Choosing rental properties in Memphis, TN

18 Replies

Dear Bigger Pockets Community,

I am new to Bigger Pockets and real estate investing in general. I live outside of the US but interested in the US market as it meets a lot of the criteria I am looking for - easy access, good cashflow etc. After a lot of research I have narrowed in on single family homes in the Memphis, TN market and have been talking to Turnkey providers and loan providers. 

I understand there is nothing like visiting the city in person (and may still do that, if for no other reason than Memphis looks like a great city!) but does anyone have any advice on the following? 

  • With a turnkey investment  company in Memphis, what yields (rent/property value) should I realistically expect in the current market. I understand property values have gone up a lot in recent years but is it still possible to get close to the 1% rent/property value ideal? 
  • Are there any merits of 3 bedroom properties vs. 2 bedroom properties in Memphis? I am looking for long term stable cashflow. Is there any difference in rental demand between the two? 
  • Similar question regarding bathrooms. Does the number of bathrooms impact rental demand? 
  • I have seen some properties advertised with large trees in the yard. My instincts would tell me that trees could be a headache for a maintenance or potential issues. Is it better to avoid properties with trees? 
  • I am using all the usual sites for property research - Google Maps, Trulia, Zillow, Shelby County Assessor, Census data and rentometer.com. Are there any other useful resources I should be using for Memphis? 

Loads of questions. That's probably enough to get started. Appreciate any advice you can give!


Noel

As long as the trees aren't 'protected' in anyway, I wouldn't worry about that affecting your decision on a property.

Bedrooms matter but bathrooms definitely matter. (A 1 bathroom house can be very difficult to rent for market rent and long term vs a 3 bedroom will have people who tend to stay longer)

Memphis is a good market, just be careful of the high crime areas. Lots of cheap properties and there is always a reason.

The websites you are using are good, don't forget loopnet as well (lots of income properties on there that aren't on the MLS. You can have a free account too even if you aren't licensed).

Hope that helped!

@Noel Bradshaw if you get a turnkey property I think your minimum will be 70k or more and you can still get 1 percent rule with turnkey.

If you go non turnkey in Memphis I would stick to places that rent for 750 or more. These values will probably be 60k or more to get that most of the time. I would stick to 3 br minimum if that’s in your budget and I would do 2 bathrooms if possible.

I’ve got a couple 3 bedroom rentals with 1 or 2 bath. I personally would do either. The second bathroom seems to get you a higher rent too, which is to be expected.

@Marc Middleton Really useful advice on the trees and the bedrooms /bathrooms. Will take a look at Loopnet. Thanks. 

@Caleb Heimsoth Thanks a lot. I was looking at the 70k-100k range for an initial property so that fits in with your advice. Useful advice too about the bed/bathrooms.

@Noel Bradshaw

Sometimes the property mgt companies also have properties from sale from their existing clients. U can snag a leased property. But do your due dilligence on the area for sure.

Like Marc said, I'd certainly try to get a 3 bedroom; I've noticed that the 3 bedroom homes tend to have a more stable rental rate during market fluctuations. 2/1's are usually very inexpensive, but they tend to be in rougher parts of town. 

2 bathrooms is certainly preferable, but if the numbers work on a 1 bathroom then go for it. I recently helped an investor purchase a 3 bedroom/1 bathroom property; he paid 36k for it, did a 10k renovation job and now has it rented out for $790. So, nothing wrong with 1 bedroom at all. 

Personally, I wouldn't buy a turnkey even if I was an out-of-country investor. It's much easier to find a better deal by buying a property through an agent and then finding a property manager after the fact. Nothing wrong with turnkey properties and some do offer good returns, but generally you can find better deals elsewhere. 

Shelby county Assessor is great to use to figure out the property taxes and their assessment is certainly of some value. The Tom Leatherwood site is where the county deed records are kept - always good to know what the property last sold for. (Zillow isn't always accurate) Zillow is pretty good for estimating market rent though... Just know that zillow assumes the property is in good condition. 

I'd recommend shopping around on Zillow for a property that looks good and then call up a Realtor to go view the property for you. A good Realtor will be able to recommend a good appraiser, inspector, loan officer, and management company. 

Memphis is a great town, you've made a good choice!

If it would help I can share a Investing Map of Memphis that classifies areas by risk, rental rate and price points.

@AJ Singh Useful info about the leased property. I think I will stick with Turnkey for my first property but may look at different options in the future if Turnkey does not work out

@Jack Inman There seems to be a common consensus so far about 3 bedrooms being less risky than 2. Thanks for the opinion about the bathrooms. First I have heard about Tom Leatherwood so will add that to my list. 

@James Martin Yes, please! That would be extremely useful.

@Jack Inman I agree on the 3/1 vs 3/2. It seems that for home buyers, the second bathroom matters somewhat, but for renters, it does not matter at all.

@Noel Bradshaw I've been following your post as I'm actually looking for my first out of state investment in Memphis as well. Good luck with your search. 

@James Martin Do you mind share the Investing Map? Thank you!

@Noel Bradshaw

Stick to properties that rent more than 900 a month even though the on paper cashflow is not as good.

Always get a third party inspector and appraisal done.

@James Martin I would be interested in the investment map as well.  Heading to Memphis this week.

@Noel Bradshaw

I'm using a Memphis based Turnkey provider.  I got 1% Rent to Value ratio during the purchase process, but my property has not rented just yet.

$95,000 purchase 3/2 Property in Parkway Village area in Memphis.

$950 Rent advertised in Proforma

Zillow Zestimate at this moment is $925 based on area rentals, I can update once rented, we are in the offseason a bit now with schools in session, winter approaching, etc.

@james martin i would love to see that map as well. thanks in advance.

Originally posted by @Peter Schuyler :

@Noel Bradshaw

I'm using a Memphis based Turnkey provider.  I got 1% Rent to Value ratio during the purchase process, but my property has not rented just yet.

$95,000 purchase 3/2 Property in Parkway Village area in Memphis.

$950 Rent advertised in Proforma

Zillow Zestimate at this moment is $925 based on area rentals, I can update once rented, we are in the offseason a bit now with schools in session, winter approaching, etc.

Did your property get rented? If so, how long did it take?

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