Memphis is the new Las Vegas

[Diane G.]

These days, you can't stay on BP for more than 5 minutes without seeing a thread about investing OOS in Memphis...

It is absolutely becoming the new Las Vegas, in my opinion...When the music stops, and it will and it always does, Memphis will be a ton of OOS investors competing for limited numbers of tenants....

[Chris Clothier]

@Diane G. - Just going off your initial post, it looks like you are referencing the fact that at some point in the past, your experience was everyone speaking of Las Vegas as the go-to market and the city seemed to come up constantly as the place to go?  I'm trying to give you some lee-way here -  a little wiggle room for the point you were trying to make.  After reading your responses, it becomes clearer that you have no idea what you are talking about.  @Tom Ott, how is the view from the cheap seats?  Just wondering when the last time was you were in Memphis to review the market to make a statement about saturation? 

If that is the case and you are saying that Memphis is the new Vegas in your opinion because it is constantly being discussed, then ok.  Only you know how often you were hearing about Vegas back in the day.

As for the statement about the music stopping and out of state investors over-running the city and fighting for a limited number of residents, I prefer this term to tenants, without understanding the sheer size of the city, the demographics, the dynamics that drive not only the rental but also the investment demand and the delivery of those services, this is just a statement thrown out with no context.  It may be your belief, but it's not based on any real backing.

The Memphis M.S.A. has over 570,000 single-family homes and growing between .5%-1% per year.  The population is expected to continue growing at a nominal rate as well of .5%-1% per year.  I use the MSA numbers because while Memphis is a very large city, a majority of the recent growth in investment has been made outside of the city limits in the outlying suburbs or outer edges of the city outside the city core.  You also have a diversification in industries providing jobs in the MSA although a majority still come from health-care, schools, government and transportation/distribution, agriculture and research just to name a few.

Why does it matter?  Memphis is not a small city by any stretch and the major job supplying industries are not subject to the up and down nature of a fluctuating economy.  So Memphis has always been known as a boring, non-sexy investment city where an investor is not going to strike it rich quickly, but can absolutely build an effective, long-term portfolio.  When you consider that all of the major investment companies, whether they be Turnkey companies or institutional buyers are only buying less than .5% of the total number of homes in a year and that number may be a stretch, then you can see that Memphis will not be over-run by investors.  The city still stands at roughly 39% of the population renting their housing, which is only slightly higher than the national average and lower than many of the cities just above them in price point and population.  There is no chance Memphis becomes glutted with renters and owners fighting for residents.

Now, that may happen in some pockets of the city and I would argue the greater chance of that happening will occur in the most distressed areas of the city where poverty is already going to make investing difficult for out of state investors.  So investors should be careful about where they buy...but isn't that what we say about any investment in any city?

Those who say Memphis has received too much attention and is no longer a good option as an investment city - insert the Tom Ott reference above here, can almost always be counted on for offering a different city to invest in where they do business and will make money.  Or, they have a bone to pick because their experience was poor.  In either case, I hardly think that should lead anyone to conclude Memphis as an investment destination is over.

If investors are patient and take their time before buying.  If investors will meet the people they are doing business with and use common sense when buying houses, they can make a very good and consistent return.  Right in line with what the city has always offered.  Nothing sexy...but certainly consistent.