MARKET BREAKDOWN
REGIONAL SPOTLIGHT: MEMPHIS
create a business-friendly climate full of consumers. The members of that consumer population, while earning relatively low incomes for the most part, formed a firm consumer- and employee base for new businesses hoping to optimize inexpensive labor and a prime trade location. That base has remained sol- idly in place since then. In the present day, the city’s prime trade location and the southeast’s relatively low cost of living create a similarly attractive environment for many businesses. A CITY OF RENTERS Even before the housing crash, Memphis boasted a significantly high- er proportion of renters in its popu- lation than the rest of Tennessee and the country as a whole. In 2015, more than 40 percent of the population in Memphis was renting, compared to about a third of the population statewide and nationally. That number has been trending upward, growing by 2.48 percent from 2014 to 2015 compared to less than one percent state- and nationwide. The Memphis economy is well-suit- ed to support a large population of renters. With Fortune 500 companies like FedEx, International Paper, and Autozone making their homes in the area and the Memphis International Airport providing a hub for residents employed in the transport business, it seems unlikely that the Memphis rental market will slow any time soon. In fact, many experts predict that Memphis will see more renters, not fewer, as housing becomes less and less affordable and more households elect to continue rent- ing indefinitely rather than buying. In the event that the affordability crisis does hit Memphis, Wachob believes that savvy investors will actually be well-po- sitioned to work in such a challenging housing environment. He recommended
INCOMING BY LAND, SEA, AIR, AND RAIL F rom the beginning, Mem- phis’ location on the Missis- sippi River made it a prime spot for shipping and freight. It was the location of the only east- west railroad built prior to the Civil War, boasts three interstate highways already with four more in the works, and is served by seven additional U.S. highways, more than any other city in the Southeast. The Memphis Inter- national Airport is the world’s second-busiest cargo airport, trailing only Hong Kong, and the city is the second-busiest cargo port on the Mississippi River. Here are just a few of the major corporations taking advantage of Memphis’ location: • Autozone • FedEx • Hilton Hotels (Hilton IT World Headquarters) • Nike • Merck • Wonder Bread • Williams-Sonoma
Regional Spotlight on Memphis, Tennessee THE BLUES CITY GIVES LOCAL INVESTORS ALL THE LOVE.
of the century, it led the world’s markets for cotton, lumber, and mules. Just when things were booming, how- ever, the 1870’s hit Memphis hard. A se- ries of yellow fever epidemics ravaged the city, demonstrating just how devastating the combination of water-borne diseases and the total lack of a public water system could be. Memphis, which had boasted a population of 40,000 (double that of Atlanta, Georgia, or Nashville, Tennessee, at that time) lost more than half of its population, including the majority of the middle and upper classes. Those citizens either died or fled the area. The yellow fever epidemics and associ- ated mortality set the stage for the lowest classes of citizens, mostly immigrants who could not afford to flee the fever, to play an unusually large role for the time in rebuilding the municipal infrastructure. When the epidemics finally ended with a hard freeze in October 1878, the remain- ing population formed a city government that promptly established the first re- gional health organization in the country. The local governing body also espoused uniquely (for the time) pro-business pol- icies. Those policies mainly led Memphis to aggressively annex surrounding areas in order to rebuild its population and
by Carole VanSickle Ellis
wo years ago, Memphis, Tennessee, was one of the hottest real estate in- vesting markets in the country. Media out- lets like CNN Money gleefully described the “hordes of real estate investors… snapping up foreclosures and other cheap housing, rehabbing the homes, and renting them out for handsome profits.” Then, in a way that long-time residents of the city nicknamed the Birthplace of Rock and Roll and Blues City likely found familiar, the media spotlight moved on. The focus shifted to other markets as the looming im- pact of the country’s burgeoning affordable housing crisis became increasingly clear. In Memphis, one of the most affordable met- ro areas in the country, the housing market kept chugging along. “Memphis may not be the most exciting real estate market to watch, but it’s one of T
a prime geographic location. Powered by a confluence of major highways, waterways, airways, and railways, Memphis, like the Egyptian city for which it was named, has been a gateway city since its inception. Centuries ago, the Chickasaw Indians oc- cupied the area before European explorers encountered the bluff overlooking the Mississippi River and began fighting each other and the tribe for the prime shipping location. Memphis is considered to be largely flood-proof despite its proximity to the river [see sidebar on pg. 40]. As tech- nology and time have added to transporta- tion and shipping options, that advantage has become even more pronounced. By the 19th century, Memphis was firmly established as a trade and trans- portation center thanks to its near-per- fect geographic location. By the middle
the best rental markets in the world,” said James Wachob, a real estate investment broker with local turnkey provider Mem- phis Investment Properties (MIP). “We’ve got moderate rent prices, low entry-price points, and high rent-to-value ratios.” Wachob cited the steady, relatively unex- citing pace of the Memphis market as part of the reason his company has been buy- ing, renovating, and managing properties in Memphis for more than three decades. “Of course, you still have to do your due diligence on each property individually, but the Memphis market is pretty steady overall,” he said.
marketing to homeowners who are likely to need to sell their homes quickly and possibly at a discount. “They could be fac- ing a divorce, job loss, or repairs and main- tenance that they simply cannot afford,” he said. “We do this type of marketing to constantly create opportunities for good deals rather than just looking for them,” he added. Some local companies, including MIP, are even building brand-new homes as rentals to expand available affordable housing inventory for the renting popula-
AMARKET ROOTED IN CENTURIES OF TRADITION That steadiness stems in large part from
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