MARKET BREAKDOWN
REGIONAL SPOTLIGHT: MEMPHIS
Out-of-towners in particular may have difficulty obtaining good comps and applying them to deals correctly. “An in- vestor from out of state may look at that market and say, ‘Oh, I can get $800 per month because other projects are getting that, but in reality they can’t get $400 a month,’” he explained. “You’ve got to know every single detail or be working with someone who does.” In Memphis, just as in any other market, it is essential that investors understand exactly what they are looking at before they buy. Verify that properties presented as comparable to each other are located in close proximity to each other and roughly the same in terms of style and structure. Watch local trends. One neighborhood could be transition- ing to a more valuable area while another adjacent development declines. Wa- chob calls Memphis a “street-by-street market,” meaning that things can be very different from one street to the next. SOMETIMES, LAGGING BEHIND CAN BE A GOOD THING On a positive note, remember that Memphis’ recovery curve has lagged be- hind other metro areas. While the idea of a market lag might sound negative, in Memphis it could be construed as positive because the market may have a few quarters of above-national-average appreciation left before it levels out. In 2016, Memphis boasted appreciation rates of more than 8.5 percent, well over the national average and ahead of many similarly-sized metro areas. In 2017, despite some warnings from analysts that an affordable housing shortage could be looming in Memphis as elsewhere around the country including southeastern neighbor Atlanta (see p. 35 for our market update on that location), both sales volume and sales prices contin-
ued to rise. The Memphis Area Associ- ation of Realtors (MAAR) reported that the first six months of 2017 were banner ones in Memphis. The volume of homes sold between January and June increased by 8.9 percent, and the average sales price increased to about $187,000. Notably, that median sales price is vastly more afford- able than most of the rest of the country. Despite being home to the interna- tional headquarters of the Blues Foun- dation and site of many blues music festivals throughout the year, Memphis real estate market investors are not likely to be singing the blues anytime soon. At least, not if they tailor their strategies to fit their local market. “I don’t love Memphis personally because I feel the market is somewhat saturated,” said Carpenter, who lives in Boston, Massa- chusetts and works with large, often gov- ernment-funded development projects throughout the country. “You’ve got to know the market,” he repeated. MIP’s Wachob takes full advantage of his local knowledge in his Memphis investments. “We focus on areas that we know our tenants will want to live in: safe, close to large employers like FedEx, St. Jude’s Children’s Research Hospital, and the Nike Worldwide Distribution Center,” Wachob explained. He believes that MIP’s local presence gives him an edge over investors working without a local contact. “When you are working in a street-by-street market, you can never generalize,” he added. “However, over time, you’ll find that Memphis is a very predictable, nonvolatile market.” • ONLY GOOD BLUES IN MEMPHIS
MEMPHIS, TENNESSEE AT A GLANCE
Memphis Investors Group (MIG) https://www.facebook.com/ memphisinvestorsgroup/ Tennessee Real Estate Investors Association (TNREIA) https://www.tnreia.com American Rental Property Owners and Landlords Association (ARPOLA) http://arpola.org/ Greater Memphis Chamber https://www. memphischamber.com Memphis Cook Convention Center http://www.memphistravel. com/conventions/memphis- cook-center The City of Memphis Official Website http://www.memphistn.gov/ Visitors/VisitingMemphis.aspx ATTOM Data Solutions www.attomdata.com (800) 550-4802 Trulia www.trulia.com U.S. Census – Quick Facts on Memphis https://www.census.gov/ quickfacts/fact/table/ memphiscitytennessee/ PST045216 Zillow www.zillow.com
Carole VanSickle Ellis is the editor of Think Realty Magazine. She can be reached at cellis@thinkrealty.com.
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