Memphis. Market Analysis. Pros and Cons

71 Replies

Some I have been investing for almost a year now and feel like I have learned a ton. Ingot properties in both Indianapolis and Birmingham and have now sparked an interest in Memphis. The reason I like Memphis now is that I think I have found a great company to work with. That said I now need to research the market in more depth. What can you tell me about Memphis? Pros and Cons?

@Joey Noel I also have an interest in Memphis but it will vary from street to street...I am planning to enter the Memphis market in the next year or so.  Personally, I feel like there is no better information that then information that comes from the property managers in the area that work it daily...Might want to reach out to them to discuss what you are seeking and get their input.  PM me and I can give you specific names.

Hi, @Account Closed .

Any particular areas, types of investments, or specific companies you want feedback on?

Memphis can be the best market in the world, but it can also be very challenging if you are not intentional on the front end.

We manage properties (mostly single family, duplexes, and small apartments) in 40+ zip codes in the greater Memphis area (including Eastern Arkansas and North Mississippi)  and the rents range from $2,000+ down to less than $500.  For better or worse, we have seen it all.

Best of luck to you!

Google "Memphis Delta fair brawl" and watch the video. Those will be your tenants if you are buying $50k turnkey homes in Memphis. Look up the recent thread on BP where a lady can't get rid of 3 turnkey properties without taking a loss.

@Joe B we know Memphis gets a bad rap, but that's just not my experience with most properties that rent under $700.00. I have found that the tenant's that truly qualify to rent a home turns out to be some of the hardest worker's, and pay well. Not to push blame, but most of the properties we find to have turnarounds are the ones were the investor have become impatient and wants a renter now! Now, are these areas challenging? Yes they are, but still there are smaller mom & pop management companies that are equipped to handle these areas. There are certain techniques and strategies needed to do well in these areas, but I would only use this vehicle for a short term investment (3 to 5 years)!

Originally posted by @Joe Bertolino :
Google "Memphis Delta fair brawl" and watch the video. Those will be your tenants if you are buying $50k turnkey homes in Memphis. Look up the recent thread on BP where a lady can't get rid of 3 turnkey properties without taking a loss.

 Booooooooooooooogus. And rather racist as well.  The rental market in Memphis is vast and filled with upper and lower class people of all income levels. I'm new to investment but not Memphis. Screen your tenants, treat them like human beings, and see what works for you.

How is it racist?   I see all races represented in that video.  I am not talking about Memphis in general as it is a great city IMO and I love visiting there,  I am talking about what your tenant base looks and acts like for a $50K turnkey house in Memphis.    I have no doubt that a landlord can do very well there and one of my old friends (RIP) did very, very well as a large landlord in Memphis... but that is because he was hands on and knew the areas inside and out.   Most of these turnkey companies are shoveling pigs in Orange Mound, Whitehaven, Hickory Hill, etc to OOS investors that don't know any better. 

If you're looking for more information on Memphis in terms of statistics, check out the link below:

http://www.bestplaces.net/city/tennessee/memphis

Understand that this represents Memphis as a whole, which would mix the good and bad areas. From what I understand, Memphis has very great areas and very bad areas.

It's good practice for an out of state investor to build a local team or partner with a seasoned investor in the area. Do your due diligence on the people you work with, the process, and the property itself. 

Additionally, REPUTABLE turnkey companies like Memphis invest create value for out of state people-- it's a prebuilt team with a business model that's been shown to work. Depending on YOUR business model, see if something like that is worth looking into.

Updated about 3 years ago

I hold no investments through Memphis Invest I am not paid for referrals by anyone Due diligence, verify everything!

Originally posted by @Joe Bertolino who are building a very good reputation working in areas that other companies are not operating and doing well for their clients (from what I hear). It is all about setting the right expectations on the front end so investors do not deal with surprises. 

As for that video, it is a bit over board to say this is your tenant at that price point.  That video doesn't represent anything other than a hot Sunday afternoon and a few people losing their temper - or their minds, whichever you prefer!    

Originally posted by @Account Closed :
Some I have been investing for almost a year now and feel like I have learned a ton. Ingot properties in both Indianapolis and Birmingham and have now sparked an interest in Memphis. The reason I like Memphis now is that I think I have found a great company to work with. That said I now need to research the market in more depth. What can you tell me about Memphis? Pros and Cons?

Joey,

I may be echoing other investors' advice, but take it slow and do your homework.  Ask lots of questions just like I am sure you did in Indy and B'ham.  There should be plenty of opportunities to meet your investment needs and lots of different people here to help so get comfortable and make your move.  If you can't get comfortable - don't.  Best advice I can give! 

I also just published a white paper on the Memphis, Dallas and Houston markets.  It is a little more in-depth than say something I would publish as a regular blog post and has lots of links to other data so you can connect deeper.  Take a look when you get a chance and you can use it to compare against the indy and b'ham markets as well:

http://blog.memphisinvest.com/a-side-by-side-revie... 

Best of luck -  

@Joe Bertolino I love my Memphis, TN.  It doesn't matter where you go in this great country, if you turn on the news, it's the same as here in Memphis.  It's all about ratings.  There are lots of positive things happening here and the good guys are winning whether you believe that or not.   

I'm guessing the reason the lady you mentioned can't get rid of her Turn Key properties without taking a loss is because she was sold an investment property at a retail price.  I currently have 6 listings I'm trying to move for new property management clients who are in the same situation as the lady you mentioned.  I've talked to 3 other new management clients who have now decided to not to sell, because they will take a loss.

Now, I know the Turn Key product is designed to be long term and the buyer should do their due diligence, but my conscience and reputation will last a lot longer than a quick profit.

-Grit and Grind

Patrick 

It wasn't meant to be a low blow, It was a comment on lower end turnkey properties in general. It could have been Buffalo, Tulsa, BHam, Indy, Toledo, Detroit, Stockton or Fresno, CA. The tenant base for homes that rent for 1.5-2% at a $50k entry point nationwide share the same problems and issues. It may be easier for some investors to ignore from 2000 miles away but those are the facts of what you will be dealing with long term. The raw reality of that type of investing is rarely discussed on these boards so newbies get the wrong idea.

For the record, I love 75% of Memphis and I'll buy all of you lunch at Cozy Corner next time I am in town.

I've been nipped at several times in the past by pro-Memphis folks who think I suck for not liking Memphis, but I have never liked Memphis as a market to buy in. I live in CA and have always bought out-of-state, and Memphis is one market I've never wanted to touch. I am from Atlanta and went to school outside Nashville and have been in Memphis a lot for random things and just never had a desire to invest there. The short of the reasons being-- I've never heard of someone wanting to move to Memphis (speaks to desirability), the market is too high of a renter's market for me (speaks to less owner-occcupants which can affect quality), if I were to have bought in Memphis it would've been 5 years ago when the deals were better before the hedge funds and individual investors ate everything up, and for current times, there are just higher returns and nicer deals (in my opinion) in other markets. Saturation is a huge issue there, in my opinion, since the boom a few years ago and that affects vacancy rates and exit strategy (there have been posts about just those on here).

However, with all of that said, Memphis is better to invest in than the majority of US cities. At least you can get returns there, so from that vantage point, I do support it. And if you have found a really good company to work with, that will go a long way as well.

I just don't like the Memphis market personally for my own purchases, but that's not to say they can't work there. I'm certain they can and there are good companies out there.

Originally posted by @Joe Bertolino :

For the record, I love 75% of Memphis and I'll buy all of you lunch at Cozy Corner next time I am in town.

 Damn - you're pulling a true local spot out of your back pocket!  I'll take you up on that and introduce you to a few other out of the way places.

https://www.rentrange.com/rental-rates/homes/TN/Memphis

Flat rent growth and limited appreciation?  Inflation and capex will eat you alive.

Originally posted by @Bob Bowling:

https://www.rentrange.com/rental-rates/homes/TN/Memphis

Flat rent growth and limited appreciation?  Inflation and capex will eat you alive.

 There is a flurry of economic activity in pockets of Memphis right now, even outside the sacred loop.  Certain areas of Memphis are going to grow very strong within the next few years, helped in no small part by a ready supply of solid housing stock.

Hi, @Ali Boone .

You make a lot of valid points, but I want to challenge you on this one, "I've never heard of someone wanting to move to Memphis (speaks to desirability)."

I grew up in the Park Cities in Dallas, went to college at Vanderbilt University in Nashville, worked in New York City for a few years, and then gladly moved to Memphis 13 years ago.

I think it's a great place to invest and an even better place to call home!

I would love to take you and @Joe Bertolino  to Cozy Corner BBQ next time you're in town!

https://www.facebook.com/Cozy-Corner-BBQ-113058262...

All the best,

Originally posted by @Bob Bowling:

https://www.rentrange.com/rental-rates/homes/TN/Memphis

Flat rent growth and limited appreciation?  Inflation and capex will eat you alive.

 Bob, I always appreciate your words of wisdom.  Where would you invest then?  My local market in Cali just breaks even or slightly negative each month.  Yes, appreciation has been good the last 5 years, but unless I sell or refi all of the equity is stuck in the house.  Most of the Midwest will not appreciate much, but if I'm able to purchase 10 homes at x 50k each and net $4000 a month I just might not need a 9-7 job and move to another country.  I'm also interested in Memphis and Ohio, just too much info to sort through and decide, pull the trigger.  Please enlighten us.  Thanks 

Originally posted by @Ali Boone :

I've been nipped at several times in the past by pro-Memphis folks who think I suck for not liking Memphis, but I have never liked Memphis as a market to buy in. I live in CA and have always bought out-of-state, and Memphis is one market I've never wanted to touch. I am from Atlanta and went to school outside Nashville and have been in Memphis a lot for random things and just never had a desire to invest there. The short of the reasons being-- I've never heard of someone wanting to move to Memphis (speaks to desirability), the market is too high of a renter's market for me (speaks to less owner-occcupants which can affect quality), if I were to have bought in Memphis it would've been 5 years ago when the deals were better before the hedge funds and individual investors ate everything up, and for current times, there are just higher returns and nicer deals (in my opinion) in other markets. Saturation is a huge issue there, in my opinion, since the boom a few years ago and that affects vacancy rates and exit strategy (there have been posts about just those on here).

However, with all of that said, Memphis is better to invest in than the majority of US cities. At least you can get returns there, so from that vantage point, I do support it. And if you have found a really good company to work with, that will go a long way as well.

I just don't like the Memphis market personally for my own purchases, but that's not to say they can't work there. I'm certain they can and there are good companies out there.

 Ali, what current markets do you recommend?  Just need a few pointers to point me in the right direction.  Thanks. 

Originally posted by @Tou V. :
Originally posted by @Bob Bowling:

https://www.rentrange.com/rental-rates/homes/TN/Me...

Flat rent growth and limited appreciation?  Inflation and capex will eat you alive.

 Bob, I always appreciate your words of wisdom.  Where would you invest then?  My local market in Cali just breaks even or slightly negative each month.  Yes, appreciation has been good the last 5 years, but unless I sell or refi all of the equity is stuck in the house.  Most of the Midwest will not appreciate much, but if I'm able to purchase 10 homes at x 50k each and net $4000 a month I just might not need a 9-7 job and move to another country.  I'm also interested in Memphis and Ohio, just too much info to sort through and decide, pull the trigger.  Please enlighten us.  Thanks 

San Francisco!   Well that or Honolulu!  @Tou V  I get a lot of grief because people think cash flow is profit and it's not and I invest for profit.  I do not suggest any area over another but report what 1.  Rent Growth and 2. Appreciation I have experienced over almost 40 years in three states.  What was that $50,000 property renting and selling for 10, 20, 30, 40 years ago?  I sold real estate  in the Greater Cincinnati area over 40 years ago and I know values and rents then and now.

If you really think you will be able to hold on to that $4,000 a month in the Midwest my question to you is what will it be worth in 10, 20 years?  My rents are increasing on average 6% a year.  Appreciation 9-11%.

Vegas is my only flyover property and rents are about the same as 12 years ago!  Luckily I bought in 1994. 

I just pulled almost $400,000 in appreciation from my 2008 Honolulu purchase.  I could buy 8 of them Memphis properties but when I run the numbers I'm still basically just being handed back my own money in monthly installments over years.  Not my idea of investing. 

I would rather join with 2-3 investors here in NCal and have one half or one third of the profits that CA provides instead of relying on a "team" thousands of miles away that has no equity stake. Any other questions? 

Also I think it is important to look at rent per sf, rent per toilet and expenses per sf.  Taxes per sf and mortgage payment per rent ratio.  I'd rather have a large amount of rent going to the large mortgage than to property taxes!

Also look out for crappers.  Your refreshed turnkey property will attract crappy tenants.  As soon as they move their crap in your property it won't seem as desirable.  They won't see why they are paying the high rent and will not take care of the property so after you chase them out for nonpayment you will have a crappy property that will have to have an expensive "refresh" to attract another crappy tenant.  Rinse. repeat.

@Account Closed   One thing to be very careful of is the double taxation... if you buy in the city of Memphis you will pay city tax and county tax.. .so be aware of that.

And like all rentals, price points will dictate tenant quality.  we all know this.

Memphis city as a whole has a fairly large % of rentals compared to homeowner ship.. so I agree that exit in most instances there is only going to be to another investor.

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