The Tennessee real estate market is home to many stable and profitable rental markets. One of these markets is the Memphis real estate market. With a successful 2019, the Memphis housing market is expected to continue its prosperity into 2020. As a real estate investor, you should definitely consider purchasing Memphis investment properties. Today, we here at Mashvisor will tell you why.
Related: Memphis Investment Properties – Why You Should Buy Now
Memphis Real Estate Market: Mashvisor’s Investment Data
Let’s start by showing you how profitable it is to buy investment properties in Memphis, TN. The best way to do so is with reliable housing market data. Where can you get access to this real estate data? Right here, at Mashvisor! Mashvisor’s real estate investment tools can help investors find and analyze any rental market and income property in the US. To learn more about Mashvisor’s tools, click here! In the meantime, take a look at the data averages for Memphis investment properties.
Pricing
- Median Property Price: $233,435
- Price per Square Foot: $57
- Price-to-Rent Ratio: 19
Traditional Investing
- Rental Income: $1,035
- Cap Rate / Cash on Cash Return: 1.9%
Airbnb Investing
- Rental Income: $2,057
- Cap Rate / Cash on Cash Return: 5.7%
- Occupancy Rate: 63.4%
Memphis Real Estate Market Trends for 2020 (Why You Should Invest)
So, why should you buy Memphis investment properties in 2020? Here are five Memphis real estate market trends that emphasize why investing in Memphis is a smart decision.
Related: The Future of Real Estate: 4 Trends of 2020
1. You Will Find Affordable Investment Properties
Affordability is a common characteristic of the Southern real estate market, and Memphis epitomizes this trend. As seen from the data above, the median price of a Memphis real estate investment is $233,435. This is significantly lower than the national median, which has ranged from $299,400 to $339,000 in 2019. It’s also lower than the state median of $309,456.
2. Memphis Rental Properties Will Be Profitable
Not only are Memphis investment properties inexpensive, but they are also very profitable. This is particularly true when comparing Memphis to the overall Tennessee real estate market. According to Mashvisor, the typical Memphis investment property has an average traditional and Airbnb ROI of 1.9% and 5.7%, respectively. Tennessee’s traditional and Airbnb ROI averages, on the other hand, are 1.4% and 4.3%.
3. Real Estate Properties Will Appreciate in Value
Memphis rental properties will also benefit from real estate appreciation in 2020. According to NeighborhoodScout, properties in the Memphis real estate market are projected to appreciate by 7.40% in 2019. This appreciation rate is similar to that of the previous year. With a forecast for a high appreciation rate in 2020 as well, Memphis investment rental properties will benefit from appreciation for years to come based on the historical rates.
4. Airbnb Is Legal in Memphis (and Profitable!)
If you are thinking of buying property in the Memphis real estate market, you may be wondering “Is Airbnb legal for Memphis investment properties?”
Fortunately, the answer is yes, Airbnb is legal in Memphis. Overall, Memphis’ Airbnb regulations are conducive to the rental strategy and do not restrict Memphis short-term rentals. This is particularly great as some cities in the Tennessee real estate market have banned Airbnb non-owner occupied rentals, while Memphis has not.
There are a number of Memphis Airbnb laws that investors need to know, all of which can be found in detail here. The most notable laws regarding Airbnb Memphis short-term rentals are as follows:
Operating Requirements
- According to Memphis Airbnb laws, short-term rentals are defined as rentals of temporary lodging for fewer than 30 consecutive days.
- Airbnb Memphis hosts must be at least 18 years old.
- The host or designee must answer calls 24 hours a day, 7 days a week for the duration of the guest’s stay.
- Airbnb Memphis investment properties must have approved smoke alarms and carbon monoxide detectors that meet state standards.
- Hosts and guests must comply with noise control restrictions per area.
Taxes
Airbnb real estate investors must pay the following taxes:
- A 3.5 percent Memphis Short-Term Room Occupancy Tax
- A $2 per bedroom per night Tourism Improvement District Assessment
A Few Tourism and Airbnb Statistics for Memphis That You Should Know
Memphis investment properties are excellent as both traditional and Airbnb investments. As a city renowned for its musical events and history, including the former home of Elvis Presley, Airbnb is quite popular in Memphis. Airbnb Memphis has seen remarkable growth in recent years. Since Airbnb was legalized, Airbnb saw a 67 percent year-over-year growth. In 2018, over 87,000 guests visited Memphis and stayed in an Airbnb. This growth of Airbnb Memphis is estimated to increase in 2020.
Related: What Will 2020 Look Like for Airbnb Real Estate Investing?
5. There Will Be High Demand for Memphis Investment Properties
The main reason investors should purchase Memphis investment properties for sale is for their high demand. The city’s high demand is evident with its status as a hot seller’s market, according to Zillow. However, this demand is likely from investors who know just how profitable rental properties are, as over 53% of residents reside in Memphis rental properties. Tenant demand in the city is always high. So even though it’s not a buyer’s market, it’s still attractive.
Also, positive population growth, which helped the population surpass 1 million, will further incentivize demand. The population continues to grow because Memphis house prices are not the only affordable aspect of its rental market. With a cost of living 24.0% lower than the US average, Memphis is also an affordable place to live. According to NerdWallet, based on the state’s average household income of $51,000, Memphis has a cost of living that is lower than:
- Nashville (by 16%)
- Chattanooga (by 16%)
- Columbia-Maury County (by 10%)
- Morristown (by 7%)
- Jackson-Madison County (by 5%)
With affordable Memphis house prices and cost of living, Memphis investment properties will be in high demand from both investors and tenants.
The Best Neighborhoods in Memphis for Real Estate Investing
Now that we’ve covered the Memphis real estate market forecast for 2020, we can move on to where to invest. According to Mashvisor, these are the best neighborhoods in Memphis, for both traditional and Airbnb.
The Best Neighborhoods for Traditional Investing
1. Windyke-Southwind
Pricing
- Median Property Price: $202,924
- Price per Square Foot: $66
- Price-to-Rent Ratio: 11
Traditional Investing
- Rental Income: $1,486
- Cap Rate / Cash on Cash Return: 3.8%
2. White Haven-Coro Lake
Pricing
- Median Property Price: $79,458
- Price per Square Foot: $38
- Price-to-Rent Ratio: 9
Traditional Investing
- Rental Income: $775
- Cap Rate / Cash on Cash Return: 3.3%
3. Hickory Ridge-South Riverdale
Pricing
- Median Property Price: $127,280
- Price per Square Foot: $60
- Price-to-Rent Ratio: 11
Traditional Investing
- Rental Income: $976
- Cap Rate / Cash on Cash Return: 3.0%
4. Raleigh
Pricing
- Median Property Price: $120,532
- Price per Square Foot: $55
- Price-to-Rent Ratio: 12
Traditional Investing
- Rental Income: $868
- Cap Rate / Cash on Cash Return: 2.6%
5. Parkway Village-Oakhaven
Pricing
- Median Property Price: $80,763
- Price per Square Foot: $47
- Price-to-Rent Ratio: 9
Traditional Investing
- Rental Income: $728
- Cap Rate / Cash on Cash Return: 2.2%
The Best Neighborhoods for Airbnb Memphis
1. Berclair-Highland Heights
Pricing
- Median Property Price: $146,519
- Price per Square Foot: $37
- Price-to-Rent Ratio: 18
Airbnb Investing
- Rental Income: $1,978
- Cap Rate / Cash on Cash Return: 11.5%
- Occupancy Rate: 51.4%
2. River Oaks-Kirby-Balmoral
Pricing
- Median Property Price: $455,251
- Price per Square Foot: $84
- Price-to-Rent Ratio: 29
Airbnb Investing
- Rental Income: $2,782
- Cap Rate / Cash on Cash Return: 6.8%
- Occupancy Rate: 81.2%
3. Downtown
Pricing
- Median Property Price: $455,285
- Price per Square Foot: $180
- Price-to-Rent Ratio: 24
Airbnb Investing
- Rental Income: $3,144
- Cap Rate / Cash on Cash Return: 6.8%
- Occupancy Rate: 65.2%
4. Midtown
Pricing
- Median Property Price: $264,002
- Price per Square Foot: $51
- Price-to-Rent Ratio: 25
Airbnb Investing
- Rental Income: $2,150
- Cap Rate / Cash on Cash Return: 5.8%
- Occupancy Rate: 62.8%
5. East Memphis
Pricing
- Median Property Price: $378,293
- Price per Square Foot: $64
- Price-to-Rent Ratio: 28
Airbnb Investing
- Rental Income: $1,541
- Cap Rate / Cash on Cash Return: 2.8%
- Occupancy Rate: 56.3%
All in all, the Memphis real estate market will be an underrated gem in the Southern real estate market. To start searching for Memphis houses for sale, click here to start your FREE 14-day trial with Mashvisor!
