When it comes to investing, you often hear the old adage, "Timing is everything." Well, I’m here to tell you that the timing is now for investing in the Memphis, TN real estate market. Sure, Memphis isn’t sexy like Miami or Las Vegas, but when you look closely at the market fundamentals, they are just too good to ignore. If you are an investor who values cash flow and safety — Memphis is the city for you. Let’s look a little closer at why Memphis real estate is so attractive right now, we did, and so can you.
When evaluating markets for real estate investment — post housing demise — a lot of weight should be given to market stability. Is the market prone to huge swings — both up and down — in development? Are property prices in line with income levels in the area? Is employment in the area overly dependent on a few companies or industries? Is this a place that people actually want to live? These are just a few of the questions you should ask. The premise of course is that you want to find a "safe" market — an area that isn’t likely to collapse if something happens to the economy.
Memphis is one of those cities that just exudes "safe." Property prices aren’t going to increase by 30%, but you can be sure they aren’t going to drop by 30% either. Memphis is an extremely important transportation hub thanks to its location in the middle of the country, and that is something that isn’t going to change. Industry in Memphis is well diversified, with services, food processing, pharmaceuticals, medical devices, education & financial services all providing plentiful job opportunities for residents.
Another important stability metric is market affordability. If an average person in the area can’t afford to buy a house, then chances are good that the market will eventually be forced to correct. On the other hand, if a majority of the population can afford to buy, chances are much better that the market will stay strong. In Memphis, affordability levels are unbelievable right now. Just to give you an idea of how affordable the Memphis market is, let’s look at some comparisons:
Memphis: (1.39 – Home Price to Income ratio)
Median Income: $56,900
Median Home Price: $79,000
Median Income: $65,700
Median Home Price: $152,000
Median Income: $59,400
Median Home Price: $144,000
Median Income: $47,700
Median Home Price: $187,000
(data pulled from CNNMoney’s Fiserv Case-Shiller home price data tool)
We have talked about market safety, but now let’s talk about investment safety. One key to safety investing in real estate, is finding property with plentiful cash flow. If you have a property that brings in significant cash flow every month, it is going to be a much safer investment than a property that is purchased primarily as a long term appreciation play. You can accurately project cash flow — the same cannot be said about appreciation.
In Memphis, you can purchase unbelievable cash flow properties right now. These properties bring in so much cash flow that you probably wouldn’t even consider selling them, and you certainly wouldn’t be forced to sell if the market unexpectedly collapses — like it did in Phoenix and Vegas a few years ago. If you decide to leverage your property, covering your mortgage payment won’t be a problem in Memphis.
There is no such thing as a risk free investment (sorry, but that includes the so call ‘risk free’ US Treasuries), so investors must take strides to minimize risk while they search for investment profits. Choosing a real estate market with low fundamental risks — like Memphis — goes a long way towards minimizing overall investment risk. Investors still need to find a good property, but identifying a good market is step number one.
Brett Immel is a senior partner at Hanover Companies – the Nation’s premier resource for real estate investors and investment property. Hanover has just acquired a BULK portfolio of Cash Flowing, Tenanted, and Rehabbed Single Family Homes in Metro Memphis. Homes start at $31,900!! All our properties have Non-Recourse financing already in place, so you can start cash flowing in your Self-Directed TODAY. Call us today, inventory is limited 877-373-2805.