MARKET CRITERIA

Before evaluating the nation for real estate markets that could meet our objectives of high cash flow returns within class-A locations there were many criterion that needed to be measured and analyzed. There are six major areas of consideration that Meridian used in our research: cash flow potential, operating costs, market volatility, local economy, geography and climate as well as the legal environment.

market-criteriaMany markets across the nation showed up strongly in our analysis in one or two major categories but would be eliminated eventually by a shortcomings in others. For example, many primary or “gateway” real estate markets were eliminate immediately on the lack of cash flow found in the median home price.Markets like San Diego, New York, or the Bay area have very strong fundamentals, however the yields were simply too low in those markets without sacrificing significantly on the quality of location, property and tenant.

Qualities of a Top Performing Market

As investors,Meridian performed research on over 360 of the nation’s largest called metropolitan statistical areas(MSA’s) and established the following criteria to optimize returns and minimize risk.

  • Quality Properties (
  • Quality Neighborhoods-(Owner occupied, solid schools districts, working families, near the median price point for the local area)
  • High Rents Relative to Meridian Property Values (Rent ratio or monthly rent divided by the value of the property @ 1% or higher)
  • Strong, Diversified Local Economy and Employment Record (real jobs for middle class families e.g. manufacturing, distribution, medical facilities)
  • Stable Appreciation-With good rent ratios & positive cash flow, appreciation can multiply returns, ensures exit strategy and protects the capital invested
  • Availability of single family rentals and large pool of qualified renters
  • Low investment property taxes and insurance rates
  • Favorable weather and geographic factors

 

AMERICA’S DISTRIBUTION CENTER

Memphis, which is more known as a secondary market of the US cities, is commonly associated with Elvis Presley, great Barbeque, and a long history of Blues music. What many investors do not yet know is that Memphis is a strategically centered transportation hub that connects the entire United States coasts by air, rail, river and road an is anchored has the international headquarters for FedEx.

Memphis has a very unique logistical and geographical advantage which allowed for the creation of what is now know as the “Nation’s Distribution Hub”. With one of the world’s leading cargo airports, five class-one railroads,the U.S.’s 4th-largest inland port, seven interstates and U.S. highways and an abundance of logistics support-service providers,Memphis offers superior operational value and flexibility throughout the many industry’s supply and production chains that operate in Memphis.

RUNWAY

Nation’s #1 largest cargo and freight airport and 2nd largest in the world next to Hong Kong

RAIL

3rd largest rail center in the US behind Chicago and St.Louis with 5 Class-One railroads

ROAD

Nation’s 3rd busiest trucking corridor which connects the Atlantic and the Pacific coasts

RIVER

4th largest inland port in the US with more import duties than most major sea ports in the United States

MAJOR MEMPHIS CORPORATIONS

MEMPHIS NEIGHBORHOODS

There are only a select number of zip codes and neighborhoods that Meridian has selected to operate in the Memphis market. Focused on the eastern suburbs areas of Shelby County like Bartlett, Cordova, SE Memphis, Olive Branch, Lakeland and areas surrounding Germantown, Meridian has found a strategic balance of attractive investment properties with strong resident demographics, school districts, and vicinity to shopping corridors while still providing stable cash flow.

MEMPHIS AREA MAP

MEMPHIS EMPLOYMENT MAP

Zip Codes:
38018, 38016
Miles from Airport:
13
Population:
82,505
Avg. Home Price – 38018:
$145,291
Avg. Home Price – 38016:
$136,092
Cordova is a beautiful suburban area on the eastern edge of Memphis. It offers a combination of shopping centers, big-box retailers, restaurants, office space, small businesses, and churches. Cordova has something for everyone. The Wolfchase Galleria, on the northern edge of the neighborhood, is an anchor for shoppers around the region. Not everything in Cordova is developed land though: the beautiful Shelby Farms Park, the nation’s largest urban park, borders Cordova and offers visitors fields, wooded terrains, bike, jogging, and hiking trails, and horseback riding. The Wolf River and Patriot Lake offer a calming influence in the midst of the city whether under the power of a sail or paddle.

Zip Codes:
38133, 38134, 38135
Miles from Airport:
17
Population:
55,675
Avg. Home Price – 38133:
$130,168
Avg. Home Price – 38134:
$87,085
Avg. Home Price – 38135:
$137,419

Bartlett is one of Memphis’ fastest-growing suburbs. Bartlett has 26 parks and a $5.5 million public recreation center. The city has an array of excellent public schools, a library, a new hospital, numerous churches, shopping centers, and many professional buildings.

Bartlett’s wide variety of community activities includes the Bartlett Community Chorus and Community Theatre, found at the Station Municipal Center. The Bartlett Performing Arts and Conference Center is a citizen favorite. From arts to athletics, the Bartlett Athletics Office provides recreational sports opportunities for teams or individuals in baseball, softball, basketball, and volleyball.

Zip Codes:
38002
Miles from Airport:
24
Population:
13,186
Avg. Home Price
$218,728

Lakeland embodies the natural terrain of classic country-style living that is rare today. Lakeland has several bodies of water alongside 65 acres of parkland that include rolling hills, a fishing pond, picnic facilities, and jogging, biking, and hiking trails winding through the wooded areas.

Located in northeast Shelby County, Lakeland is home to many businesses and is just a few miles away from Wolfchase Galleria.

Zip Codes:
38125, 38141
Miles from Airport:
6
Population:
101,940
Avg. Home Price – 38125:
$143,570
Avg. Home Price – 38141:
$63,083
Just under the 385 freeway in Southeast Memphis, this area is a comfortable neighborhood with a diverse demographic and many nice middle-class neighborhoods. The area offers upscale homes, with pools and vaulted ceilings. Locals can shop at many rapidly expanding commercial retail centers. With Bill Morris Parkway bordering one side of it, SE Memphis is accessible to everywhere else in the region.

Zip Codes:
38138, 38139
Miles from Airport:
13
Population:
39,747
Avg. Home Price – 38138:
$249,070
Avg. Home Price – 38139:
$400,119

Germantown is a picturesque community that offers residents an attractive and energetic place to live. Germantown has a rapidly expanding medical community — with Methodist Le Bonheur Germantown Hospital and Baptist Rehabilitation Hospital as the cornerstones — and is the headquarters of the Campbell Clinic. Germantown has many award-winning schools, and the city has upscale shopping at Saddle Creek, Germantown Collection, Germantown Village Square, and Exeter Place.

Germantown also has 700 acres of parkland. The Wolf River nature area offers animal displays, butterfly gardens, and nature programs. Community activities include the Germantown Charity Horseshow, the IRIS Chamber Orchestra, Germantown Symphony Orchestra, community chorus, city art collection, recreational center, Germantown Community Theatre, and the world-class Germantown Performing Arts Center.

Zip Codes:
38017
Miles from Airport:
21
Population:
45,152
Avg. Home Price:
$291,602

Historical Collierville has classic small-town appeal. With lovely natural surroundings, award-winning schools, a community theater, and recreational centers, Collierville is a great place for raising a family.

Collierville’s historic town square, built in the late 1800s, is still a focal point of the town today. Collierville has 11 parks with 300 acres of parkland, 25 athletic fields, and six miles of walking trails. Collierville also offers world-class shopping, such as at the Carriage Crossing mall, antique stores, and fine dining.

A MEMPHIS CASE STUDY

Meridian acquired the below property, completed significant renovations and placed a long-term tenant into the property prior to its sale to a private out-of-state investor. Meridian is currently providing on-going property management services to ensure rents are collected and the asset is adequately maintained with minimal owner involvement. The investor is receiving attractive monthly cash-on-cash returns while also benefiting from potential long-term home price appreciation

Property Address

9383 Helmsley Drive

Location

Memphis, TN

Investor Purchase Date

1/14/2014

Sales Price

$155,000

Year Built – BR/BA

2000 – 4BR/2.5BA

Square Feet

2,460

Monthly Rent

$1,350

Rent Ratio

0.87%

Cash-on-cash
Proforma Return
(unlevered)

6.75%

Cash-on-cash
Proforma Return
(levered 80% LTV/4.625%/30Y)

10.2%