Memphis, Tennessee is widely recognized as one of the best markets in the United States for rental property investors. With its affordable real estate, high tenant demand, and strong rental yields, Memphis offers tremendous potential for beginners looking to build passive income through real estate. This guide explores the most effective strategies, legal requirements, and top neighborhoods to help you generate rental income in Memphis, TN.
Why Memphis is a Great City for Rental Income
- Low Property Prices: Memphis offers entry-level investment opportunities, with many properties under $150,000.
- High Rental Yields: Gross rental yields in Memphis can range from 8%–15%, making it ideal for cash flow-focused investors.
- Strong Renter Demand: More than 55% of Memphis residents are renters, creating a large and stable tenant pool.
- Business-Friendly Environment: Tennessee has no state income tax, and Memphis has a streamlined rental property licensing system.
Top Strategies to Generate Rental Income in Memphis, TN
1. Long-Term Residential Rentals
Buy-and-hold single-family homes and duplexes in areas like Parkway Village, Raleigh, or Frayser to lease to families or individuals on 12-month leases. These properties offer predictable monthly income and low turnover costs.
2. Section 8 Housing
Partner with the Memphis Housing Authority to rent to tenants using Housing Choice Vouchers. Landlords receive reliable rent payments backed by the government, with strong demand in many low- to mid-income neighborhoods.
3. Student Rentals
Memphis is home to the University of Memphis, Christian Brothers University, and other institutions. Investing in multi-bedroom houses near campus and renting by the room can yield higher returns per square foot.
4. Mid-Term Furnished Rentals
Offer 30–90 day leases to traveling nurses, contractors, and remote professionals. Areas near Baptist Memorial Hospital, St. Jude, and the downtown medical district are ideal for mid-term furnished rentals.
5. Duplex & Triplex House Hacking
Live in one unit and rent the other(s) — a low-risk way to reduce living expenses while earning monthly income. These are especially effective in neighborhoods like Whitehaven and Orange Mound.
Legal Requirements for Landlords in Memphis
- Residential Rental Property Registration: All rental properties must be registered with the City of Memphis under the Residential Property Registration Ordinance.
- Business License: Required if operating as a rental business, available through the Shelby County Clerk’s Office.
- Code Compliance: Rental units must meet city housing codes related to electrical, plumbing, safety, and habitability.
- Lead Paint Disclosure: Required for properties built before 1978. Landlords must provide lead disclosure forms and ensure compliance.
- Lease Requirements: Use Tennessee-compliant leases. State law requires proper notice for rent increases, evictions, and security deposits.
Estimated Monthly Costs for Memphis Rental Properties
| Expense Type | Estimated Monthly Cost |
|---|---|
| Property Taxes | $100 – $400 |
| Landlord Insurance | $60 – $150 |
| Maintenance & Repairs | $100 – $250 |
| Property Management (optional) | 8% – 10% of monthly rent |
| Registration & License Fees | $50 – $150/year |
Top Neighborhoods for Rental Investment in Memphis
- Raleigh: Affordable, high-yield area with strong Section 8 demand.
- Whitehaven: Popular for families and close to the airport — ideal for long-term rentals and house hacking.
- Frayser: Cash flow-heavy area with high rental returns and strong tenant demand.
- South Memphis: Improving area with low entry prices and opportunity for long-term growth.
- Midtown: Near universities and hospitals — great for mid-term rentals and professional tenants.
Tax Benefits for Memphis Landlords
Although Tennessee does not tax wage income, landlords must report rental income on their federal returns. However, many expenses are deductible, including:
- Mortgage interest and property taxes
- Depreciation of the home and appliances
- Maintenance, repairs, and insurance
- Utilities, marketing, and management costs
- Legal and accounting services
Short-term rental operators may also be subject to Memphis’s local hotel occupancy tax and state sales tax if renting for fewer than 30 days.
Tips to Maximize Rental Income in Memphis
- Invest in Off-Market Deals: Direct-to-seller or auction purchases can yield better margins in neighborhoods with high rental demand.
- Screen Tenants Rigorously: Conduct full background, income, and credit checks to ensure reliable renters.
- Use Property Managers for Scale: Hiring a local management company helps streamline operations, especially for out-of-state investors.
- Capitalize on Section 8: Offers guaranteed income and long-term tenants in specific Memphis ZIP codes.
Conclusion
Memphis, TN is one of the most promising rental markets in the U.S., especially for beginner investors seeking cash flow, affordability, and market stability. Whether you’re buying your first duplex in Frayser or building a student rental portfolio near U of M, Memphis offers powerful tools for passive income success. By following city regulations and investing strategically, you can build wealth through real estate in the heart of the Mid-South.
Need help with licensing, Section 8 registration, or rental strategy in Tennessee?
Connect with PEAK Business Consultancy Services — your trusted partner for property compliance, tenant sourcing, and rental income growth in Memphis, TN.
