Tips for Purchasing a Memphis Investment Property in a Seller’s Market

What does the current real estate market in Memphis look like? 

Many would say it’s a seller’s market, which means that the inventory of available properties to buy is scarce, and demand is high. There are fewer foreclosures than there have been in the recent past, and sellers are in a strong position to list their homes at the prices they want and push back against any contingencies or improvements that buyers might have expected in other markets. 

There is a shift, however, and that’s due to a couple of things.

First, prices are higher than they’ve ever been, and while the market is certainly supporting those increases, there’s a sense that prices are peaking. We are not sure how much higher those asking prices can go. 

Second, it’s getting more expensive for buyers to get a mortgage. Interest rates have jumped quite a bit over the last few months, and there’s the potential that the Federal Reserve will make additional increases in the months to come. 

However, it’s still a seller’s market. There’s still more demand than there is inventory, and buyers are competing for the best homes in and around Memphis. Investors are paying in cash when they have to, and that provides for a lot of leverage and fewer costs.

Here are some of our tips for purchasing a Memphis investment property in a seller’s market like the one we’re experiencing now.

Make Peace with It and Prepare Yourself

Sure, you can wait and see if things slow down in 2023, and make your move then. 

But, what if they don’t?

You don’t want to miss out on potential investment opportunities, even if it’s a strong seller’s market. We like to advise our investors to step up to the plate and hold on with both hands. You’re going to need a solid plan for financing your property, some strong negotiation skills, and a willingness to identify those properties that are worth fighting for and to walk away from those that aren’t. 

For some investors, this comes naturally. For others, it’s a struggle. 

Take a look at your investment goals. What do you need to be buying right now to grow your portfolio and push yourself towards those desired outcomes? You need to be focused, and you need to have a plan. 

There’s not going to be a lot of room for negotiation, but you should leverage everything you can. Surround yourself with professionals who can help. That’s going to be your strongest starting point when you’re trying to buy a Memphis investment property in a market like this.

Pull Back on Contingencies

In some markets, you can show up with a list of demands after you make an offer and prepare for closing. 

Not so much in a seller’s market. In what we’re seeing in Memphis right now, a lot of sellers are generally hesitant on having any contingencies in place. 

Where you can negotiate is when a seller has some pain points that are easier for you to address as an investor. But in a seller’s market, there’s still a lot of strength that even a compromised seller can flex. 

For example, we had a phone call from someone who was trying to sell a property. The investment wasn’t in the best area of town, but there was a lot of potential in what we could do to make it stand out on the rental market. It could have been a profitable acquisition for a smart investor. 

When the seller came in to sign the contract and move forward, we discovered that there were back taxes on the property. Before the title was deliverable, those back taxes had to be paid. The seller was unwilling to sign the contract until the buyer agreed to pay the back taxes. 

This is not a deal that a lot of investors would take in a normal market. But, this is not a normal market and in order to close a deal quickly, you may need to drop some of the things that you thought were important to you. It’s also possible you’ll find yourself agreeing to things like back tax payments.

That’s the power of a seller’s market when you’re a seller.

Time is of the Essence in a Memphis Seller’s Market

When it comes to real estate transactions, time is always of the essence. 

In a seller’s market, that’s even more pronounced. You need to act quickly. Be ready to buy, be ready with your financing or your funds, and have everything prepared before you even make the offer. If you can make an all-cash offer, you will stand out in a sea of people who are struggling to get a mortgage that isn’t outrageously expensive. You’ll be more attractive to sellers because you can waive inspections and negotiate on any work that needs to be done prior to closing.

Close as quickly as you can in a seller’s market. You don’t want to wait around for deals to fall through. 

If you want an inspection contingency, keep it short term. No more than five days. All you really want to know is that the property is structurally sound. Cosmetics do not matter, you’ll be making some improvements before you get it onto the rental market anyway. 

You need to have a team in place if you want to succeed in buying a Memphis investment property in a seller’s market. A sharp real estate agent who also understands property management will be your best asset. This is where we can help you at RiverTown Realty. We not only understand the mechanics of entering the market and making it work for you when you’re ready to buy, we can also help you understand how much rent you’ll earn on a particular property. We’ll tell you what you can expect to budget for maintenance and what you’ll need to get the home ready for the rental market. 

This is what we do best. When you’re ready to invest, don’t be put off by the current market conditions. Let’s jump in and make it your most successful investment property yet. Contact us at RiverTown Realty.