How to Know if It’s the Right Time to Invest in a Memphis Rental Property - Article Banner

Memphis investors are aware that interest rates are going up and that sales prices have likely peaked in the local real estate market. That puts us in a very competitive place, and if you’re wondering when it’s the right time to invest in a Memphis rental property, we have two answers for you: 

  • Now is the right time. 
  • It’s always the right time.

Both of these statements are true, thanks to the strong rental market in Memphis. Rents are rising and demand is high. If you have a well-maintained rental property in a great Memphis location, you’re holding onto a valuable asset. 

Investing now is a great idea because home prices in Memphis are well below the national average. Meanwhile, rents are high and there’s a large pool of tenants to choose from. 

The Memphis Economy Supports Investments 

It’s rarely a good idea to invest in rental properties when the local area is experiencing high unemployment and a depressed local economy. 

That’s not an issue in Memphis right now, which makes it an ideal time to invest. The local economy is strong, and we’re seeing a lot of new industry and small business creation. As the second most populous city in Tennessee, we give people a lot of reasons to move here. There are jobs available, and the University of Memphis enrolls more than 22,000 students. 

The opportunities for growth are continuing to present themselves. The employment rate is high, and our local economy has managed to sustain itself even during periods of higher inflation.

Opportunities for Cash Flow with Memphis Real Estate Investments 

Another great reason to invest now is that you have a remarkable opportunity to earn positive cash flow soon after listing your property for rent. 

This is a high-interest market that’s battling high inflation. Waiting for prices to magically come down isn’t the best investment strategy. 

Real estate provides investors with a fantastic hedge against inflation. That’s because real estate values rise when inflation goes up. You’ll have no trouble increasing your rental rates in order to stay competitive with the market. Even when you’re adjusting your projected earnings for higher tax rates and insurance premiums, you’re still earning some impressive cash flow, especially when you’re smart about how you finance your investment. 

Cash flow, for most rental property owners, is passive income that can easily keep you afloat during any market volatility or uncertainty. 

Every investor wants to buy low and sell high, but plenty of other factors will impact what you ultimately earn on your investment properties. When you know enough to earn what you need to make an investment valuable, why not put your money to work right away. Buy a Memphis investment property. 

Choose the Right Investment Property 

The key to making a profitable investment decision – any time you buy – is to choose the right property. Here’s what you need to be aware of in Memphis. 

  • Location Will Always Be Everything

Location will always matter when we’re talking about real estate, and it will matter for buyers as well as renters. Location affects your rental value and your overall property value. It also impacts how quickly you’ll rent out the home and whether you attract high quality tenants or tenants who are looking for anything and have no real standards. In a market like this one, properties in desirable locations tend to hold their value better than those in less desirable areas. They’re also listed for higher prices, so prepare to pay them or bring your best negotiation skills to the table. 

  • Decide on Property Type When Investing in Memphis Now

Property type will also impact what you’re able to earn, how you manage risk, and whether you’ll have to deal with a lot of vacancy and maintenance. Single-family homes and multifamily properties appreciate at different rates, depending on the market and demand. Luxury homes will appreciate quickly, and properties that are more affordable will rent faster. Decide what works for your investment goals, and remember that it’s always a good idea to diversify your real estate investment portfolio.

  • Lease Terms and Vacancies

Most lease agreements are for a year. Consider what kind of vacancy exposure you’re dealing with, and get an idea of how long tenants tend to stay in place in the property you’re considering. Single-family homes generally retain tenants longer than apartment units. But, vacancy rates are low right now across the Memphis rental market. You likely won’t have to worry about losing tenants and turning over properties every year. 

  • Avoid the Fixer-Uppers 

In a market where home prices are higher than they have been, it’s easy to look for those bargain prices that need a lot of work. Buying a fixer-upper may make sense if you’re an investor who has built a portfolio on flipping homes. That will be hard to do in this current market, however. Instead of buying distressed properties, look for homes that you can rent out immediately. You don’t want to delay the cash flow you can earn because your home isn’t rent-ready yet. 

Working with a Memphis property manager while you look for the right investment opportunity can benefit you tremendously. Not only will you get their expert opinion on the neighborhood, you’ll also get some insight into how much you’ll likely earn in rent. Your property manager can advise you on any repairs or replacements that might be needed before the property is ready for the rental market. You can discuss the types of tenants you might attract and what the ongoing maintenance costs may average out to for a home you’ve identified as a potential rental. 

Real Estate MarketPrepare for a Memphis real estate market that remains competitive. Finance your purchase in a way that high interest rates do not drain your cash flow, and surround yourself with professionals when you’re looking for just the right investment property. We’d love to help. Contact us at RiverTown Realty.