Real estate investors usually consider a variety of factors when searching for investment opportunities. This is because they don’t want to buy or construct a real estate development in a given town or city when they can get better returns from a different part of the country. Investors can also decide to invest overseas, but the US real estate market is the safest and most convenient for them. Recently, Memphis, Tennessee has been attracting a lot of interest from real estate investors all over the country. It is considered to be one of the best rental markets in the country for investors. You may be wondering why is Memphis great rental market for investors. Keep reading to find out.
A Brief Overview of Memphis as a rental market
Property prices in Memphis are much lower than property prices in comparable cities, with a median income of just $85,900. Property prices are projected to increase gradually in the coming years and decades. These are the main reasons why millennials have been moving to Memphis. They hope that their real estate investment will grow their portfolio steadily over the years.
Importance of Professional Property Management Services
When investing in real estate, both millennials and seasoned investors should hire a professional property manager. This professional will take over the day-to-day running of the rental property to ensure the client gets the passive income they desire. Below are some of the reasons why investing in Memphis is a great idea:
1. Favorable Demographics
Memphis has a higher population of African-American residents (about 61%) compared to white and Hispanic residents at 23% and 10% respectively.
A. Population growth in Memphis
In recent years, population growth has been negative, which means that the number of residents has been reducing marginally. The most recent data shows that the population in Memphis increased by 0.61%.
i) Influx of new residents from other states
The cost of living in Memphis is much lower than in other cities. That is why the city has recently welcomed thousands of people from other parts of the country. These are mainly millennials looking for job opportunities. It’s important to note that Memphis has been ranked the number 1 city in America for job creation. The search for job opportunities in Memphis is the main reason for the influx of new residents from other states.
ii) Growing demand for rental properties
As more people move to Memphis for work or in search of work, the demand for rental properties increases. Unfortunately, there is a huge shortage of rental properties. In fact, real estate experts, economists, and seasoned real estate investors consider Memphis a renter’s market. Industry statistics show that fewer homes are being built in Memphis, but the demand is high, which forces many people to search for rental units to live in.
B. Age distribution in the city
i) High percentage of young professionals
Memphis has a high percentage of young professionals. Memphis residents who are aged between 20-44 years account for 38.5% of the population. This is an important figure for real estate investors as it shows that there are many residents who can either buy a house or rent one.
ii) Increased need for quality rentals
As the number of new residents continues to increase, the demand for quality rentals also continues to rise. Since 38.5% of the population comprises young professionals, the demand for quality rental units will continue to increase.
2. Job Growth Trends in Memphis
The main reason why many people are moving to Memphis is the job growth trends in the city.
A. Diverse economy with various industries driving growth
Memphis has a robust economy. It hosts 3 Fortune 500 companies. This includes; FedEx, International Paper, and Autozone. The city has a diverse economy ranging from logistics and auto manufacturing to healthcare.
i) Examples: Logistics sector, healthcare industry, manufacturing
Memphis hosts an aircraft manufacturing plant that accounts for 52.5% of the city’s exports. The city plays a big role in the medical instruments manufacturing industry. It also manufactures orthopedic appliances and packaged medicaments. Memphis is also a logistics hub as it hosts the headquarters of FedEx.
B. Attraction of major corporations to the city
Memphis is a logistics hub as the FedEx headquarters is located in the city. This means that major corporations that are into manufacturing and shipping are attracted to Memphis because it is easier for them to ship their products anywhere across the country through the FedEx hub.
i) Examples: FedEx’s headquarters located in Memphis
The establishment of the FedEx headquarters in Memphis in the 1960s was the game changer. Tennessee is located in the middle of the country, so making it a logistics hub was not only convenient but also a game changer as this attracted many other corporations to the city.
C. Impact on rental demand due to job opportunities
Many millennials from the state, surrounding states and across America want to move to Memphis to take advantage of the job opportunities in the city. The high influx of the young workers has caused a huge demand for rental properties, which is a great opportunity for investors.
3. Affordability Factors in the Rental Market
Rental rates in Memphis are much lower than rental rates charged in other cities across America. This is something that continues to make Memphis attractive for millenials who are looking for job opportunities.
A. Comparatively lower cost of living than other major cities
The overall cost of living in Memphis is lower than other major cities in America. This is an important indicator for real estate investors.
i) Example: Comparison with Atlanta or Los Angeles costs
You only need to spend $4,600 in Memphis, TN, to enjoy the same quality of life as someone living in Los Angeles who needs a whooping $7,021 to enjoy the same quality of life.
B. Higher average rent prices compared to national average
The demand for rental units in Memphis has pushed rental rates upwards. This is great news for real estate investors.
i) Potential higher returns on investment for property owners
The huge demand for rental properties and higher average rent prices translates to higher ROIs for investors. This is the reason why many investors across the country are looking at Memphis.
4. Professional Property Management Services in Memphis
Memphis is home to dozens of reputable real estate management companies. These firms can help investors, both local and from other states, to manage their properties.
A. Benefits of using a professional property manager
The importance of hiring a reputable professional property manager cannot be overstated. The following are a few benefits of using a professional property manager:
i) Maintenance and repairs coordination
Property managers usually coordinate and oversee, inspections, maintenance and repairs to ensure every unit is in a good condition and habitable. They know how to keep maintenance and repair costs minimal.
ii) Tenant screening and selection process
This is the most important service offered by property managers. Investors want their rental units to be occupied by paying tenants. That is why tenant screening is important. Property managers usually run background checks, credit checks and verification of references to identify suitable tenants to occupy rental units.
iii) Rent collection and financial reporting
One of the key roles of a property manager is rent collection. The best service providers can collect 100% of collectible rent all the time. They also prepare financial reports to show how rent has been collected and utilized for repairs and maintenance among other things.
B. Creating a positive experience for landlords and tenants
Landlord-tenant relationship can be difficult at times, especially if there is a breakdown of communication. However, this can be remedied through:
i) Communication and conflict resolution
Establishing open lines of communication between tenants and the landlord is important if you want to have a positive landlord-tenant experience. Conflicts should also be resolved amicable and in a timely manner.
ii) Ensuring compliance with local rental regulations
Property managers and landlords must be well-versed with local rental regulations and observe them to the letter. This is important because any breach can lead to huge fines and penalties.
Conclusion
Memphis, TN, is a great market for real estate investors because there is a huge demand for rental properties. The high rental rates charged in the city and huge influx of young professionals into the city make it one of the best places to invest in real estate in America.
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