When people think of Memphis, TN, thoughts of parties on Bourbon Street, delicious barbecue, and Graceland come immediately to mind, but these highlights only scratch the surface of what makes Memphis great. It is a rapidly expanding city drawing in big companies and young professionals. The real estate market is hot but still affordable. If you are looking for opportunities to invest in real estate, Memphis should be on the top of your list. Here are our top 7 reasons why.
Price to Rent Ratio
The price to rent ratio is the ratio of a home price to the annual cost of renting. This ratio indicates whether it is more affordable to rent or own a home in any given city. The lower the number, the more favorable it is for homeowners. In 2019, the national price to rent ratio was 12.7. Memphis's price to rent ratio in 2019 was well below the national average coming in at 8.4. To put this number into perspective, this was the third-lowest price to rent ratio in the country!
Affordable Real Estate
When looking to invest in real estate, affordability is always a top concern. Memphis is growing, but it is still affordable. The median house cost in Memphis is $94,200, which is 19.4% below the national average! Kiplinger named Memphis the fourth most affordable city to buy a house in 2019.
Memphis is growing. The city is developing to such a great extent that even the skyline will look different. Memphis is in the middle of a five billion dollar development of their downtown area focusing on two different districts. The construction will bring economic growth and jobs to an already secure job market.
Memphis was struck hard by the 2008-09 recession. The unemployment rates hit the double digits, but since then, much has changed. Upwards of 60,000 jobs were introduced to the growing city, and unemployment in 2019 was reduced to 3.9%.
Big Companies Bring Big Jobs
Although Memphis loves its small-town feel and small business, it is also home to several big companies. Memphis's location on the Mississippi River, as well as its central highway location, makes it the perfect choice for large companies to build hubs. Three Fortune 500 companies, FedEx, AutoZone, and International Paper, are headquartered in Memphis. Mueller Industries and ServiceMaster, also headquartered in Memphis, are on the Fortune 1000 list. Having large companies in the city creates more jobs and job security.
Low Homeownership Rate
The national rate of people who own their home is 63.9%. In Memphis, homeownership makes up only 46.5% of the population, which means this is an excellent place for investors looking to buy rental properties. The population is also young, with the average citizen being 34 years old vs. the national average of 38. Young populations favor rentals for varying reasons, including student debt, low savings, and convenience. They make an excellent market to rent to.
Short term Rental Friendly
While some cities in Tennessee are not friendly to short term rentals, like Airbnb, Memphis is. Owners must have smoke and carbon monoxide detectors, and renters must comply with noise restrictions, but other than that, the regulations are minimal. Airbnb also do quite well in Memphis. The average occupancy is 67%, with a 6% cash return.
Whether you are investing in property for short term renters or you prefer long term tenants, Memphis is an excellent choice. Its economic and physical growth make it a city not to be ignored. Big companies and young professionals alike are being drawn to the expanding city. The real estate is still affordable, but it is hot, so now is the time to act. To start investing today, contact us