For real estate investors, Memphis is a great investment destination. Following the upsetting blows of the real estate bubble bursting, the Bluff City has taken its time getting back on its feet.
Now, it’s a booming real estate destination for investors interested in investment properties. The investment properties are not only reasonably priced, but the demand is also on the rise.
Reasons to Invest in Memphis Real Estate:
· Memphis has a relatively young population.
15% of the population is aged 9 years and below. This makes the Memphis real estate market an excellent option both in the short term and long term. You can target those who are trying to find the perfect place to raise a family but aren’t yet ready to buy their own place.
· Memphis experiences nice weather
The nice weather makes it attractive for people living in less amiable climates, particularly those living in the northern locations.
· The Memphis rental market is sound.
Since the population is generally young, it means that they still cannot afford to buy a home on their own yet. For this reason, if you are thinking of buying a Memphis investment property, consider one that accommodates a small family.
· Memphis investment properties are really affordable.
For both real estate investors and homebuyers, housing prices are a key factor. Generally speaking, investment properties in Memphis are relatively affordable right now. Various types of Memphis investment properties – single-family homes, condos, townhome – are priced reasonably, below the national averages.
Evidently, Memphis is one of the hottest real estate markets now, and this is projected to continue into 2019 and beyond.
Nevertheless, before buying a Memphis investment property, there are certain important things worth considering.
Tips for Buying Investment Property in Memphis:
1. Find the right real estate agent.
You want a real estate agent who is well-versed with the local Memphis real estate market and Tennessee rental laws. Ideally, find one who’s interested in establishing a relationship, owns rental property themselves and specializes in investment property.
An agent becomes especially valuable when you are considering investing in a neighborhood you are unfamiliar with. A good agent will help you determine exactly what you are looking for and then truly bring your dream home to light.
2. Know that finding good tenants is key.
Homing in on the right investment property is only one half of the equation. The other half involves filling it with the right tenants. Finding the right tenants will save you time and money and avoid potential problems. With the right renters, you won’t have to worry about enforcing Tennessee’s landlord-tenant law.
To find the right tenants, you need to have a thorough tenant screening process in place. If you aren’t familiar with the process, consider hiring a property manager. Keep in mind that not all property managers are created equal, though. Hence, screen them just as you would screen potential tenants.
3. Your Memphis investment property doesn’t have to be your dream home.
This is a common mistake that first-time investors usually make. Does your list of must-haves generally include double-sink bathrooms, a two-car garage, and hardwood floors? If so, then you might want to reconsider your priorities.
While these might be okay for your personal abode, these aren’t necessary when it comes to investment properties.
What you should be paying more attention to is the property’s location. When it comes to attracting the right tenant, location matters big time.
4. Calculate your Return on Investment (ROI) prior to purchasing.
By now, you probably know that real estate isn’t without risk. Don’t jump on an investment property without checking your potential ROI. It’s just like you likely wouldn’t put money into a mutual fund or Exchange-Traded Fund (ETF) without first checking its performance.
Preferably, it would be best for you to invest in a rental property with a potential return of at least 14% to start. Essentially, look for something with returns much higher than what a diversified portfolio would return.
To estimate your ROI for the first year, you’ll need to subtract the annual principal and interest that you’d pay from your total estimated net income from the property (which includes projected property appreciation, estimated tax savings, and potential rental income).
Next, divide that figure by your down payment. This is assuming that taxes and closing costs are already factored into your mortgage, and repair costs.
Keep in mind that it can be complex to truly understand your return on investment. Your estimation will likely boil down to your specific situation.
5. Buy an investment property with as little maintenance and ongoing repair as possible.
This will help you maximize the profit on your Memphis investment property. Look for flooring that is hard-wearing and low maintenance. Ensure that the property is structurally sound. Check the conditions of the fittings and state of the bathroom and kitchen to ensure their condition is good.
If you take all these factors into account, buying a Memphis investment property can be hugely lucrative. You can earn passive income for years to come and remain with something valuable once you are done servicing the mortgage.