Ultimate Memphis Real Estate Investing Guide for 2024

The acronym BRRRR is a description of a long-term lease strategy — Buy, Rehab, Rent, Refinance, Repeat. This is a way to increase your investment assets rather than acquire a single income generating property. It is a must that you are qualified to do a “cash-out” mortgage refinance for the plan to be successful.

When you are done with repairing the rental, its value must be higher than your combined purchase and fix-up spendings. Then you get a cash-out refinance loan that is computed on the superior market value, and you pocket the balance. This money is put into the next investment asset, and so on. You acquire more and more rental homes and constantly expand your lease revenues.

After you’ve accumulated a considerable group of income producing assets, you can choose to authorize others to oversee all rental business while you enjoy repeating net revenues. Discover one of the best investment property management companies in Memphis TN with the help of our exhaustive directory.

Factors to Consider

Population Growth

The growth or shrinking of the population can indicate if that area is desirable to landlords. An increasing population usually indicates vibrant relocation which translates to additional tenants. Relocating businesses are drawn to increasing markets offering job security to people who relocate there. Rising populations grow a dependable renter reserve that can handle rent increases and home purchasers who help keep your investment property prices high.

Property Taxes

Real estate taxes, regular maintenance expenditures, and insurance specifically impact your returns. Excessive expenditures in these categories threaten your investment’s bottom line. Markets with high property tax rates aren’t considered a reliable setting for short- and long-term investment and should be avoided.

Price to Rent Ratio

Price to rent ratio (p/r) is a market indicator that tells you how much you can anticipate to collect for rent. An investor can not pay a large sum for an investment property if they can only charge a small rent not enabling them to pay the investment off in a appropriate time. A higher price-to-rent ratio informs you that you can demand modest rent in that community, a small one shows that you can demand more.

Median Gross Rents

Median gross rents illustrate whether a location’s lease market is solid. You need to find a location with regular median rent increases. You will not be able to achieve your investment targets in a location where median gross rents are dropping.

Median Population Age

The median population age that you are searching for in a strong investment market will be near the age of employed individuals. If people are relocating into the neighborhood, the median age will have no problem staying at the level of the labor force. If working-age people aren’t venturing into the market to follow retirees, the median age will go up. This isn’t good for the impending economy of that market.

Employment Base Diversity

A varied employment base is what an intelligent long-term rental property investor will look for. When there are only a couple significant employers, and either of such moves or closes shop, it will make you lose renters and your asset market values to go down.

Unemployment Rate

High unemployment results in fewer tenants and an unpredictable housing market. Non-working individuals can’t pay for goods or services. Workers who still keep their jobs can discover their hours and salaries reduced. Even renters who are employed may find it difficult to stay current with their rent.

Income Rates

Median household and per capita income data is a valuable indicator to help you navigate the areas where the renters you are looking for are located. Your investment analysis will include rental fees and asset appreciation, which will rely on income raise in the region.

Number of New Jobs Created

The more jobs are regularly being produced in a community, the more dependable your renter source will be. A larger amount of jobs equal new tenants. This reassures you that you will be able to maintain a sufficient occupancy level and acquire more assets.

School Ratings

Local schools will make a strong influence on the property market in their location. Employers that are considering relocating want good schools for their employees. Reliable renters are a consequence of a steady job market. Recent arrivals who purchase a house keep property values up. Good schools are an essential component for a strong real estate investment market.

Property Appreciation Rates

High property appreciation rates are a prerequisite for a profitable long-term investment. You need to make sure that your assets will rise in market price until you decide to move them. Small or shrinking property appreciation rates should remove a market from your choices.

A short-term rental is a furnished unit where a tenant resides for shorter than four weeks. Short-term rental owners charge more rent each night than in long-term rental properties. With tenants fast turnaround, short-term rental units need to be repaired and cleaned on a constant basis.

Typical short-term renters are tourists, home sellers who are relocating, and corporate travelers who need more than hotel accommodation. Any homeowner can transform their home into a short-term rental with the assistance given by online home-sharing platforms like VRBO and AirBnB. This makes short-term rental strategy a convenient technique to pursue real estate investing.

Short-term rentals require interacting with tenants more frequently than long-term rentals. That means that landlords handle disagreements more frequently. Give some thought to controlling your liability with the help of one of the best real estate lawyers in Memphis TN.

Factors to Consider

Short-Term Rental Income

First, figure out how much rental revenue you must have to meet your anticipated profits. A market’s short-term rental income levels will promptly reveal to you if you can predict to accomplish your projected rental income range.

Median Property Prices

Thoroughly assess the amount that you can pay for additional investment properties. The median market worth of property will tell you if you can afford to participate in that market. You can also employ median market worth in specific sub-markets within the market to pick locations for investment.

Price Per Square Foot

Price per square foot can be influenced even by the style and layout of residential properties. If you are examining the same types of property, like condominiums or stand-alone single-family homes, the price per square foot is more consistent. Price per sq ft can be a quick way to compare different sub-markets or properties.

Short-Term Rental Occupancy Rate

A peek into the area’s short-term rental occupancy levels will show you whether there is an opportunity in the district for additional short-term rental properties. A location that needs additional rental housing will have a high occupancy level. If investors in the area are having challenges filling their current properties, you will have trouble filling yours.

Short-Term Rental Cash-on-Cash Return

Cash-on-cash return is a method to evaluate the value of an investment plan. Take your estimated Net Operating Income (NOI) and divide it by the cash amount you’re ready to invest. The resulting percentage is your cash-on-cash return. If an investment is lucrative enough to reclaim the investment budget promptly, you’ll have a high percentage. If you take a loan for a fraction of the investment amount and put in less of your money, you will get a higher cash-on-cash return.

Average Short-Term Rental Capitalization (Cap) Rates

Another measurement shows the market value of an investment property as a revenue-producing asset — average short-term rental capitalization (cap) rate. High cap rates indicate that properties are accessible in that community for fair prices. If cap rates are low, you can expect to pay a higher amount for investment properties in that market. You can determine the cap rate for potential investment real estate by dividing the Net Operating Income (NOI) by the Fair Market Value or purchase price of the property. The percentage you will get is the property’s cap rate.

Local Attractions

Short-term renters are usually people who visit a location to attend a recurrent significant event or visit tourist destinations. This includes top sporting tournaments, youth sports activities, schools and universities, large auditoriums and arenas, festivals, and amusement parks. Natural attractions such as mountains, lakes, coastal areas, and state and national nature reserves will also invite future tenants.

To fix and flip a house, you need to pay lower than market value, perform any necessary repairs and upgrades, then sell the asset for full market worth. The essentials to a successful investment are to pay a lower price for the home than its current value and to precisely analyze the budget needed to make it saleable.

You also need to understand the housing market where the house is located. You always want to check how long it takes for listings to close, which is determined by the Days on Market (DOM) metric. Selling the property immediately will keep your costs low and ensure your profitability.

In order that real property owners who need to get cash for their property can readily locate you, highlight your status by using our directory of the best home cash buyers in Memphis TN along with top property investment companies in Memphis TN.

Also, hunt for the best property bird dogs in Memphis TN. Professionals on our list specialize in procuring distressed property investment opportunities while they are still off the market.

Factors to Consider

Median Home Price

The market’s median home value could help you spot a good community for flipping houses. You are on the lookout for median prices that are low enough to hint on investment possibilities in the area. You have to have lower-priced properties for a lucrative deal.

If your investigation shows a rapid weakening in property values, it may be a signal that you will discover real estate that meets the short sale criteria. You will receive notifications about these possibilities by joining with short sale negotiation companies in Memphis TN. Discover more concerning this sort of investment detailed in our guide How Do You Buy a Short Sale House?.

Property Appreciation Rate

The changes in real property values in a location are vital. You are searching for a stable increase of the city’s real estate values. Accelerated price growth could suggest a market value bubble that is not sustainable. When you’re acquiring and liquidating swiftly, an unstable market can sabotage your efforts.

Average Renovation Costs

A careful analysis of the city’s construction expenses will make a significant influence on your market selection. The time it will require for getting permits and the municipality’s requirements for a permit request will also impact your decision. If you need to present a stamped suite of plans, you’ll need to include architect’s charges in your expenses.

Population Growth

Population growth figures let you take a peek at housing demand in the area. When there are purchasers for your rehabbed properties, the statistics will show a robust population growth.

Median Population Age

The median residents’ age is a factor that you might not have considered. The median age in the market needs to equal the age of the usual worker. These are the people who are active home purchasers. People who are planning to leave the workforce or have already retired have very restrictive housing requirements.

Unemployment Rate

You want to have a low unemployment rate in your considered location. An unemployment rate that is less than the US median is what you are looking for. If the community’s unemployment rate is lower than the state average, that is an indication of a strong economy. Non-working individuals cannot buy your real estate.

Income Rates

Median household and per capita income are a solid indication of the robustness of the real estate conditions in the city. When people purchase a property, they normally have to borrow money for the purchase. The borrower’s income will dictate the amount they can borrow and if they can purchase a house. The median income stats tell you if the city is eligible for your investment project. Search for places where salaries are rising. If you want to augment the asking price of your residential properties, you need to be certain that your customers’ income is also improving.

Number of New Jobs Created

The number of jobs appearing annually is useful insight as you reflect on investing in a particular city. More people acquire houses if their city’s economy is adding new jobs. With additional jobs appearing, new prospective buyers also relocate to the city from other locations.

Hard Money Loan Rates

Short-term investors regularly utilize hard money loans rather than traditional financing. This lets them to rapidly purchase desirable assets. Look up Memphis real estate hard money lenders and compare financiers’ fees.

In case you are inexperienced with this financing vehicle, understand more by reading our article — What Are Hard Money Loans?.

Wholesaling is a real estate investment strategy that entails locating houses that are appealing to real estate investors and putting them under a sale and purchase agreement. However you do not buy it: after you have the property under contract, you get someone else to take your place for a fee. The investor then finalizes the acquisition. The wholesaler does not sell the property under contract itself — they just sell the purchase agreement.

The wholesaling method of investing involves the employment of a title company that understands wholesale transactions and is knowledgeable about and involved in double close purchases. Find Memphis title companies for wholesaling real estate by reviewing our list.

Learn more about this strategy from our complete guide — Real Estate Wholesaling 101. While you manage your wholesaling activities, put your firm in HouseCashin’s list of Memphis top real estate wholesalers. This will help your possible investor customers find and reach you.

Factors to Consider

Median Home Prices

Median home prices in the area will show you if your preferred price range is viable in that location. As real estate investors want properties that are on sale for less than market value, you will need to take note of below-than-average median purchase prices as an implicit tip on the possible availability of properties that you may purchase for lower than market worth.

A sudden downturn in housing prices may be followed by a sizeable selection of ’upside-down’ homes that short sale investors hunt for. Short sale wholesalers frequently gain advantages using this opportunity. However, there could be challenges as well. Discover more concerning wholesaling short sales with our extensive article. When you choose to give it a go, make certain you employ one of short sale law firms in Memphis TN and foreclosure attorneys in Memphis TN to consult with.

Property Appreciation Rate

Property appreciation rate boosts the median price statistics. Real estate investors who plan to keep real estate investment properties will have to know that home values are steadily increasing. A dropping median home price will show a poor rental and housing market and will disappoint all kinds of real estate investors.

Population Growth

Population growth information is an important indicator that your prospective investors will be knowledgeable in. A growing population will have to have new residential units. This involves both leased and resale properties. When a community isn’t multiplying, it doesn’t require more housing and real estate investors will search somewhere else.

Median Population Age

A friendly residential real estate market for investors is strong in all aspects, including tenants, who become home purchasers, who transition into bigger houses. For this to take place, there needs to be a solid workforce of prospective tenants and homeowners. If the median population age matches the age of wage-earning citizens, it illustrates a reliable residential market.

Income Rates

The median household and per capita income should be on the upswing in a vibrant real estate market that real estate investors prefer to operate in. If tenants’ and home purchasers’ salaries are going up, they can keep up with rising rental rates and residential property prices. Investors avoid cities with weak population wage growth figures.

Unemployment Rate

The city’s unemployment stats are a vital consideration for any targeted wholesale property purchaser. Delayed rent payments and default rates are higher in areas with high unemployment. This upsets long-term real estate investors who want to rent their property. Investors cannot count on renters moving up into their homes when unemployment rates are high. This is a challenge for short-term investors purchasing wholesalers’ agreements to renovate and flip a home.

Number of New Jobs Created

The frequency of jobs generated every year is an important component of the housing framework. Workers move into a location that has fresh jobs and they require a place to reside. This is helpful for both short-term and long-term real estate investors whom you count on to purchase your sale contracts.

Average Renovation Costs

Repair costs will be critical to most real estate investors, as they typically purchase bargain neglected properties to rehab. Short-term investors, like fix and flippers, can’t make money when the purchase price and the rehab expenses equal to a higher amount than the After Repair Value (ARV) of the property. The cheaper it is to update a home, the friendlier the city is for your future contract clients.

Buying mortgage notes (loans) pays off when the loan can be bought for less than the remaining balance. When this happens, the note investor becomes the borrower’s mortgage lender.

When a loan is being paid as agreed, it is thought of as a performing note. Performing loans are a consistent source of passive income. Some note investors look for non-performing notes because when the mortgage note investor can’t satisfactorily rework the loan, they can always purchase the collateral at foreclosure for a below market price.

Someday, you could grow a selection of mortgage note investments and be unable to manage them without assistance. At that juncture, you may need to utilize our list of Memphis top third party loan servicing companies and reclassify your notes as passive investments.

Should you choose to employ this plan, append your venture to our list of real estate note buying companies in Memphis TN. When you’ve done this, you will be seen by the lenders who market lucrative investment notes for procurement by investors like you.

Factors to Consider

Foreclosure Rates

Note investors hunting for current mortgage loans to acquire will hope to uncover low foreclosure rates in the market. High rates could signal investment possibilities for non-performing loan note investors, but they need to be careful. If high foreclosure rates are causing a weak real estate environment, it might be difficult to resell the collateral property after you foreclose on it.

Foreclosure Laws

It is important for mortgage note investors to know the foreclosure regulations in their state. They’ll know if the law dictates mortgages or Deeds of Trust. Lenders may need to get the court’s approval to foreclose on a property. Investors don’t need the judge’s approval with a Deed of Trust.

Mortgage Interest Rates

Purchased mortgage loan notes contain a negotiated interest rate. Your investment return will be influenced by the mortgage interest rate. Interest rates are crucial to both performing and non-performing mortgage note buyers.

The mortgage rates set by conventional mortgage firms aren’t equal everywhere. Private loan rates can be slightly more than conventional loan rates considering the larger risk accepted by private mortgage lenders.

Note investors ought to always know the prevailing local mortgage interest rates, private and traditional, in possible mortgage note investment markets.

Demographics

An efficient mortgage note investment plan includes an examination of the community by using demographic information. It is important to determine whether enough people in the neighborhood will continue to have reliable jobs and incomes in the future.
A young expanding community with a diverse employment base can contribute a reliable income stream for long-term note buyers hunting for performing notes.

Non-performing mortgage note purchasers are interested in similar components for various reasons. If non-performing investors have to foreclose, they will need a vibrant real estate market when they liquidate the collateral property.

Property Values

Note holders need to see as much equity in the collateral as possible. When the investor has to foreclose on a loan with little equity, the foreclosure sale may not even repay the balance owed. The combination of mortgage loan payments that lessen the loan balance and annual property value growth increases home equity.

Property Taxes

Normally, lenders collect the house tax payments from the customer each month. The lender passes on the property taxes to the Government to ensure the taxes are submitted without delay. If mortgage loan payments aren’t being made, the mortgage lender will have to either pay the property taxes themselves, or the property taxes become delinquent. Property tax liens take priority over any other liens.

If a market has a record of growing tax rates, the total house payments in that area are regularly growing. Overdue customers might not have the ability to maintain rising payments and could interrupt paying altogether.

Real Estate Market Strength

A region with growing property values promises excellent opportunities for any mortgage note buyer. As foreclosure is an essential element of mortgage note investment planning, growing real estate values are key to discovering a desirable investment market.

A strong market can also be a potential area for originating mortgage notes. For veteran investors, this is a useful segment of their investment strategy.

Some real estate investment firms are conceived as a trust termed Real Estate Investment Trusts or REITs. This was originally invented as a way to empower the ordinary investor to invest in real property. Most investors these days are capable of investing in a REIT.

Shareholders in such organizations are completely passive investors. The exposure that the investors are taking is spread within a selection of investment assets. Shares can be unloaded whenever it is agreeable for the investor. Shareholders in a REIT aren’t allowed to advise or pick real estate properties for investment. The assets that the REIT decides to purchase are the properties your money is used for.

A Real Estate Investment Fund is a mutual fund that holds stocks of real estate companies. The investment real estate properties are not owned by the fund — they are held by the businesses in which the fund invests. These funds make it feasible for a wider variety of people to invest in real estate. Where REITs must disburse dividends to its shareholders, funds do not. The return to you is generated by growth in the value of the stock.

You may select a fund that focuses on a selected type of real estate you’re expert in, but you do not get to choose the market of each real estate investment. Your decision as an investor is to choose a fund that you rely on to handle your real estate investments.