Ultimate Memphis Real Estate Investing Guide for 2024

A long-term wealth growing plan that involves Buying a property, Repairing, Renting, Refinancing it, and Repeating the procedure by employing the capital from the refinance is called BRRRR. This is a plan to grow your investment assets rather than own one rental home. A vital piece of this strategy is to be able to receive a “cash-out” refinance.

You add to the value of the property beyond what you spent purchasing and fixing the property. The home is refinanced using the ARV and the difference, or equity, is given to you in cash. You purchase your next asset with the cash-out sum and start all over again. This assists you to reliably add to your assets and your investment income.

When an investor has a large collection of investment homes, it seems smart to employ a property manager and establish a passive income stream. Find top Memphis real estate managers by using our directory.

Factors to Consider

Population Growth

The increase or decline of a market’s population is a good benchmark of the market’s long-term attractiveness for rental property investors. A booming population normally illustrates active relocation which equals additional tenants. The market is attractive to employers and workers to locate, work, and create households. This equals dependable renters, more lease revenue, and more possible homebuyers when you intend to sell your property.

Property Taxes

Property taxes, ongoing maintenance costs, and insurance directly impact your revenue. Unreasonable property taxes will hurt a property investor’s returns. Steep real estate tax rates may predict an unreliable area where costs can continue to expand and should be thought of as a warning.

Price to Rent Ratio

Price to rent ratio (p/r) is a market signal that shows you the amount you can anticipate to collect as rent. If median real estate values are high and median rents are small — a high p/r, it will take more time for an investment to pay for itself and achieve good returns. A higher p/r tells you that you can demand modest rent in that location, a small p/r informs you that you can collect more.

Median Gross Rents

Median gross rents are a clear indicator of the vitality of a lease market. Search for a consistent expansion in median rents during a few years. If rents are being reduced, you can scratch that market from deliberation.

Median Population Age

The median residents’ age that you are on the hunt for in a vibrant investment market will be close to the age of salaried people. If people are moving into the region, the median age will not have a challenge staying in the range of the employment base. If you see a high median age, your supply of tenants is becoming smaller. That is a weak long-term financial picture.

Employment Base Diversity

A diverse employment base is something a smart long-term rental property investor will look for. When working individuals are employed by a couple of dominant businesses, even a little disruption in their operations could cause you to lose a lot of renters and expand your exposure tremendously.

Unemployment Rate

You won’t be able to get a secure rental cash flow in a location with high unemployment. Unemployed individuals are no longer customers of yours and of related businesses, which creates a ripple effect throughout the market. This can generate increased retrenchments or shorter work hours in the area. Existing renters might fall behind on their rent in this situation.

Income Rates

Median household and per capita income rates help you to see if enough suitable renters live in that area. Improving wages also tell you that rental rates can be increased throughout the life of the asset.

Number of New Jobs Created

A growing job market results in a steady flow of renters. New jobs equal additional tenants. Your plan of leasing and purchasing more rentals needs an economy that can generate new jobs.

School Ratings

School ratings in the community will have a huge impact on the local property market. When a business evaluates a city for potential relocation, they remember that good education is a prerequisite for their workforce. Moving companies relocate and attract prospective renters. Recent arrivals who buy a home keep property market worth strong. Reputable schools are an important requirement for a strong property investment market.

Property Appreciation Rates

High property appreciation rates are a prerequisite for a profitable long-term investment. You want to ensure that the chances of your asset appreciating in value in that location are promising. You don’t need to take any time exploring communities with unimpressive property appreciation rates.

A short-term rental is a furnished unit where a renter resides for shorter than 30 days. Short-term rental owners charge a steeper rate a night than in long-term rental properties. Because of the increased rotation of tenants, short-term rentals entail more recurring upkeep and tidying.

Average short-term tenants are excursionists, home sellers who are waiting to close on their replacement home, and corporate travelers who require something better than hotel accommodation. House sharing websites such as AirBnB and VRBO have encouraged many homeowners to join in the short-term rental industry. A convenient way to get into real estate investing is to rent a residential property you currently keep for short terms.

The short-term rental housing business includes interaction with renters more frequently compared to annual rental units. This leads to the investor having to constantly manage grievances. You might need to defend your legal liability by hiring one of the top Memphis investor friendly real estate law firms.

Factors to Consider

Short-Term Rental Income

You must imagine the range of rental revenue you’re aiming for based on your investment calculations. A glance at a region’s present average short-term rental prices will show you if that is a good location for your investment.

Median Property Prices

Thoroughly calculate the budget that you are able to spend on new investment properties. To find out if a community has opportunities for investment, check the median property prices. You can adjust your real estate hunt by analyzing median market worth in the region’s sub-markets.

Price Per Square Foot

Price per square foot provides a basic idea of market values when looking at comparable units. If you are examining similar kinds of property, like condominiums or separate single-family residences, the price per square foot is more reliable. Price per sq ft may be a fast method to gauge different communities or properties.

Short-Term Rental Occupancy Rate

The ratio of short-term rental units that are presently rented in a city is vital information for a landlord. A market that demands more rental units will have a high occupancy level. If the rental occupancy indicators are low, there is not enough demand in the market and you must explore in a different place.

Short-Term Rental Cash-on-Cash Return

To determine if you should put your money in a specific investment asset or city, look at the cash-on-cash return. You can calculate the cash-on-cash return by determining your Net Operating Income (NOI) and dividing it by your cash being invested. The return is shown as a percentage. High cash-on-cash return shows that you will regain your money quicker and the investment will have a higher return. When you take a loan for a fraction of the investment budget and put in less of your funds, you will get a higher cash-on-cash return.

Average Short-Term Rental Capitalization (Cap) Rates

One metric conveys the market value of an investment property as a revenue-producing asset — average short-term rental capitalization (cap) rate. A rental unit that has a high cap rate as well as charging average market rental rates has a good market value. Low cap rates show more expensive rental units. Divide your expected Net Operating Income (NOI) by the property’s market worth or purchase price. The answer is the annual return in a percentage.

Local Attractions

Short-term renters are commonly tourists who visit a community to enjoy a recurrent major event or visit unique locations. This includes top sporting events, youth sports contests, schools and universities, large auditoriums and arenas, festivals, and theme parks. Natural tourist spots like mountains, waterways, coastal areas, and state and national parks will also draw prospective renters.

The fix and flip approach means purchasing a property that needs improvements or rebuilding, generating added value by enhancing the building, and then reselling it for a better market value. To get profit, the flipper has to pay less than the market price for the house and calculate what it will cost to rehab it.

You also want to evaluate the resale market where the house is located. The average number of Days On Market (DOM) for houses sold in the market is important. To successfully “flip” real estate, you have to liquidate the renovated home before you have to spend a budget to maintain it.

To help distressed residence sellers find you, enter your firm in our catalogues of cash property buyers in Memphis TX and real estate investment firms in Memphis TX.

Additionally, hunt for real estate bird dogs in Memphis TX. Specialists found here will help you by quickly discovering possibly lucrative deals ahead of the projects being listed.

Factors to Consider

Median Home Price

Median home price data is a vital indicator for assessing a future investment region. Low median home prices are an indication that there should be a good number of real estate that can be acquired for lower than market worth. This is a vital component of a successful fix and flip.

When you detect a quick drop in real estate market values, this may mean that there are potentially properties in the area that qualify for a short sale. Real estate investors who team with short sale negotiators in Memphis TX receive regular notices regarding possible investment real estate. Learn how this is done by reviewing our guide ⁠— What Are the Steps to Buying a Short Sale Home?.

Property Appreciation Rate

The movements in real estate prices in a region are crucial. You are looking for a reliable growth of the area’s real estate prices. Rapid market worth surges could reflect a value bubble that isn’t reliable. You may wind up purchasing high and liquidating low in an unstable market.

Average Renovation Costs

A thorough analysis of the area’s building costs will make a substantial difference in your area choice. The time it will require for acquiring permits and the local government’s rules for a permit application will also affect your decision. You need to be aware whether you will have to hire other contractors, like architects or engineers, so you can be prepared for those expenses.

Population Growth

Population increase is a strong indication of the potential or weakness of the city’s housing market. If the number of citizens isn’t expanding, there is not going to be a sufficient supply of purchasers for your fixed homes.

Median Population Age

The median citizens’ age is a straightforward sign of the presence of potential home purchasers. The median age better not be less or higher than the age of the usual worker. Workforce are the individuals who are qualified homebuyers. People who are preparing to exit the workforce or are retired have very particular housing requirements.

Unemployment Rate

You want to see a low unemployment rate in your target area. An unemployment rate that is less than the US median is preferred. When the area’s unemployment rate is less than the state average, that is an indicator of a good economy. If you don’t have a dynamic employment environment, a market won’t be able to supply you with qualified home purchasers.

Income Rates

The residents’ wage stats show you if the city’s financial market is strong. Most people who buy a house need a home mortgage loan. Home purchasers’ ability to take financing depends on the size of their wages. The median income indicators will tell you if the community is beneficial for your investment endeavours. You also prefer to see incomes that are going up over time. Building expenses and home prices go up periodically, and you want to be certain that your target customers’ income will also improve.

Number of New Jobs Created

Understanding how many jobs are generated per year in the community can add to your assurance in an area’s investing environment. Homes are more easily liquidated in a community with a vibrant job market. Qualified trained workers taking into consideration buying a house and deciding to settle opt for migrating to areas where they won’t be jobless.

Hard Money Loan Rates

People who acquire, rehab, and liquidate investment properties prefer to enlist hard money and not typical real estate loans. Doing this lets investors negotiate profitable deals without hindrance. Review Memphis private money lenders for real estate investors and study lenders’ costs.

Investors who aren’t well-versed regarding hard money lending can learn what they should understand with our resource for those who are only starting — What Is Private Money?.

In real estate wholesaling, you search for a property that real estate investors would consider a profitable deal and sign a contract to purchase it. When a real estate investor who needs the property is found, the sale and purchase agreement is sold to the buyer for a fee. The contracted property is bought by the investor, not the wholesaler. The real estate wholesaler does not liquidate the property — they sell the contract to buy one.

Wholesaling relies on the participation of a title insurance company that’s experienced with assigning purchase contracts and understands how to work with a double closing. Search for title companies for wholesalers in Memphis TX in HouseCashin’s list.

Our complete guide to wholesaling can be viewed here: Property Wholesaling Explained. When you go with wholesaling, add your investment company in our directory of the best wholesale property investors in Memphis TX. This will help your future investor customers locate and reach you.

Factors to Consider

Median Home Prices

Median home values in the community under review will immediately inform you whether your investors’ target properties are positioned there. Reduced median prices are a valid sign that there are plenty of residential properties that could be acquired under market price, which investors have to have.

A rapid drop in the value of real estate could cause the sudden appearance of properties with more debt than value that are desired by wholesalers. Short sale wholesalers can reap advantages from this strategy. Nonetheless, be aware of the legal risks. Find out more about wholesaling short sales with our exhaustive guide. When you’ve chosen to try wholesaling these properties, be sure to employ someone on the list of the best short sale law firms in Memphis TX and the best foreclosure law firms in Memphis TX to advise you.

Property Appreciation Rate

Median home price dynamics are also critical. Many investors, including buy and hold and long-term rental landlords, specifically need to see that residential property prices in the area are growing over time. Declining market values indicate an equally poor leasing and home-selling market and will dismay real estate investors.

Population Growth

Population growth stats are a contributing factor that your prospective real estate investors will be familiar with. When the community is expanding, additional residential units are needed. This combines both leased and ‘for sale’ properties. When a location is losing people, it does not require more residential units and investors will not look there.

Median Population Age

A friendly housing market for investors is active in all aspects, notably tenants, who turn into home purchasers, who transition into more expensive real estate. This takes a vibrant, reliable labor force of people who feel optimistic to go up in the residential market. That’s why the city’s median age should be the age of skilled workers in the employment market.

Income Rates

The median household and per capita income in a robust real estate investment market need to be increasing. Income growth demonstrates a location that can keep up with rent and housing purchase price surge. Investors stay out of cities with weak population income growth numbers.

Unemployment Rate

The city’s unemployment numbers are a crucial point to consider for any potential contract buyer. Late lease payments and default rates are widespread in places with high unemployment. Long-term real estate investors will not purchase real estate in a market like that. Renters can’t move up to ownership and existing owners can’t sell their property and move up to a larger home. Short-term investors will not risk getting pinned down with a home they can’t resell quickly.

Number of New Jobs Created

Understanding how frequently new jobs appear in the community can help you find out if the home is positioned in a vibrant housing market. New citizens move into a market that has new jobs and they need a place to live. No matter if your buyer base is made up of long-term or short-term investors, they will be attracted to a place with regular job opening generation.

Average Renovation Costs

Rehab expenses will be important to many real estate investors, as they usually purchase inexpensive distressed properties to fix. When a short-term investor fixes and flips a home, they have to be prepared to unload it for a larger amount than the total sum they spent for the acquisition and the rehabilitation. The cheaper it is to fix up a unit, the more profitable the community is for your potential contract clients.

Investing in mortgage notes (loans) works when the loan can be obtained for a lower amount than the remaining balance. This way, the purchaser becomes the mortgage lender to the initial lender’s borrower.

Loans that are being paid as agreed are referred to as performing loans. Performing notes earn repeating income for you. Some mortgage note investors like non-performing loans because if the note investor can’t satisfactorily restructure the loan, they can always purchase the collateral at foreclosure for a low amount.

One day, you might have a large number of mortgage notes and necessitate additional time to oversee them on your own. In this event, you may want to enlist one of mortgage loan servicing companies in Memphis TX that will basically convert your investment into passive cash flow.

Should you choose to adopt this investment model, you should place your business in our list of the best promissory note buyers in Memphis TX. When you’ve done this, you will be seen by the lenders who publicize desirable investment notes for purchase by investors such as yourself.

Factors to Consider

Foreclosure Rates

Performing loan buyers are on lookout for communities showing low foreclosure rates. High rates may signal investment possibilities for non-performing note investors, but they need to be cautious. However, foreclosure rates that are high may signal a weak real estate market where getting rid of a foreclosed unit will be a no easy task.

Foreclosure Laws

It’s imperative for mortgage note investors to learn the foreclosure laws in their state. They’ll know if the state dictates mortgages or Deeds of Trust. A mortgage dictates that the lender goes to court for permission to foreclose. Investors do not have to have the court’s agreement with a Deed of Trust.

Mortgage Interest Rates

Purchased mortgage loan notes have a negotiated interest rate. Your investment profits will be influenced by the interest rate. Interest rates are critical to both performing and non-performing mortgage note investors.

The mortgage rates quoted by conventional lending companies aren’t the same everywhere. Loans issued by private lenders are priced differently and can be more expensive than conventional loans.

Note investors should consistently know the prevailing local mortgage interest rates, private and conventional, in possible mortgage note investment markets.

Demographics

A lucrative mortgage note investment plan incorporates an assessment of the market by using demographic information. It is critical to determine whether a suitable number of people in the area will continue to have good jobs and wages in the future.
A youthful expanding community with a vibrant employment base can generate a consistent revenue flow for long-term note investors looking for performing mortgage notes.

Non-performing mortgage note investors are interested in similar elements for various reasons. If foreclosure is necessary, the foreclosed home is more easily unloaded in a good property market.

Property Values

The more equity that a homebuyer has in their home, the better it is for you as the mortgage lender. If the property value isn’t significantly higher than the mortgage loan balance, and the lender wants to start foreclosure, the house might not realize enough to repay the lender. The combined effect of loan payments that lessen the loan balance and yearly property value appreciation expands home equity.

Property Taxes

Payments for house taxes are most often paid to the lender simultaneously with the loan payment. The mortgage lender pays the payments to the Government to make sure the taxes are paid on time. If loan payments are not being made, the mortgage lender will have to choose between paying the property taxes themselves, or they become delinquent. When property taxes are past due, the government’s lien leapfrogs any other liens to the head of the line and is paid first.

If an area has a history of rising tax rates, the combined home payments in that city are constantly expanding. Homeowners who are having difficulty handling their mortgage payments might drop farther behind and eventually default.

Real Estate Market Strength

A stable real estate market having good value growth is beneficial for all kinds of mortgage note buyers. They can be confident that, if necessary, a defaulted collateral can be unloaded at a price that makes a profit.

Vibrant markets often provide opportunities for note buyers to generate the first mortgage loan themselves. It is an added stage of a mortgage note investor’s career.

A REIT, or Real Estate Investment Trust, means a business that makes investments in income-generating real estate. REITs were invented to enable everyday people to buy into real estate. Shares in REITs are economical to most people.

Shareholders in REITs are totally passive investors. REITs oversee investors’ exposure with a varied collection of real estate. Shareholders have the ability to liquidate their shares at any time. One thing you cannot do with REIT shares is to determine the investment properties. You are confined to the REIT’s collection of assets for investment.

Real estate investment funds are in essence mutual funds that focus on real estate companies, such as REITs. Any actual real estate is possessed by the real estate companies rather than the fund. Investment funds are considered an affordable method to incorporate real estate in your allocation of assets without needless liability. Investment funds are not required to pay dividends unlike a REIT. The worth of a fund to an investor is the expected growth of the worth of the shares.

You can select a real estate fund that focuses on a specific kind of real estate business, such as commercial, but you cannot suggest the fund’s investment assets or markets. Your selection as an investor is to select a fund that you rely on to manage your real estate investments.