At this point, it goes without saying that the real estate market is on fire. In 2021, the housing market experienced unprecedented growth.
Investors have swooped in the take advantage of low interest rates. The result? Bidding wars and price increases.
Luckily, experts project that 2022 will be a much better year to invest in property. Interest rates are expected to return to their pre-pandemic rates. This should cause overall housing prices to drop significantly.
As a result, more and more buyers are interested in purchasing a home. A good percentage of those people are looking to invest in a rental property.
But, are rental properties a good investment? And, is Memphis the right area to buy property?
We have put together this guide to help you understand the pros and cons of Memphis rental properties. This information could help you understand if this investment is right for you.
Memphis Is A Booming City
Location, location, location. This expression might sound like a cliché. But, it is the golden rule of real estate investment. Property values stem mainly from their locations.
The good news is that Memphis is a fantastic location. It provides a decent balance of urban and rural living that attracts a blossoming local population.
Nestled alongside the Mississippi River, Memphis offers some fantastic access to nature. Residents frequently enjoy activities like kayaking, SUP boarding, and rowing.
The city also boasts some exciting cultural attractions. Elvis Presley’s Graceland and the Blues Hall of Fame both bring a lot of visitors to the area. River cruises and Beale Street bars also provide a lot of entertainment.
As a result of all of this activity, Memphis is a thriving city. Its 633,000 inhabitants are more and more employed each year. Over the course of the last decade, the local job growth rate increased by 1.4 percent.
Memphis is also a very young city. 39 percent of the local population is between the ages of 20 and 49.
A high concentration of young people is generally a good indicator that a city will continue to grow. It also means that there will be high demand for rental properties, as young people tend to rent their homes.
The Memphis Housing Market Is Growing
It’s no secret that Memphis is the newest hot spot for the housing market. Consequently, investing in Memphis real estate could be a great idea.
In 2021, the number of properties sold in Memphis increased by 15 percent. According to projections for 2022, the Memphis market will grow by an additional 7.4 percent.
This growth outpaces other Tennessee cities. The Nashville market is projected to grow 5.5 percent, and the Knoxville market could grow around 3.7 percent.
This could make Memphis one of the fastest-growing urban centers in the whole state!
Some Memphis property investors might be concerned about the rapid rate of this growth. If the Memphis market grows so quickly, won’t some investors get priced out?
In short, we don’t think so.
The average cost of a Memphis house is $245,000. This is well below the national average of $388,000. Consequently, investors should be able to find high-quality properties in their price range.
It’s also important to remember that the rental market in Memphis is also growing. In the next twelve months, national rent prices could go up around seven percent.
This is great news for landlords, who will be able to profit more on their current properties.
Are Rental Properties a Good Investment?
Aspiring landlords frequently fantasize about passive income. Imagine that you own a house and all you have to do to make money is cash your tenants’ monthly checks.
This might sound like a dream. However, being a landlord requires a lot more work than just sitting back and watching the checks roll in.
You will need to take care of your property and respond to your tenants’ requests. You might even have to call your tenants to complain about late or missed payments.
If this sounds like a lot of hassle, you might want to reconsider the type of investment property that you are interested in.
Below, we have listed a few things that you should consider before investing in rental properties.
Are Your Finances In Check?
Buying a rental property is an investment. However, before you make any investment, you have to make sure that your finances are solid.
Do you have enough money to finance a down payment? What kind of conditions did the bank offer you?
A great way to evaluate your financial situation is through the Ten Percent Rule.
You should never pay more than a 10 percent downpayment. You should never pay more than 10 percent in interest. You should always try to buy about 10 percent below the market price.
If you follow this rule, you will increase your chances of profiting from your financial investment. However, if you don’t follow this rule, it’s very likely that you will lose money on your investment.
Are You Handy?
Imagine that your tenant clogs the pipes. This sort of issue is a normal part of living in a home.
Your tenant will not be responsible for fixing the problem. You will be.
Many landlords have a background in areas like plumbing and electricity. These folks have no trouble heading over to their property and fixing the problem themselves.
The less handy landlords, on the other hand, will need to hire a plumber or an electrician to visit the property and take a look. Unfortunately, this kind of incidence can decrease your profits.
We recommend doing a bit of market research. Is there a handyman in Memphis who you can trust? Will the cost of hiring this person compensate in the long run?
These are some important questions to consider before moving forward.
Schedule A Call Today
Are you excited about investing in Memphis property? Do you still have questions about the process? Are rental properties a good investment?
You should give us a call. In this free consultation, we will respond to all of your Memphis real estate questions. We can even recommend a few listings for you to check out.
All in all, we look forward to hearing from you!