How to Evaluate a Market for SFR Investments
While Meridian Pacific Properties is located in San Diego, the majority of our investment properties are located in the Greater Memphis Area.
How did we determine that Memphis would be a strong market for real estate investments?
Meridian performed research on more than 360 of the nation’s largest Metropolitan Statistical Areas (MSA’s), carefully examining the potential submarkets and properties. Many markets showed up strongly in our analysis in one or two major categories but would be eliminated by shortcomings in others. Memphis stood out as having the best potential to optimize returns and minimize risk.
What are the qualities of a strong real estate investment market?
Using a proprietary formula that carefully weighs each market quality, Meridian can determine the cash flow each submarket could generate. These are the most important qualities for a market to possess when evaluating the potential for SFR investments.
- Real jobs for middle-class families e.g. manufacturing, distribution, logistics, medical facilities
- With good rent ratios & positive cash flow, appreciation can multiply returns, ensure exit strategies and protect the capital invested
Supply and Demand
- An appropriate balance is required between rental demand and available inventory
- Class A new construction homes with upgraded finishes that have been “hardened” to minimize future maintenance expenses
- Owner-occupied, quality school districts, working families, slightly above the median price point for the local area
- Rent ratio or monthly rent divided by the value of the property at 0.65% – 0.85%
Low Taxes and Rates
- Property tax rates between 0.6% – 1.6% with modestly priced insurance
- Moderate climate with temperatures that typically range from 34oF to 91oF
- Finding landlord friendly states
If you would like to discuss our findings with SFR in Memphis or know about future investment opportunities, please reach out to us for more information at [email protected].