Memphis is the new Las Vegas
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Chris ClothierBusiness Member
Rental Property Investor · memphis, TN · Member since 2009 · 2k+ posts · 3k+ votes@Diane G. - Just going off your initial post, it looks like you are referencing the fact that at some point in the past, your experience was everyone speaking of Las Vegas as the go-to market and the city seemed to come up constantly as the place to go? I'm trying to give you some lee-way here - a little wiggle room for the point you were trying to make. After reading your responses, it becomes clearer that you have no idea what you are talking about. @Tom Ott, how is the view from the cheap seats? Just wondering when the last time was you were in Memphis to review the market to make a statement about saturation?
If that is the case and you are saying that Memphis is the new Vegas in your opinion because it is constantly being discussed, then ok. Only you know how often you were hearing about Vegas back in the day.
As for the statement about the music stopping and out of state investors over-running the city and fighting for a limited number of residents, I prefer this term to tenants, without understanding the sheer size of the city, the demographics, the dynamics that drive not only the rental but also the investment demand and the delivery of those services, this is just a statement thrown out with no context. It may be your belief, but it's not based on any real backing.
The Memphis M.S.A. has over 570,000 single-family homes and growing between .5%-1% per year. The population is expected to continue growing at a nominal rate as well of .5%-1% per year. I use the MSA numbers because while Memphis is a very large city, a majority of the recent growth in investment has been made outside of the city limits in the outlying suburbs or outer edges of the city outside the city core. You also have a diversification in industries providing jobs in the MSA although a majority still come from health-care, schools, government and transportation/distribution, agriculture and research just to name a few.
Why does it matter? Memphis is not a small city by any stretch and the major job supplying industries are not subject to the up and down nature of a fluctuating economy. So Memphis has always been known as a boring, non-sexy investment city where an investor is not going to strike it rich quickly, but can absolutely build an effective, long-term portfolio. When you consider that all of the major investment companies, whether they be Turnkey companies or institutional buyers are only buying less than .5% of the total number of homes in a year and that number may be a stretch, then you can see that Memphis will not be over-run by investors. The city still stands at roughly 39% of the population renting their housing, which is only slightly higher than the national average and lower than many of the cities just above them in price point and population. There is no chance Memphis becomes glutted with renters and owners fighting for residents.
Now, that may happen in some pockets of the city and I would argue the greater chance of that happening will occur in the most distressed areas of the city where poverty is already going to make investing difficult for out of state investors. So investors should be careful about where they buy...but isn't that what we say about any investment in any city?
Those who say Memphis has received too much attention and is no longer a good option as an investment city - insert the Tom Ott reference above here, can almost always be counted on for offering a different city to invest in where they do business and will make money. Or, they have a bone to pick because their experience was poor. In either case, I hardly think that should lead anyone to conclude Memphis as an investment destination is over.
If investors are patient and take their time before buying. If investors will meet the people they are doing business with and use common sense when buying houses, they can make a very good and consistent return. Right in line with what the city has always offered. Nothing sexy...but certainly consistent.
42 Replies
- Rental Property Investor · Durham, NC · Member since 2016 · 7k+ posts · 7k+ votes9yDiane G. By saying Memphis in the new vegas are you saying vegas is having an oversupply of rentals and not enough tenants?
- 9yCurt DavisBusiness MemberFlipper/Rehabber · Memphis, TN · Member since 2008 · 5k+ posts · 2k+ votes
How many rentals do you own in Memphis? Also how many times have you actually visited memphis?
Curt Davis - KAIZEN Realty538 Reviews - 9yDiane G.CA · Member since 2016 · 1k+ posts · 1k+ votesOP
I don't own anything in Vegas and have not visited it for a looooong time, but I knew it was a disaster in the last round of meltdown....So, no, I don't need to own anything in Memphis or visit to make my statement....
- 9yCurt DavisBusiness MemberFlipper/Rehabber · Memphis, TN · Member since 2008 · 5k+ posts · 2k+ votes
Ok that is what I thought. Just not sure why you would make a statement without any factual information regarding any market in general. Two very different markets.
Curt Davis - KAIZEN Realty538 Reviews - Investor · Orange County, CA · Member since 2015 · 2k+ posts · 3k+ votes9y
While I don't necessarily disagree with you, that is hard for a non-local (or even a local) to say for sure ahead of time ... but it sure is easy to tell after the fact if it comes to fruition ... that is the time to snatch them up at fire sale prices. Ask me how I know (hint: Phoenix, 2010).
- Engineer · Carlsbad/San Diego · Member since 2014 · 285 posts · 97 votes9y
@Curt Davis General question - why do you think the Memphis property prices hardly go up in spite of such high demand especially from turnkey investors? Is there a lot of supply?
@David Faulkner Just checked Zillow for both Memphis and Phoenix price history. Median Phoenix price went from 100k in 2011 to about 200k right now, still below its 2006 highs around 250k. Good catch. But its a cash flow game, right? Or are you using that equity?
- Investor · Orange County, CA · Member since 2015 · 2k+ posts · 3k+ votes9y
Originally posted by @Hersh M.:
@Curt Davis General question - why do you think the Memphis property prices hardly go up in spite of such high demand especially from turnkey investors? Is there a lot of supply?
@David Faulkner Just checked Zillow for both Memphis and Phoenix price history. Median Phoenix price went from 100k in 2011 to about 200k right now, still below its 2006 highs around 250k. Good catch. But its a cash flow game, right? Or are you using that equity?
Just cashed out on Phoenix ... bought for around $50k, sold at around $150k on average, so a bit better than median on a percentage basis ... it is a total return game for me Hersh ... I just want the profits, and am agnostic as to if they come from cash flow, appreciation (forced or market), tapped via cash out refinance or sale, mortgage pay down, or tax benefits ... I consider all the sources and will tailor my strategy to maximize them all while hedging my risks ... profits all spend the same.
- 9yDouglas SkipworthBusiness MemberRental Property Investor · Memphis, TN · Member since 2014 · 1k+ posts · 1k+ votes
Hi, @Diane G..
If you ever come here for a visit, we would love to show you around and tell you more about our local market. I have only been in the business for 15 years so I'm not the authority, but we focus on (1) buying right, (2) managing effectively, and (3) financing prudently, which has continued to serve us well over that time.
What specifically do you think is going to happen here?
Investor's Guide to Memphis Real Estate - Investor · Vacaville, CA · Member since 2016 · 433 posts · 249 votes9y
I do not see the correlation at all. Vegas hit highs in 2006 that were about 200% more than 5 years before just like Phoenix and then crashed hard. Vegas was hit harder than others as it was dependent on tourism. Memphis didn't boom in values like vegas and isn't dependent on tourism like vegas is. So basically they are two totally different situations in my opinion. Like night and day or apples and oranges if you prefer.
- 9yCurt DavisBusiness MemberFlipper/Rehabber · Memphis, TN · Member since 2008 · 5k+ posts · 2k+ votes
Over the past 5-6yrs the prices in Memphis for the most part have continued to increase. Maybe not like some other markets but prices are going up. In many lower quality areas the prices have not increased much.
Curt Davis - KAIZEN Realty538 Reviews - Specialist · CHICAGO · Member since 2015 · 680 posts · 650 votes9y
@Diane G., I get what you are throwing out there. Is the run up on Memphis going to break? Maybe...
It would likely happen at a lesser extent than CA or Denver...the sand states....and then leak into the stronger growing markets like Memphis...possibly. Is it causing prices to go up like foreign investments are running up the values in Chicago? Maybe.
If the US takes a financial hit we are all at risk of losing value in our localities.
I like when someone talks about the hard stuff to consider here...its hard to hear though when you are invested in that marketplace. Memphis has become a "household name" in investing so its far more likely to suffer from a run up than a midwestern city you buy a turnkey in.
But, personally, I think Memphis is a far safer play than many out there. Thanks for asking the hard questions.
- Specialist · CHICAGO · Member since 2015 · 680 posts · 650 votes9y
But, there ARE tenants for those properties. There just may not be enough local investors buying turnkey. A good turnkey provider would have it already rented and SHOULD have a property management branch to help maintain tenants. Is your theory that the market would be so inundated with turnkey rentals that it would surpass the need for quality rentals?
- Equity Raiser and Turnkey Provider · Cleveland, OH · Member since 2016 · 4k+ posts · 1k+ votes9y
Originally posted by @Diane G.:
These days, you can't stay on BP for more than 5 minutes without seeing a thread about investing OOS in Memphis...
It is absolutely becoming the new Las Vegas, in my opinion...When the music stops, and it will and it always does, Memphis will be a ton of OOS investors competing for limited numbers of tenants....
It is already becoming so saturated. I am happy this is getting discussed now. We have seen this is many markets (Las Vegas) One day it will implode and investors will be looking elsewhere.
We are already seeing a large influx of investors in the Midwest. They are thinking it might be the next gem.
- 9yChris ClothierBusiness MemberRental Property Investor · memphis, TN · Member since 2009 · 2k+ posts · 3k+ votes
@Diane G. - Just going off your initial post, it looks like you are referencing the fact that at some point in the past, your experience was everyone speaking of Las Vegas as the go-to market and the city seemed to come up constantly as the place to go? I'm trying to give you some lee-way here - a little wiggle room for the point you were trying to make. After reading your responses, it becomes clearer that you have no idea what you are talking about. @Tom Ott, how is the view from the cheap seats? Just wondering when the last time was you were in Memphis to review the market to make a statement about saturation?
If that is the case and you are saying that Memphis is the new Vegas in your opinion because it is constantly being discussed, then ok. Only you know how often you were hearing about Vegas back in the day.
As for the statement about the music stopping and out of state investors over-running the city and fighting for a limited number of residents, I prefer this term to tenants, without understanding the sheer size of the city, the demographics, the dynamics that drive not only the rental but also the investment demand and the delivery of those services, this is just a statement thrown out with no context. It may be your belief, but it's not based on any real backing.
The Memphis M.S.A. has over 570,000 single-family homes and growing between .5%-1% per year. The population is expected to continue growing at a nominal rate as well of .5%-1% per year. I use the MSA numbers because while Memphis is a very large city, a majority of the recent growth in investment has been made outside of the city limits in the outlying suburbs or outer edges of the city outside the city core. You also have a diversification in industries providing jobs in the MSA although a majority still come from health-care, schools, government and transportation/distribution, agriculture and research just to name a few.
Why does it matter? Memphis is not a small city by any stretch and the major job supplying industries are not subject to the up and down nature of a fluctuating economy. So Memphis has always been known as a boring, non-sexy investment city where an investor is not going to strike it rich quickly, but can absolutely build an effective, long-term portfolio. When you consider that all of the major investment companies, whether they be Turnkey companies or institutional buyers are only buying less than .5% of the total number of homes in a year and that number may be a stretch, then you can see that Memphis will not be over-run by investors. The city still stands at roughly 39% of the population renting their housing, which is only slightly higher than the national average and lower than many of the cities just above them in price point and population. There is no chance Memphis becomes glutted with renters and owners fighting for residents.
Now, that may happen in some pockets of the city and I would argue the greater chance of that happening will occur in the most distressed areas of the city where poverty is already going to make investing difficult for out of state investors. So investors should be careful about where they buy...but isn't that what we say about any investment in any city?
Those who say Memphis has received too much attention and is no longer a good option as an investment city - insert the Tom Ott reference above here, can almost always be counted on for offering a different city to invest in where they do business and will make money. Or, they have a bone to pick because their experience was poor. In either case, I hardly think that should lead anyone to conclude Memphis as an investment destination is over.
If investors are patient and take their time before buying. If investors will meet the people they are doing business with and use common sense when buying houses, they can make a very good and consistent return. Right in line with what the city has always offered. Nothing sexy...but certainly consistent.
- 9yAlex CraigBusiness MemberReal Estate Professional · Memphis, TN · Member since 2009 · 1k+ posts · 1k+ votes
I am not aware of implosion that @Diane G. is talking about as I have added 2 more to my portfolio this year. But let's just say she is right that there are to many rental homes. Looking at our board this month, at least I can say when the tenants move in, we don't have to fight to often with other landlords for this "limited tenant pool". 500 properties under management with only 5 move outs for the end of the month. Crestridge has a tenant moving in 2 weeks later (nice bonus for my office on that one).
Tenant occupancy length on the properties below:
2322 Eastover: 18 months
2986 Cresthaven: 30 months (Rent for $1,595 the first time, $1,795 the second time)
4898 Flamingo: 12 Months (Early Move out, rented out in 30 days back in 2016)
948 Perkins: 7 years
4531 Rosswood: 36 months
- Investor · Tampa, FL · Member since 2011 · 2k+ posts · 3k+ votes9y
I've never been to Memphis and don't know anything about the demographics. I hear it's a really cool city, and I'd love to visit someday. But I think the perception of Memphis being overrun by rentals has more to do with the fact that the turnkey operations in Memphis are very good at marketing, and has less to do with actual data.
- Real Estate Investor · Memphis, TN · Member since 2016 · 940 posts · 695 votes9y
We (Memphis and Vegas) both have pretty cool pyramids!! :)
More seriously, Memphis can be great for investing but so can many other markets and many other forms of investing. One of the beauties of REI is there are so many different ways and places to do it.
Sure we've made "investment" decisions that didn't work out as well as we had hoped but that is part of investing in anything (except for oneself - I think that is always a great idea).
There are lots of us local investors (that aren't connected to a TKP) and the reason is it is still a great market.
@Nick C. - We aren't Tampa either but have some unique visiting opportunities. Come on up anytime! Let us know.
- 9yJay HinrichsBusiness MemberReal Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
@Diane G. on one of your post a reply came back that your comparing oranges to Iceberg lettuce and for sure you are when you compare vegas and Memphis.
What caused the meltdown in Vegas and PhX @David Faulkner well I can tell you
Vegas relys on gambling and tourism in the crash any tourist city and gambling city got hurt
and then for rentals what killed that market and phx is that a very large portion of your renters were in the building trades subcontractors laborers etc etc.. building came to a complete STOP.. those thousands upon thousands of jobs left.. and most of those folks rented.
Memphis is a rental city and has basically always been one with about 50 to 55% of pop are renters. New construction there is miniscule compared to the southwest or other areas. so work force more diverse.. but that also leads to very moderate gains in values and values because there are so many rentals are really related to what one will pay for a given cash flow and the 1% rule seems to be the bench mark for OOS investors to take the leap to other markets..
unlike the west coast were our locals are happy at the .05% rule... there is no way they are going to Memphis or Cleveland or any other mid west market for the 05% rule.. why would they with no real value growth there are better ways and safer ways to invest.
So where does the investment real estate inventory come from.
1. burnt out landlord syndrome there are areas of the city that many won't work in @Chris Clothier commented on those neighborhoods in a thread earlier this week. Others like @Douglas Skipworth and his company are happy in those areas.
2. transitioning neighborhoods that are moving from homeowner to renter dominated.. Homeowner old and sells out to a investor.. or moves out as they want better schools and or don't want to be around a bunch of renters.
3. there will always be a section of US citizen who cannot manage credit.. who gets divorced and or dies intestate so you have BAnk owned or lender Owned real estate that comes on the market.
But the same happens in Vegas as well I bought 4 fix and flips in the last 30 days in Vegas all will make substantial profits on the resale.. so all these markets have some great thing about them and you cannot compare them to each other.. you can't even compare Memphis to Nashville and they are in the same state.
My long winded 2 cents and I have my flame suit on if anyone wants to take a jab at me :)
- Specialist · CHICAGO · Member since 2015 · 680 posts · 650 votes9y
Alright, there ARE deals in Memphis...but it seems perhaps the TKP's that exist with such fine tuned systems are putting a squeeze on local smaller investors. In my locality there aren't any so for me deals are easy to find. How are the locals feeling about finding deals. Perhaps this conversation can shed some light on that notion. Is there still room for small full time investors? Part time investors?
I also invest in Chicago and have done so in DC too, so its not like I don't know what its like to compete with an aggressive market of investors both OOS, local, AND international. So, Memphis small investors...are you guys getting outbid often? Have you had to change your lead generating strategy? What strategies used to work that no longer do?
@Elizabeth Wilson I know you have something to share... :)
- 9yDiane G.CA · Member since 2016 · 1k+ posts · 1k+ votesOP@ jay hinrichs - you don't know that the collapse in Vegas and Phx was caused solely because construction worker leaving... that is simply not true... Having a tons of OOS investors was another contributors.... there are many many studies/articles supporting that... When resession hits next, those OOS that can't find a tenant will bail... that was what caused the collapse of Phex and Vegas, at least partially....
- Investor · Memphis, TN · Member since 2016 · 279 posts · 257 votes9y
This is great, and I love seeing all points of view. Each of us (thankfully) is free to make claims without regard for veracity. I have a front row seat to some of the things I've said in life, and trust me, there was minimal accuracy in some of it. Sometimes we have to go with our gut despite what others are doing or saying and that can be frustrating. Maybe you got burned here? It does boil down to empirical evidence to substantiate a claim though for me. I love data and would love an opportunity to review anything someone has to share in this regard. Much of what was posted above meets this criteria already. But if there's a storm coming and we can estimate its intensity with data projections, I'm all ears. What I hear so far does not comport with that notion, which is why I'd love to hear any counter argument with substance.
- 9yJay HinrichsBusiness MemberReal Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
@Diane G. the reason they could not find tenants is the construction workers left the city or state its well known.. it was one of the great contributors to the decline in those markets. along with too much inventory and rampant speculators who were trying to flip
I had clients that bought 4 plexs in PHX only to find them 100% vacant in 09 to 2010 they bought them in 04 ish for 350k each.. by the time the bottom hit those units were vacant 100% like I said and trading at 80k.
Same with Vegas.. the tenants left.
my point Is Memphis is already a renter city and there is little to no new construction compared to the west and the south.. so the tenant base is already working in a myriad of occupations.
I guess if Fed Ex up and left and some of the bigger employers but it seems stable for now.
- 9yJay HinrichsBusiness MemberReal Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
@Sam Wilson the risk in Memphis in my mind is like any other deep south city or mid west city.. its buying in a war zone or an area were the neighborhood turns from good to bad.
- 9yCurt DavisBusiness MemberFlipper/Rehabber · Memphis, TN · Member since 2008 · 5k+ posts · 2k+ votes
even during the market crash the rental market held strong as it would if there was another one.
Curt Davis - KAIZEN Realty538 Reviews
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