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1) Memphis has a "price-to-rent ratio" of 13.6, indicating affordable housing compared to rental costs
Signal strength: strong
When considering real estate investment, one key metric to look at is the price-to-rent ratio, which in Memphis is 13.6. This figure is considered low, indicating that the cost of buying a property is relatively affordable compared to renting.
In simple terms, a low price-to-rent ratio suggests that buying a home could be more cost-effective than renting over time. This is because the initial investment in purchasing a property can be recouped more quickly through rental income.
For investors, this means that the potential for generating rental income is strong, making it a potentially lucrative opportunity. Additionally, a low ratio often signals that property values have room to appreciate, offering the chance for capital gains.
However, if the price-to-rent ratio were to rise above 20, it might indicate that buying is less favorable compared to renting, suggesting a need for caution.
Sources: USCensus, Redfin, Zillow
2) Memphis has a "livability score" of 70, indicating a good quality of life
Signal strength: moderate
The livability score of 70 in Memphis is considered good because it reflects a balance of factors that make the city attractive for residents. This score indicates that Memphis offers a quality of life that is appealing to many, which is a positive signal for real estate investors.
One specific characteristic that contributes to this score is the vibrant music scene, particularly the city's rich history in blues and rock 'n' roll, which attracts tourists and new residents alike. Additionally, Memphis is known for its affordable cost of living, which is lower than the national average, making it an attractive option for families and young professionals. The city also boasts a strong sense of community, with numerous local events and festivals that foster a welcoming atmosphere.
These factors combined suggest that investing in property in Memphis could be a wise decision, as they contribute to a stable and potentially growing real estate market. A good livability score often correlates with increased demand for housing, which can lead to property value appreciation over time.
However, if the livability score were to drop below 60, it might indicate underlying issues that could affect the desirability of the area and, consequently, the value of real estate investments.
Source: AreaVibes
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3) In Memphis, a local can afford to buy a house in about 2.9 years, which is relatively quick
Signal strength: moderate
In Memphis, the fact that it would take around 2.9 years for a local to buy a house is a promising indicator for potential real estate investors. This relatively short time frame suggests that the housing market is accessible and affordable, making it an attractive option for those looking to invest.
With a median household income of approximately $51,399, residents have a reasonable earning capacity to support home purchases. Coupled with a median home price of about $149,755, the affordability ratio is favorable, indicating that homes are within reach for many locals.
Such affordability can lead to a stable demand for housing, which is a positive sign for investors. When the local population can afford to buy homes, it often results in a steady appreciation of property values over time, enhancing the investment potential.
If the time to buy a house were to increase significantly, say to over 5 years for a local to afford a home, it might suggest that the market is becoming less accessible, potentially signaling a less favorable investment environment.
Source: USCensus
4) Memphis is enhancing real estate values through infrastructure projects like the "I-55 Bridge Replacement" and the "Memphis Innovation Corridor."
Signal strength: moderate
Several infrastructure projects in Memphis, Tennessee, are poised to boost real estate values, making property investment in the area potentially lucrative.
The I-55 Bridge Replacement is a significant undertaking, expected to be completed by 2026. This project involves replacing the bridge over the Mississippi River, a vital link for commerce and connectivity. By improving safety and efficiency, the new bridge will support smoother freight movement and better accessibility, accommodating up to 64,000 vehicles daily by 2050. This increased capacity is likely to boost economic vitality in the region, benefiting residents and businesses across Tennessee, Arkansas, and Mississippi.
The Memphis Innovation Corridor Project is another key development, featuring a bus rapid transit line connecting downtown, the Memphis Medical District, and the University of Memphis. With exclusive bus lanes and enhanced transit features, this project aims to improve transportation efficiency, which could lead to increased real estate values in the affected areas.
Additionally, the Memphis International Airport Modernization is a $653 million project focused on enhancing the traveler experience and supporting long-term growth. By modernizing the terminal building, this project is expected to boost real estate values in the surrounding areas, further supporting the notion that investing in Memphis property is a wise decision.
Sources: Tennessee Governor's Office, Transit DOT, Memphis International Airport
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5) Memphis is expected to see a 4.2% rise in its population between 2024 and 2034
Signal strength: moderate
The population of Memphis is projected to increase by 4.2% from 2024 to 2034, which is a positive indicator for real estate investment in the area.
Historically, population growth is a key driver of real estate demand. As more people move to or are born in an area, the demand for housing typically increases. This can lead to a rise in property values and rental prices, making real estate a potentially lucrative investment. The projected population increase in Memphis suggests a reversal of the recent declining trend, indicating a potential upswing in the local housing market.
Moreover, a growing population often stimulates economic development, attracting businesses and creating jobs. This can enhance the overall appeal of the area, further boosting property values. The forecasted growth in Memphis's population could lead to a more vibrant economy, making it an attractive location for both residential and commercial real estate investments.
Additionally, the projected increase in the metro area population, reaching 1,684,743 by 2034, highlights the potential for long-term growth and stability in the real estate market. Investors looking for opportunities in emerging markets might find Memphis appealing due to its anticipated population growth and the associated economic benefits.
Sources: Neilsberg, Synergos Technologies, Macrotrends
6) The "cash-on-cash return" for Airbnb in Memphis, at 6.0%, is fairly appealing
Signal strength: moderate
The cash-on-cash return on Airbnb in Memphis is 6.0%, which is considered moderately attractive for investors looking at short-term rental properties.
This percentage indicates that the income generated from renting out the property is relatively good compared to the initial cash investment. In Memphis, short-term tenants often include tourists visiting for the city's rich musical heritage, such as the birthplace of blues and rock 'n' roll.
Additionally, business travelers attending conferences or events in the city also contribute to the demand for short-term rentals. The presence of students and families visiting local universities further supports the need for temporary accommodations.
If the cash-on-cash return were to drop below 4.0%, it might suggest that the investment is less favorable, indicating a potential decrease in profitability.
Source: Mashvisor
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7) The "cash-on-cash return" of 6.0% in Memphis is fairly appealing
Signal strength: moderate
The cash-on-cash return of 6.0% in Memphis indicates a moderate level of profitability for real estate investors.
This percentage suggests that the income generated from the property, relative to the cash invested, is reasonably attractive compared to other markets. In Memphis, long-term tenants often include students, young professionals, and families who are looking for affordable housing options.
These groups are typically drawn to Memphis due to its growing job market and educational institutions. The presence of these tenants provides a stable rental demand, which is crucial for maintaining consistent rental income.
If the cash-on-cash return were to drop below 4.0%, it might indicate a less favorable investment opportunity in the Memphis real estate market.
Source: Mashvisor
8) Memphis homes are significantly more affordable, with prices 66% lower than the national average
Signal strength: minimal
The fact that Memphis has a median home price 66% below the national average suggests that there is significant room for property value appreciation. This makes it an attractive market for investors looking to buy low and potentially sell high.
In Memphis, the most expensive properties are likely luxury homes located in areas like East Memphis, where amenities and schools are top-notch. On the other hand, the cheapest properties are often small single-family homes in neighborhoods such as Frayser, which may require some renovation but offer great entry points for investment.
Investing in Memphis real estate could be a smart move because the lower initial cost allows for a higher return on investment as the market grows. Additionally, the city's economic development and population growth are positive indicators for future property value increases.
If the median home price in Memphis were to rise to within 10% of the national average, it might suggest that the market is becoming less of a bargain and could alter the investment appeal.
Source: Zillow
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So, is it worth buying property in Memphis? Absolutely, it is.
Memphis offers a compelling case for real estate investment, thanks to its affordable housing market and strong potential for rental income. With a price-to-rent ratio of 13.6, buying a property is more cost-effective than renting, making it an attractive option for both investors and homebuyers.
The city's livability score of 70 and a vibrant cultural scene contribute to a good quality of life, which in turn drives demand for housing. This demand is further supported by the fact that a local can afford to buy a house in just 2.9 years, indicating a market that is both accessible and affordable.
Infrastructure projects like the "I-55 Bridge Replacement" and the "Memphis Innovation Corridor" are set to boost real estate values, while a projected 4.2% population increase by 2034 suggests a growing market. With a cash-on-cash return of 6.0% for Airbnb properties and home prices 66% lower than the national average, Memphis presents a lucrative opportunity for real estate investors.