MARKET BREAKDOWN
REGIONAL SPOTLIGHT: MEMPHIS
may find the going a bit tough at first. The city is known for its thriv- ing turnkey rental sector, of which MIP is a part. Turnkey rentals are
IS MEMPHIS TRULY FLOOD-PROOF? O ne of the things that made the Memphis area attractive to the Chickasaw tribe and later to European colonists was its proximity to the Mississippi River and location on relatively high ground. Some writers have gone so far as to describe the city as “flood proof.” Think Realty Magazine asked Affinity Loss Prevention Services (ALPS) assistant vice president BreAnn Stephenson about this description and how it should affect an investor’s decision to buy properties in the area.
rental properties sold to investors as a perform-
ing package. Usually a turnkey rental will have a tenant lined up and vetted or already installed and paying rent before an investor buys the property. These properties often have property
“First of all, even if Memphis or any other area is considered ‘low risk’ for flooding, that doesn’t mean that purchasing a flood policy is unreasonable,” said Stephenson. “Every investor should be aware that Flood coverage is not included in any standard property policy.” Stephenson cited a 2011 flood in the area as an example of one of the rare times the area has experienced flooding. “The big issue seems to have been Heavy Spring Rains combined with melting snow run-off from northern states,” she said. “This combination caused back-ups in the tributaries, and there were some evacuations and homes damaged to the north, in Tiptonville. “I didn’t find record of any other recent floods in Memphis, so it looks like their system of levies has held the river at bay,” she added. Note: Notice some unusual punctuation or capitalization in this insurance ar- ticle? These anomalies are not typos, but deliberate. When covering insurance-re- lated topics, we capitalize intentionally to indicate types of coverage, exclusions, or policy formats. For example, Water Damage, when capitalized, refers to the cov- erage in your policy for water damage. Without the capital letters, you are simply discussing damage done by water, which may or may not be covered. BreAnn Stephenson is the author of ALPS’ series, “It’s Not Covered,” which educates real estate investors about the intricacies of property insurance in order to help them avoid disasters. She may be reached at www.affinitylps.com
management in place. They may sell at or above market value because the new owner can truly take ownership with the turn of a key. Turnkey properties are popular with passive real estate investors interested in building a real estate portfo- lio but not in managing it. Investors should not automatically view the presence of these turnkey giants in Memphis area as a negative, however. The presence of turnkey rental provid- ers means that there is a strong support system in place for rehab and renova- tion companies, property management companies, wholesalers, and even, in some areas, flippers. Furthermore, many turnkey companies have scaled their operations to the point where certain deals that might appeal to an individual investor no longer meet their criteria. Identify these deals, and you could find yourself very happily investing, alone, in niche properties. GETTING SPECIFIC IN THE BLUFF CITY Niched or otherwise, your success in the Memphis market hinges on knowing as much as you can about the little things, said Sean Carpenter, CEO of Shamrock Development Associates. Carpenter, a development consultant as well as a developer himself, emphasized that in his experience, Memphis properties are often not as similar as they appear at first.
WHY PEOPLE RENT IN MEMPHIS
G iven local levels of housing affordability, why is Memphis such a solid rental market? One reason certainly lies in local employment options, many of which hinge on an employee’s ability to travel or be otherwise mobile. Another may be the local culture, which attracts a number of young professionals who are either unwilling to buy a home or unable due to student loan debt or other barriers to obtaining a conventional mortgage. The local film industry also brings in a large population, including Millennials, who simply prefer renting over owning. The local film industry, which is largely powered by the Memphis & Shelby Film and Television Commission, has attracted production for a number of major films over the years. Those films include The Firm, The People vs. Larry Flynt, The Silence of the Lambs, Cast Away, Black Snake Moan, and The Grace Card.
tion. Often, turnkey investors find this type of rental attractive as well. “There is very little maintenance; the properties are energy efficient, and there is an abundance of qualified renters who would love to live in a new home,” Wachob explained. His company purchased dozens of buildable lots for about 20 cents on the dollar during the housing crash. They have been developing those lots for rentals ever
since. “Lately, however, we have also been focusing on multifamily properties because the supply of discounted and undeveloped land is vanishing,” he said.
TAKING TURNKEY INTO CONSIDERATION
Individual investors just getting started on the rental side of things in Memphis
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