(Gross Yields from 17%, 62% Occupancy Rate)
This is the latest in our series of investor guides we release for free to our investors and everyone interested in Short-Term (Airbnb) Rentals.
For this analysis, we have used the trailing twelve months (October 1st, 2021 to September 30th, 2022). See our previous post for historical data.
See our post on regulation in these markets.
Active Rentals
There are 958 active rentals in Memphis. Almost 77% of all listings are 1 and 2 bedrooms.
Larger homes catering to bigger parties and families are potentially undersupplied. There are only 143 active 4 & 5-bedroom homes.
Average Daily Rate (Nightly Price)
The Average Daily Rate for rentals in Memphis is $120.
Throughout the year, the rate only fluctuates by $13 from the mean with the highest Average Daily Rate in May 2022 ($134) and the lowest in February 2021 ($109).
Occupancy Rate
Occupancy Rates in Memphis are high in the summer, despite Memphis’s hot summer weather. In the last 12 months, the average occupancy rate was 62%.
The lowest occupancy rate was in January 2022 at 46% and the highest was in April of 2022 at 80%.
The average occupancy rate is the highest for 2-bedroom homes and studios, at 64% respectively.
Get projections on revenue, average daily rate, cap rates, and a lot more.
High-Performance Properties
Chalet’s research shows that 2-bedroom homes have the highest percentage of homes in the high-yield territory (56.92%) and could be and therefore could be a good strategy for this market.
Chalet considers properties with a gross yield greater than 15% as high-yield properties. Gross yield equals Gross Income/Purchase Price
Annual Revenue
The median revenue is the highest in May of 2022 at $3300 and the lowest in February 2022 at $1700.
Short-term rentals in Memphis generate a median revenue of $29,968 annually. The highest median revenue for rentals in Memphis is for 5 bedrooms at $44900.
Throughout the year, monthly revenue fluctuates the most for 5-bedroom homes and the least for 1-bedroom homes. More conservative investors should look into 1 bedroom investment properties as data shows they are the most stable and predictable.
Demand
Most of the Memphis short-term rental guests are domestic guests from the United States, though January is when the presence of international guests is most noticeable.
However, international guests in January barely crossed the 10% threshold of total guests in Memphis. The majority of international guests visit from Canada and the United Kingdom.
The majority of Memphis guests come from U.S. cities located within driving distance. We expect drive-to locations/cities to continue to do well in the post-covid world.
Market Facts
Population: – City – 652,000 / Metro – 1.34 million (2013)
- It is the 2nd largest city in Tennessee and 28th largest city in America.
- While population growth is consistently slow in Memphis, there has been a recent real estate boom in the county. Like many markets in the US, Memphis has experienced a surge in demand with low supply. Memphis has one of the strongest long-term rental markets in the US so residents might be shifting to home ownership.
Cost of Living: Payscale ranks the cost of living in Memphis to be 17% lower than the national average. Memphis, TN ranks as the 6th Most Affordable City to live in in the United States.
Job Market: According to Bloomberg, Memphis has been the #1 metro area for job creation in the U.S., when compared to the average area employment rate over the past 10 years.
Fortune 500 Companies: FedEx, AutoZone, and International Paper Co
Universities
Sports Team – Professional basketball team (NBA) is the Memphis Grizzlies, who play at the FedEx Forum Arena in downtown Memphis. The City of Memphis does not currently have an NFL or MLB team but does have a large abundance of college sports.
- Christian Brothers University (Founded 1871) – Private Catholic University, Division 2
- Lemoyne-Owen College (Founded 1871) – Historically Black College, Private University HBCU, Division 2
- University of Memphis (Founded 1912) – Public State School, Division 1
- Rhodes College (Founded 1848) – Private Liberal Arts School, Division 3
- University of Tennessee Health Science Center (Founded 1911) – Public Medical School
Seasonality
According to U.S.News., Memphis’ peak tourism season is in the Summer. In contrast, the city of Memphis experiences the lowest tourism season in Winter, between November and February. In 2019, Memphis had 12.4M+ visitors and almost all visitors rank their reason for travel as primarily involving live music. Here are some of the key features that draw tourists to the City of Memphis(source: Memphis Travel):
- Memphis music legends like Elvis, B.B. King and Johnny Cash
- Live music scene – number one driver
- Nightlife, Beale Street
- Beal Music Festival
- Elvis week
- World-famous barbeque
- World Championship Barbecue Cooking Contest
Other Facts
The average property tax rate is 1.42% which is double the state average according to SmartAsset. That’s also higher than the 1.07% national average.
According to Zillow, homes in Memphis appreciated 17.8% year-over-year (YoY) and the median home price for active listings was 223,317 (as of December 2022).
Homes in Memphis average 36 days on the market according to data from Redfin.
The BLS reported that the unemployment rate in Memphis fell to 4.5% in October of 2022, which is higher than the national average of 3.7%.
Short-Term Rental Regulation
Shelby County is a very short-term rental-friendly market.
A short-term rental license is required for every listing and there is a small cost associated with obtaining a license. A great benefit of regulations in Shelby County is that there are no occupancy limits. In most markets, the number of guests (occupancy) is limited based on the home’s number of bedrooms. However, this is not the case in Shelby country which gives hosts more flexibility.
See Chalet’s detailed analysis of short-term rental regulation in the Memphis metro.
