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Investing in Memphis Rentals

By Brian Kline | February 5, 2019

Memphis real estate investing offers tremendous opportunities for those wanting to be in the rental market. Memphis, like most major cities, has a very diverse population. Some parts of Memphis have a very small rental market (upscale areas) while you are better off avoiding others because of high crime rates and high unemployment rates.

Memphis Rental Market is Strong

In fact, Memphis has a stronger rental market than most major cities. U.S. Census data shows that nationally, the rental market increased about 5% between 2006 and 2016. Over that same period, the Memphis rental market grew at more than twice that rate – 11%. The percentage of residents renting in Memphis grew from 45% to 56%.

Some of the best parts of Memphis for rentals are East Memphis/Colonial Acres, High Point Terrace, parts of Midtown, Cordova, the University of Memphis, White Station, and Grahamwood areas. These enjoy a healthy demand from good tenants because they are close to jobs and amenities. Other areas such as Berclair and Southeast Memphis (including Fox Meadows and Parkway Village) also have reliable rental demand.

Memphis Rental Management Tips

Rental real estate in Memphis is one of the more lucrative investment opportunities you will find. However, you can't just one day decide to become a landlord. To make money in the Memphis real estate market you do need to know the ropes. If you're new to the market, you should consider using a property management company at least until you become confident you understand the regulations involved and are knowledgeable about placing competent tenants in your properties.

Real estate is about location, location, location. You don't need to know the global rental market but here are some tips you want to educate yourself about for the Memphis market:

  • Obviously, you need to understand the various markets that exist within the Memphis metropolitan area. The short lists at the beginning of this article are good places to begin with.
  • You need to learn such basics as the vacancy rate, the average amount of rent being charged each month, and the history of rental rates over the past five years or so. Have rents kept up with or exceeded the inflation rate? A major reason people invest in real estate is that it typically appreciates in value faster than inflation. You need this information specific to the neighborhood you are considering investing in.
  • There are also technical and legal requirements both at the federal and local level that you need to comply with. By using a property management company, you will more quickly become knowledgeable about your obligations.

Memphis Rental Management Example

Here is a good reason that you need to know rental markets at the local level. Tennessee Code Annotated (T.C.A.) 66-28-201(c) states in part that:

Rent shall be payable without demand at the time and place agreed upon by the parties. Notice is specifically waived upon the nonpayment of rent by the tenant only if such a waiver is provided for in a written rental agreement.

What that means in real-world language is that, as a landlord, you must give tenants written notice that they are behind in the rent if they fail to pay and before you can begin eviction proceedings. Reality is that owners are busy people and may go several weeks before realizing that a tenant failed to pay the rent. That effectively slows down the collection/eviction process. However, by including the clause below in your lease agreement, you are no longer required to give the tenant written notice that they failed to pay the rent.

Rent is due without demand or notice from Manager/Landlord.

Although data shows the U.S. homeownership rate is very slowing increasing, it’s likely to be many years, if ever, before for it returns to historic peaks. Investors looking for some of the best rental opportunities should take a close look at Memphis.

Please leave a comment on your thoughts about the Memphis real estate investment market. Also, our weekly Ask Brian column welcomes questions from readers of all experience levels with residential real estate. Please email your questions, inquiries, or article ideas to [email protected].

Brian Kline has been investing in real estate for more than 30 years and writing about real estate investing for seven years with articles listed on Yahoo Finance, Benzinga, and uRBN. Brian is a regular contributor at Realty Biz News
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