According to the website Neighborhood Scout, Memphis homes have appreciated in value an average of 12 percent over the last two years or at an annual rate of 5.8 percent per year. More importantly, the last quarter saw an appreciation rate of 1.38 percent or 5.6 percent annually. Over the years, the highest appreciation rates in Memphis are the neighborhoods at:
- St. Thomas / Pearl Ave.
- Riverside Drive / Arkansas Street
- Central Ave. /S. Fenwick Rd.
- Visible School – Music and Worship Arts College / Southern Ave.
- N. Mclean Blvd / N. Parkway
- N. Watkins St. / Jackson Ave.
- Central Ave. / E. Parkway S.
- Rhodes College / N. Parkway
- S. Mclean Ave. / Central Ave.
- Thomas St. / Chelsea Ave.
The Memphis Rental Market
Besides being one of the most entertaining cities in the world, Memphis is among the top rental investments in the nation. US News & World Report ranked Memphis as the number 1 rental market among the top ten cities in the country. Approximately 50 percent of the Memphis population rents either single-family houses or apartments. Memphis has proven to have a stable real estate market. At the peak of the real estate decline (2008), the Memphis market saw only a 3 percent decline. Today, Memphis vacancy rates are well below the national average although even the nation average is considered low.
The current median house price in Memphis is about $103,000. The median rental price is about $875. That leaves plenty of room for positive cash flow. There are many variables that go into calculating your positive cash flow. Using the Memphis median averages and assuming a 10 percent down payment, you can expect to have a mortgage payment in the $427 dollar range with a loan at 3.7 percent. Adding in another 10 percent for typical expenses such property taxes and insurance brings that monthly cost to about $469. Using the Memphis median rental price, that leaves you approximately $406 in positive cash flow each month. Of course, everyone’s circumstances are different and this example is based on averages.
What Makes Memphis Rentals a Good Investment?
To say the least, the stock market has left investors guessing what will happen next in 2016. However, as employment has grown every month for approximately the past 70 months, household formation has taken off as well. Most people enter the housing market as renters. Memphis is among the top cities that has performed well during this growth phase and shows promise of continuing this trend.
The younger generation continues to be attracted to the urban housing market. The Memphis metropolitan area has a population of approximately 1.3 million. It also offers all of the entertainment and great food venues that people are looking for in the urban centers today.
Flipping Memphis Homes
According to RealtyTrac, home flipping increased in 75 percent of U.S. markets, yielding an average gross profit of $55,000 nationwide — the highest average gross profit for homes flipped nationwide since 2005. The better news is that Memphis is among the top 5 flipping markets depending on how you rate them.
Memphis has all of the characteristics to attract house flippers. The most recent data shows that Memphis had 20 percent more houses flipped in 2015 than 2005 (prior to the Great Recession). Memphis is ranked number 1 regarding the volume of houses flipped. With 10.6 percent of all sales going to house flippers. It’s ranked number 9 for return on investment with the average being 55 percent more than the original purchase price.
As an investor, you can’t afford to sit on the sidelines any longer. The stock markets remain volatile leaving real estate as a great investment option. Among the many real estate markets out there, Memphis is one that you definitely want to take a close look at.
Please leave a comment if this article was helpful or if you have a question.
Author bio: Brian Kline has been investing in real estate for more than 35 years and writing about real estate investing for ten years. He also draws upon 37 plus years of business experience including 12 years as a manager at Boeing Aircraft Company. Brian currently lives at Lake Cushman, Washington. A vacation destination, a few short miles from a national forest. In the Olympic Mountains with the Pacific Ocean a couple of miles in the opposite direction.