So right now my main focus is like in section eight, with my units probably over 190 years, just 100%, just section eight tenants, which is nice. So a huge chunk of my income is guaranteed every month. I ain’t got to chase rents no more, which is nice. But still there’s a huge secondary market.

So like since Memphis is a tight market when it comes to jobs a lot of people have evictions or they get bankruptcy So for second chances you can have companies like single key that could put an insurance policy on a rental Regular tenant then I can take that tenant and kind of make it like my own section 8 version Where I don’t have the risk of worried about people not paying rent or damages So as long as you build off whatever type of market you’re in you can have a really strong portfolio pretty much anywhere

Scott Bursey (06:51)
That’s huge, limiting your risk. James, what’s the biggest mistake you see out of state investors make when they try to enter the Memphis market alone?

James Jones (07:01)
The main thing would be trusting realtors or wholesalers. A lot of times people over promise ARVs that they start with the wrong number. I personally know people that have lost $50,000 on a bad deal just because they were painting a different picture of the ARV. So a lot of times it’s best to learn, go to YouTube. It’s very simple to learn how to your own comps to make sure that you’re actually the one supplying all the numbers versus having someone who’s benefiting in the transaction give you the numbers. And then also just trusting the wrong contractor.

Make sure that you actually check out the Better Business Bureau, Google reviews. Don’t just go with the cheapest guy. And then the last one is just trusting management companies to place a tenant. Not all tenants are the same. Make sure the management company is using your parameters, your credit score, what you’re looking for, because these management companies, don’t care if the tenant moves out two, three months later and you’re having to fix the property up. They just care about getting that lease signed and getting that 250, you know, moving fee per tenant.

Scott Bursey (07:54)
Excellent breakdown. Interested to know, in today’s noisy market, what is the one hard truth agents are ignoring right now in your view?

James Jones (08:04)
I right now the main thing is they’re just going out too far. So typically, like I said, when banks go to refi, typically banks won’t come within one mile. Memphis is a very small market within Lambast. It’s not like a Nashville or like a Dallas or Atlanta. So they don’t go three to four miles out. So the problem is in Memphis, you can have a house like an Orange Mountain that’s worth probably 180 to 250 all day long. But if you go out three miles, you might think that house is now worth 325 or 350. And that’s what I was thinking.

investors go wrong because they’re used to using set parameters in other markets but you just got to make sure you’re going by the parameters of that local bank that’s going to be doing your refi or whatever bank you’re working with to make sure you’re pairing apples to apples and that you know peaches to plums.

Scott Bursey (08:46)
That’s the key right there. Absolutely. What’s the biggest lesson you’ve learned from a deal that went completely sideways?

James Jones (09:28)
I think recently the largest thing I learned is like,

Probably ⁓ just make a sugar stain with the whole entire transaction

So we have a lot of virtual assistance to kind of like handle a lot of tasks for us So we had a good property was amazing. It was a great portfolio ⁓ You know, we had insurance on everything but the day before closing unfortunately ⁓ We didn’t go check it like normal. So the whole entire property burnt down ⁓ Luckily, we always have the insurance in place 48 hours prior But it was a headache just trying to have the insurance company pay out since we didn’t actually own

the property technically at time of the fire but you know it took a few weeks to you know fight that battle you know luckily we did win and we were made whole or whatever but

Just no matter what, never get too cocky. Just always remember your systems and always just make sure you check 24 hours prior to closing. Don’t assume anything is good and don’t take the word. So unfortunately the realtor said they went by, they verified everything was good and it came out that the realtor wasn’t even in town. He was on vacation. just make sure you’re always checking it yourself or sending someone you trust versus just using the word to someone else.

Scott Bursey (10:35)
It sounds like you focus on staying grounded. And that’s big. Sometimes the biggest positives come from those tough lessons. Thank you for sharing that. James, what’s the one piece of advice you wish you had known when you first began your journey, when you first started your career?

James Jones (10:52)
There’s going to be losses like real estate or life is all ebbs and flows. There’s ups and downs like don’t get upset and don’t panic. Literally, like I said a few months ago, there was banks that were drying up. had over 30 properties on hard money. I didn’t panic. just know, listen, this is just course. It is what it is. Like, you fortunately, you know, we just started a brand new war. We’re attacking people like banks get tight. No big deal. But it’s a storm. You just weather the storm. That’s why hard money is there six months or a year. So we’re able to navigate, find new lenders and now we’re

know, smoothing along and buying more property. So just never panic. Understand that a bow and arrow has to be pulled back before it goes forward. This is just normal parts in the circle of, you know,

Scott Bursey (11:32)
Absolutely, stay

calm and keep your focus. That makes a lot of sense. Interested to know what was the very first passive property you ever owned and what did that first rent check feel like for you?

James Jones (11:47)
Yeah, so the first one was a long time ago back in 2008. It was a street called no field And the first check was like $207. It wasn’t nothing like Impressive that was like the net after you know property manager and everything now I self managed to have more control of my portfolio But it was great like I looked at the check and I was like listen, you know I was doing a lot of you know flipping paper that’s called wholesaling now and it was always chasing that next Check the next deal and then I just found out that like

hey listen, this is pretty cool, this little check and take care of my utility bill that I kept on going after that and was built in a nice portfolio and within a matter of no time, we had hundreds of units and then there’s a local bank that was pretty cool and fortunately things kind of took a switch and then from 2006 to 2008 we built the portfolio, then we kind of took a little down slide and then 2013,

2014

all these like guess you call them gurus like ⁓ You know Sean Terry was a good one flip to freedom started coming out and the whole selling things started picking back up and I just hopped back in and just Rode the wave to the top again

Scott Bursey (12:59)
It can be a roller

coaster, but the key is riding that wave. And it’s a great feeling when you start to escalate back up to the top. Now, I know a lot of our audiences either earlier in their journey or looking to level up in some capacity. And I think they benefit from hearing this from you. When it comes to building relationships and growing your network, James, what’s the biggest difference for you?

James Jones (13:08)
Correct.

Yeah, so your network is your net worth. So when I was younger, you know, I kind of try to do a lot of stuff myself. I was like taking wholesale checks and I was buying properties, putting 20 % down. It was total just chaos. I wasn’t actually leveraging my time to meet people and, you know, find harmony lenders. Now these days I have lenders that allow me to, you know, put my points, my closing costs and payments in these loans. So I’m able to scale, I’m able to ramp it up. So I’m able to be able to, you know, keep my cash more and other things.

like S &P 500 or just different investments that’s earning me money versus my cash, know, paying closing costs and points because once you do volume, if you’re working just say 10 deals at a time, that’s about $200,000 to, you know, almost half a million dollars you have have just on the sideline just to cover points, closing costs, the payments for those six months. So not by having to do that, I’m able to scale so much faster just by these connections I made over the years.

Scott Bursey (15:00)
Absolutely, and that’s not just good karma. That’s a bulletproof business strategy. James, last question. What are you most excited about now that you want everyone to ⁓ keep an eye on?

James Jones (15:13)
I love AI, so like a lot of just automating tasks. A lot of people are afraid of it, but like now, before I was having to pay, you know, a VA, maybe $300 a week to go through and paste on all these, you know, Facebook groups and all this kind of jazz. Now with the simple prompt, I can, you know, post in 300 Facebook groups instantaneously across multiple platforms. And my deal flow has increased so much higher. I’m getting more conversations. You know, more people sending me deals. I’m getting better deals because I’m usually able to work so much faster.

So in one hour with AI, I can do what a team of five VAs would take almost a month to do and post it close to three, four hundred groups, which is nice. So I’m able to get more deals faster. People see me more recognition. So think just AI is a big game changer, going into this new age of real estate.

Scott Bursey (15:58)
It sounds like you’re excited

about AI. Is there any reservations or question marks you may have as far as that’s concerned?

James Jones (16:06)
Well, like I said, ⁓

Realistically not really the only thing that AI has kind of been harder these days is like on listing pictures a lot of people are doctoring the pictures up they’re making them look more sexy and Crazy stuff. So like I said with every you know positive is always a negative Like I said AI is a tool just like a guns a tool it all depends on who’s using it You know good or bad and so due diligence has got a lot more different these days where we before we could just buy off pictures and videos and just Call it a day, but now we’re having us and our guys back out there just to check to make sure everything is good

to go to make sure the pictures are what they say they are, but I think they were still pushing forward.

Scott Bursey (16:41)
Love it that was incredible thank you for those insights and that level of conviction that you have is exactly what it takes to actually win in this market.

All right, James, before we wrap, if someone wanted to reach out, connect with you, maybe collaborate or learn more about what you’re doing, what’s the best way for them to contact you?

James Jones (17:02)
Yeah, the best way is probably my Instagram, just James Jones, R-E-I. Pretty simple, just shoot me a DM. Like I said, I try to respond to everybody and give everybody the time of day, because everybody deserves that question to be answered.

Scott Bursey (17:15)
Certainly,

yes they do. The personal touch, if you will. And we can appreciate that. Huge thanks to you, James, for dropping those strategies. It was awesome having you on the show.

James Jones (17:26)
Appreciate it so much. Thanks for having me.

Scott Bursey (17:28)
And for everyone tuning in, if you found value in today’s episode, please make sure you’re subscribed. Until next time, keep your standards high and your vision clear. We’ll see you in the next episode, everybody.