Is Memphis The Next Boom Town?

Question

I recently moved back to Memphis 14 months ago from Atlanta. I was a wholesaler in Atlanta and I'm just now getting back into the game. I did two deals but had over 7 more under contract that fell through for one reason or another. So getting the contract isn't a problem.

I noticed in Atlanta that hedge Funds were going in buying blocks at a time instead of one house at a time. I also noticed that in certain areas they were buying lots or houses and tearing them down and building New. I am seeing this trend in Memphis within a year of being back. This is really picking up in the downtown and midtown area.
The housing projects near the FEDEX Forum have ALL been replaced with brand new housing and downtown is busting with Apartment and business combos.

I was told several years ago that everything 5 miles east of the FedEx forum was slated for renewal and my mom's neighborhood is in that slotted area. She has been getting the "Do You Want To Sale' phone calls.

I have been asked by several investors to be the boots on the ground for them once they found out I was moving back. Memphis is my hometown.

One of the trends I noticed was that there where these yellow for rent signs popping up in my mom's neighborhood. These were houses that had belonged to people that I grew up knowing and the parents started passing away. The kids had moved on and didn't want anything to do with the house. So this company was buying 1 or 2 houses per month and renting them out within 2 weeks of the sign being put in the yard.

Since I was getting back into the game I started checking to see what they were renting the houses for and what the values were. For the last 6years that I've checked my mom's house value and others in this area, the range was $22k-32k. These are basically 2beds 1 bath or 3 beds 1 bath.  The rent in the area ranged from $550-$650.

All of this time my mom's house was running between $23k-$28k. Now on sites like Redfin, Realtor.com and Zillow have it ranging from $49k-$79K.

I looked up the sold prices of the homes that were bought by the hedge fund and I noticed that they are ALL ranging from $62-$65k. I'm sure this is how they are manipulating the higher prices in the area. I am also sure that this is the beginning of something similar to what happened in Atlanta years ago. So is this the beginning of the transition?

If this is the beginning of the trend what strategy would you use if you where in my shoes? I am negotiating a contract on a two-house deal in that area tomorrow.

Randall Weatherall · Answer

There has been some tremendous growth here in the last few years and currently, the market is at a high that just hasn't been seen before on SFR.  Prices are up 25-40% nearly across the board with signs of plateau but no decrease in sight.  I think there's so much investor interest coming in at once, timed with the national increase in prices that we're seeing that when most markets start to fall down to 'normal' the new normal for Memphis units will still be higher than before by far.  This area is getting more and more jobs and more people willing to work and progress certain areas than ever before.  It's definitely an exciting time to be here!

Herndon Davis · Answer

Change is coming so be a part of the change .  You know the neighborhood better than a days so work your contacts from the neighborhood church, friends etc.

Pitch yourself to the headfunds working not just on a fee or commission basis but with some equity or skin in the game.

Finally you should consider commercial property as well because once residential is tapped out the next thing to do is create commercial spaces to serve the new residents.

Whatever you do don't wait because it's already too late

Raven Henderson · Answer

Hi Everyone! Yes, Memphis is definitely a great place to invest at this time! There are many emerging areas perfect for rentals, fix & flips and also airbnb opportunities. Property owners are not having trouble selling either. I just listed one the other day and the same day, we had 4 offers. Now is absolutely the time to explore the Memphis market! Good luck to you all!

David Hutson · Answer

I agree with @Herndon Davis.  The whole downtown area is changing and there will be numerous apartment complexes and hotels being built.  Several have already been started.  I don't know that you are too late but you are definitely in a good position now.  Reach to those who may want to sell.  Let everyone know you are from that area.  Hopefully you can get some deals over there.

Gurshan Bansal · Answer

I am glad I ran across this post. @Michael Williams, I moved to Atlanta in 2015 for work. Like you, Memphis is my hometown - I lived there for 18 years. My family lives all over the area and I visit frequently. I feel like the last 4 years I've seen Memphis grow quarter over quarter right in front of my eyes. I am a new investor and want to focus on the Memphis market as we already own two rentals in the area and its encouraging to see you transferring your talents from Atlanta to Memphis!

Thank you for sharing!

G

Michael Williams · Answer

Actually those are not HEDGE FUNDS they are management companies. I have an international Hedge Fund I may be working with once Ido my due diligence on them. There are also major players from Atlanta I work with. I want to get more detail on arrangement before I name them.

Jack Prins · Answer

Thank you so much. If nothing else comes of your suggestion (my being in NC),  because it makes me feel very comfortable with BP knowing that good folks like you are out there responding. It’s a good start 👍

Michael Williams · Answer

@John Moore Memphis Invest is a huge one which Raven may be able to tell you more about then there is Midsouth rentals that are buying up everything in the south.  As you can see by the comments Memphis is on a big upswing. My wife just became a Realtor so we are setting up the business fom two persectives, plus I have video marjeting and digital marketing

John Moore · Answer

This is very inciteful. I am an investor based out of Los Angeles that is interested in the Memphis area as well. I am looking into areas that have the strongest development potential and this information is insightful. I am interested to hear more about what hedge funds you are dealing with so I can follow where they are investing if you don't mind sharing.

Michael Williams · Answer

@ Herndon Davis  Thanks, I will. Are you a hard money lender or a private lender?