Real estate prices are rising across the country, and it’s hitting real estate rental property rates. Renters see a large rent increase as real estate investors buy more properties. We’re currently in a seller’s market.

Memphis, TN, is one of many cities that have caught the eye of real estate investors. Some people believe it is cutting into the availability of affordable housing. Thereby leading to housing insecurities for low-income residents.

The city is becoming a mecca for young adult professionals. It’s listed as one of the top five fastest-selling markets, making it a prime target for investing in Memphis real estate. 

Are you an investor looking for new investment opportunities? Please keep reading to learn why Memphis is experiencing a large rent increase and what it means for your portfolio.

What Is the Average Rent Increase in Memphis?

Single-family rentals have increased by 7.5%, while apartments have seen a 17.2% increase in apartment units. Some of the increases are attributed to renovations of properties to make units more marketable.

Investors putting large sums of money into properties expect a return on their investments. Increasing rents are justifiable. 

On the other side, city officials are now grappling with finding affordable housing solutions. Their priority is renters who’re now paying more than 30% of their income in rent. Thirty percent is the amount set in 1969 by public housing regulations.

The 30% rule has been incorporated in debt-to-income ratios when qualifying for rental units and buying a home. Today, many people pay more to live in communities with high-end amenities.

Supply and Demand

The current housing market is placing homeownership out of reach for many first-time homebuyers. It is also making it difficult for existing homeowners to move into bigger homes and better neighborhoods. With fewer properties on the market, potential buyers are turning to rentals.

The trickle-down effect works in favor of those investing in Memphis real estate. 

The demand is now high for rental properties. Renters who can pay high rents receive amenities that make the higher rents worth the extra money.

Growing Millennial Population

In 2021, millennials were 27-41 in 2021. They were also the fastest-growing demographic in Memphis. Over the past ten years, the city has seen a growth of about 10% for this age group.

Millennials are one of the highest educated groups, and the city has created an environment that caters to their needs. Everything from the cultural arts scene to a nonprofit hotbed has created a magnet for entrepreneurs.

The Memphis real estate trends align with those who may not be as eager to purchase a home. Therefore, renting in Memphis is more attractive.

Memphis Rental Population Is High

Memphis has a high rental occupancy rate, making it prime for investing there. People looking to rent want prime listings. Amenities that increase a property’s value include:

  • Gated communities
  • Swimming pools
  • Clubhouse
  • SMART features
  • On-site property management

Other selling points include proximity to downtown, shopping areas, and transportation.

A real estate investor that can meet these needs will do great investing in Memphis. Choosing a property management firm to handle your rental units frees your time to research future investments. 

Cost of Living

Although Memphis rents are increasing, the overall cost of living isn’t. Memphis is located in a state that does not have a state sales tax. Utilities are lower than in other parts of the country. They also have lower rents compared to other popular cities.

A real estate investor can use these talking points to make properties more appealing. With more people relocating to the state, transplants can become the target audience.

Strong Job Market

Memphis continues to have a strong job market. Three of their top employers are AutoZone, FedEx, and International Paper Co. These companies are among many successful medium and large-size companies.

As we mentioned above, millennials make up a large portion of Memphis transplants. Millennials are more likely to start a business, which adds to job creation. The city is also prime for small businesses.

The stronger the job market is in a city, the greater the possibility that a rent increase can get absorbed. 

Long-term Return on Investment

The ultimate goal of a real estate investor is to turn a profit. Whether you choose to focus on rental income or sell the property, you’re in a good position. 

Real estate in Memphis is expected to continue over the upcoming years. If you choose to buy and sell, there’s the opportunity for a good return. 

Holding on to the properties and making earnings off the rent is another good strategy. Even if the markets have a downturn in the near future, housing is a commodity that will eventually correct itself.

Passive Income

Renting in Memphis will allow your investments to pay for themselves. Keeping your properties occupied ensures you recoup your investments faster. Once an investment begins to turn a profit, it becomes passive income.

Memphis real estate trends include using income from rental properties to build generational wealth. Imagine retiring and passing on your portfolio to your children. 

Building a strong portfolio includes diversifying your investments. Right now, investing in Memphis real estate is essential to reaching your goals.

Are You Ready to Invest in Memphis?

Are you considering investing in Memphis real estate but concerned about the rent increase? We hope we’ve put your mind at ease. 

Memphis, Tennessee, is a beautiful city quickly becoming a place more people want to call home. With the changing landscape, now is the time to consider investing in Memphis real estate.

We’d love to have you join our MIP buyer’s list. We can keep you posted on our full inventory of properties. Plus, we offer full-service property management.