How to Build a Thriving Rental Portfolio in Memphis

Memphis can be a favorable place to put together a rental portfolio because many residents rent, and home prices are relatively affordable. The best results usually come from focusing on steady cash flow, careful resident screening, and realistic expectations rather than rapid price growth.

The Memphis real estate market ended 2005 on a high note compared to figures from the previous year, according to the Memphis Area Association of Realtors. Median sale prices on property surged 17% higher.

While local property prices aren’t as high as those in other major cities in the area, like Nashville, the region attracts a steady stream of renters due to stable and reasonably priced rents. If you’re looking to build a steady, dependable rental portfolio, Memphis is a great choice.

Is Memphis, Tennessee, a good rental market?

According to the US census, over half of Memphis’ residents rent their homes. The proportion of renters versus property owners is unlikely to change significantly in the near future.

For landlords, this situation has both advantages and disadvantages. Rental properties offer a dependable source of income, but building rental income is usually slow and steady due to high levels of local competition.

Is Memphis a Good Rental Market?

One significant reason for the high rental demand is that the city is home to large-scale employers that attract workers from across the country and globally. For example, FedEx operates its global hub out of Memphis International Airport, attracting everyone from highly qualified IT professionals to blue-collar delivery drivers.

Most of these workers opt for rentals rather than owning property outright. FedEx alone employs tens of thousands of people, and the city is also a significant manufacturing hub.

Not only are there plenty of well-established companies bringing in thousands of new renters every year, but there are also plans from other multinational companies to open new local operations. For example, Ford is planning to build a new electric vehicle facility, which, according to figures from Ford, will create around 6,000 direct jobs.

Is Tennessee a Landlord-Friendly State?

On the regulatory side, the law is highly favorable compared to coastal states like California. There’s no cap on rental rates, and despite high competition in the market, rentals still trend towards average rates. In some up-and-coming neighborhoods, there’s no red tape stopping landlords from making gains on their smart investments.

One of the main legal benefits involves the eviction process. While other, more resident-favorable states give delinquent residents months to vacate the property, courts in Memphis are quick to grant eviction notices for non-payment. Residents who don’t pay their fair share will usually be out within a couple of weeks.

Now let’s look at some ways you can maximize your Memphis property portfolio.

Memphis Rental Property Strategies

If you’re looking for neighborhoods that will experience rapid growth and provide massive returns on investment, other cities might be a better option. While Memphis does have areas undergoing renovations, such as Binghamton, the key to success here is purchasing investment property like single-family homes or small multifamily units.

Focusing your rental portfolio on areas where the local workforce lives if you prioritize consistent yield. For higher chances of finding quality residents, consider areas like Midtown or South Main. Simply put, Memphis is more of a slow-growth city, and it’s a mistake to expect rapid appreciation on your investment.

Protect Your Memphis Real Estate Investment: Resident Screening

As mentioned earlier, residents in Memphis are generally favorable to landlords, but that doesn’t mean you can skip the resident screening process. Memphis has high levels of poverty and some neighborhoods with relatively high crime rates.

While you can quickly evict problematic residents, having a few can significantly impact your investment in a market where investors depend on modest, consistent returns. For the best results with resident screening, it’s advisable to outsource the process to a professional property management company that understands local dynamics.

Consider Future Job-Creation

Once you have a stable portfolio with properties in more secure neighborhoods, consider branching out to riskier ones. For example, you might anticipate future housing demand driven by new job creators in the area, such as the Ford Electric Vehicle Campus.

However, note that the competitiveness of the area means this strategy is unlikely to yield huge returns on investment.

Frequently Asked Questions

What’s an Example of a High-Risk Neighborhood in Memphis?

Binghampton is a traditionally working-class community that has fallen on hard times in recent years, but it is now in transition as extensive renovation efforts move forward.

Here’s a quick snapshot of Binghampton:

Renovation underway: Extensive renovation efforts are underway, and the area is undergoing a transition.
Renter mix: A mix of local renters now lives alongside new arrivals drawn by relatively low rent.
Reputation shift: The neighborhood is trying to shake off its high crime reputation.
New listings: Many newly renovated properties are going on the market.
Close to Midtown: Its proximity to more affluent areas like Midtown and East Memphis may appeal to investors.
Regeneration upside: If efforts succeed and the area becomes safe and desirable, investing in newly renovated properties could pay off.

Which Neighborhood Is Most Attractive to Affluent Residents?

South Main is a typically gentrified neighborhood. Let’s look at a quick rundown of South Main:

Loft conversions: It’s full of loft conversion apartments surrounded by trendy bars and restaurants.
Affluent residents: The typical resident here is a young student or professional with high levels of disposable income.
Higher costs: The disadvantage for landlords is that property is expensive.
Higher standards: Residents will demand only the best in furnishings and decoration.

Expand Your Rental Portfolio With Confidence

Memphis rewards investors who play it slow and steady. Buy for cash flow, keep expectations realistic. With disciplined screening and a repeatable strategy, a Memphis rental portfolio can produce steady income while positioning you for long-term upside.

Investing in Memphis requires local knowledge and expertise. Particularly when it comes to resident screening. Here at Reedy & Company, we have over four decades of experience working with local property owners to maximize their investment returns. We also have experience managing over 3,500 properties.