Memphis Cap Rate Map 2026: Why Headlines Lie and What's Real

A friend in Houston called me last week. He had been scrolling rental sites and saw a $55,750 house in New Chicago, Memphis. The rent comp at the bottom of the listing said $1,500 a month. He pulled out a calculator. "That's a 32 percent cap rate. Tell me what I'm missing."

What he was missing is the $50,000 we did not see in the listing.

Cap rate maps for Memphis are everywhere online. Most of them are wrong in the same way for the same reason. They divide the rent a tenant pays by the price a recent buyer paid, and they ignore the fact that the recent buyer paid for a house that needs forty to seventy thousand dollars of work before it can collect that rent.

Here is what the real numbers look like once you put the missing money back in.

The Number Missing From Every Memphis Cap Rate Map

A median sale price reports what homes traded for. It does not report what condition they were in. In Memphis, that distinction matters more than almost anywhere else.

Roughly 70 percent of qualified sales under $100,000 in Memphis are properties that need significant capital before they can rent at the rents you see online. The $55,750 New Chicago house is rarely rent-ready at $55,750. It is a 1950s frame home with a 30-year-old roof, a cast iron drain stack on its last decade, knob-and-tube wiring somewhere in the walls, no HVAC or a dying one, and a kitchen that has not been touched since the Carter administration. To collect $1,500 in rent, you put $40,000 to $70,000 into that house first.

Here is what realistic rehab money looks like across the Memphis price stack, pulled from our maintenance and turn job data over the past two years:

• Sub-$100K houses like New Chicago, Douglass, Klondike-Smokey City: expect $40,000 to $70,000 of work. Roof, HVAC, plumbing, electrical updates, full kitchen, bath, flooring, exterior. Use $50,000 as a midpoint.

• $100K to $150K houses like Highland Heights, Brinkley Heights, Orange Mound: expect $15,000 to $35,000. Kitchen and bath refresh, one major system, flooring, paint. Use $25,000 as a midpoint.

• $150K to $250K houses like Normal Station, Parkway Village, Hickory Ridge: expect $10,000 to $20,000. Cosmetic plus one system. Use $15,000.

• $250K and above like Hein Park, Audubon Park, Chickasaw Gardens: $0 to $15,000. Move-in ready or close to it. Use $8,000.

A second path exists. You can buy turnkey from another investor instead of buy-and-rehab yourself. The turnkey New Chicago listed at $120,000 already has the rehab markup baked in. You pay $120K instead of $55K plus $50K. The math comes out roughly the same. The tier breakdown below uses the apples-to-apples buy-and-rehab path because that is the math most non-Memphis investors are being quoted.

Once you add the rehab money to the sale price, divide annual rent by total all-in basis, and rank what you get, three different Memphis investment markets show up.

Tier 1: Where The Headline Cap Rates Live (And Why They Are a Trap)

Real cap rate above 14 percent. Violent crime 30 to 60 per 1,000 residents. Six to ten times the safer Memphis neighborhoods. The cap rate is paying you to take all of that risk, and most out-of-state investors badly under-price what taking that risk actually costs.

• New Chicago. Sale $55,750 + $50K rehab = $105,750 all in. Rent $1,500. Real cap 17.0%. Violent crime 33 per 1,000. Headline of 32.3% was math without rehab.

• Main Street Mall. Sale $118K + $25K = $143K all in. Rent $1,750. Real cap 14.7%. Violent crime 60 (small population skews the rate). Strong yields on paper, actively rough today.

• Douglass. Sale $50K + $50K = $100K all in. Rent $1,218. Real cap 14.6%. Violent crime 38.

• Klondike-Smokey City. Sale $80K + $50K = $130K all in. Rent $1,398. Real cap 12.9%. Violent crime 36.

• Orange Mound. Sale $98,500 + $50K = $148,500 all in. Rent $1,400 (anchored by 6 active PM-direct comps in our scrape). Real cap 11.3%. Violent crime 30.

These properties can pencil. They do not pencil for a remote investor with a conforming-lender mortgage and no boots on the ground. They pencil for an operator who lives in Memphis, has a maintenance crew on call, and either pays cash or uses non-conforming financing. The cap rate above the financing cost is real. The question is whether you can actually operate at the cost the cap rate assumes.

If you cannot, do not start your Memphis portfolio here. More on the specific pitfalls of remote-investor purchases is in our out-of-state Memphis investing guide.

Tier 2: The Sweet Spot Where Most LPS Owners Buy

Real cap rate 9 to 14 percent. Violent crime under 15 per 1,000. Meaningful 12-month building permit activity behind the median. The math, the safety, and the construction signal all line up.

• Rozelle. Sale $113,974 + $25K = $138,974 all in. Rent $1,650 (sourced from our own scrape of Memphis PM portals). Real cap 14.3%. Violent crime 14. 42 building permits in trailing 12 months. If you can clear an STR permit, the real cap stacks to 21.2 percent. Edge of the downtown drive ring.

• Glenview. Sale $136,500 + $25K = $161,500 all in. Rent $1,495. Real cap 11.1%. Violent crime 12. STR cap 11.7 percent.

• Highland Heights. Sale $115K + $25K = $140K all in. Rent $1,250. Real cap 10.7%. Violent crime 12. 125 active permits in trailing 12 months.

• Brinkley Heights. Sale $115K + $25K = $140K all in. Rent $1,158 (anchored by 8 PM-direct comps in our scrape, the deepest rent data in any Tier 2 neighborhood). 204 trailing qualified sales. Real cap 9.9%. Violent crime 12. 117 active permits.

• Messick-Buntyn. Sale $140K + $25K = $165K all in. Rent $1,398. Real cap 10.2%. Violent crime 17. STR cap stacks to 10.9 percent.

• Parkway Village. Sale $155K + $15K = $170K all in. Rent $1,350 (anchored by 7 PM-direct comps). 234 trailing qualified sales. Real cap 9.5%. Violent crime 13. 24,764 residents. The largest neighborhood by sales depth in the data set.

• Normal Station. Sale $165K + $15K = $180K all in. Rent $1,374. Real cap 9.2%. Violent crime 4.6 per 1,000, lower than every cap-positive neighborhood in this band. Sits next to the University of Memphis. 12-minute drive to St. Jude Children's Research Hospital and Methodist University Hospital. The cleanest risk-adjusted setup in the entire data set.

• Hickory Ridge. Sale $189,900 + $15K = $204,900 all in. Rent $1,525 (11 PM-direct comps). Real cap 8.9%. Violent crime 10. 146 active permits. STR cap stacks to 16.5 percent.

• Sherwood Forest. Sale $140K + $25K = $165K all in. Rent $1,200. Real cap 8.7%. Violent crime 9. STR cap stacks to 15.2 percent.

• Berclair. Sale $145K + $25K = $170K all in. Rent $1,145. Real cap 8.1%. Violent crime 6.

A Memphis reader will notice the absence of Cooper-Young, Central Gardens, Evergreen Historic District, and Vollintine-Evergreen from this list. Those neighborhoods did not clear the 30-rent-observations density gate as standalone polygons. Midtown rent and sale data is real, but it is spread across smaller polygons that each fail the publish bar. The Midtown geography shows up later in the report through Crosstown (Tier 3) and Glenview (Tier 2). For Cooper-Young specifically, the Memphis STR statistics page and the Memphis neighborhoods hub carry the live data even where the density gate fails.

This is the band most LPS-managed owners are buying into. Real cap rates well above mortgage cost, crime profile insurers and lenders will underwrite without screaming, and enough trading activity that the median actually means something.

Four neighborhoods in this tier deserve a closer look.

> Rozelle. The strongest real cap rate in the data set anchored by our own rent scrape.
> Our scraper pulled 4 active PM-direct listings inside the Rozelle polygon. Rent median lines up with the regional Rentometer sample, which is the cleanest case for trusting a number. LTR real cap 14.3 percent. STR real cap 21.2 percent if you can clear Ordinance 5631. Sources: Shelby County QualifiedSales, our PM-portal scraper, Airbtics neighborhood STR feed.

> Brinkley Heights. The deepest data position in the table.
> 8 PM-direct rent comps in polygon. 204 qualified sales in the trailing window. 117 active building permits over the last 12 months. Real cap 9.9 percent. Violent crime 12. The rent number here is anchored, not interpolated. If you want a Memphis neighborhood where the median actually represents what the houses do, this is one of the few.

> Normal Station. The cleanest risk-adjusted setup in the data.
> 4.6 violent crime per 1,000, lower than every cap-positive neighborhood above it on the table. Sits next to the University of Memphis. 5 PM-direct rent comps in polygon. STR cap stacks to 12.3 percent if permitted. The kind of neighborhood where you can run a quiet rental book without the headaches of higher-cap-higher-crime alternatives.

> Parkway Village. The largest neighborhood by sales depth.
> 234 trailing qualified sales and 24,764 residents mean the median sale price is statistically grounded, not a small-sample fluke. 7 PM-direct rent comps, 69 active permits, 13.1 violent crime. Real cap 9.5 percent. If you want to acquire multiple properties without moving the local market, this is the neighborhood with the most inventory turnover.

Tier 3: Where Cap Rate Math Stops Working

Real cap rate below 6 percent. At current mortgage rates and Memphis operating expense ratios (50 to 60 percent of gross rent), these neighborhoods produce negative cash flow on most acquisitions. For most rental investors, they are not investment neighborhoods. They are great places to live.

The narrow exceptions are buyers with significant existing wealth doing multi-decade appreciation holds, real-estate-professional tax-status investors using rental losses to shelter high W2 income, or families buying a future personal residence and parking a tenant in it for a few years. If you are not in one of those three lanes, these are not investments.

• Crosstown. All in $273K. Real cap 6.6%. Violent crime 6. Inside the Crosstown Concourse halo. The edge case of the tier. Math gets close to break-even after operating expenses, but only with low debt or all-cash.

• High Point Terrace. All in $318K. Real cap 5.3%. Negative cash flow at current mortgage rates.

• Audubon Park. All in $341K. Real cap 4.8%. Negative cash flow.

• Hein Park. All in $387K. Real cap 4.3%. Violent crime 3. Primarily owner-occupied. Not an investment market and not a real STR market either.

• Southwind. All in $583K. Real cap 3.7%. Functionally not an investment.

• Chickasaw Gardens. All in $891K. Real cap 1.9%. The land cost alone exceeds rental yield. People who buy Chickasaw Gardens are buying school district stability and appreciation, not rental income.

Two things to flag on Tier 3. First, none of these are real STR markets despite what the Airbtics cap rate math sometimes suggests. Tier 3 is primarily owner-occupied territory. HOA restrictions, neighbor pushback patterns, and housing stock that does not function as STR product all sit in front of the cap rate math. We have actually looked. Second, anyone selling you a Memphis rental property in this tier on the basis of cap rate is selling you the wrong house. The numbers say what the numbers say.

What Actually Works as a Memphis STR (And What Doesn't)

STR cap rate math runs differently from LTR cap rate math. Airbtics gives us nightly revenue per neighborhood, we divide by all-in basis, and a number comes out. But STR yield only translates to reality where the neighborhood actually supports STR operations. That is a much narrower set than the cap rate table shows, and it is the place new investors most often misread Memphis.

Three operational filters that matter more than the cap rate number.

1. Ordinance 5631 permit eligibility. Memphis caps new STR permits at 5 percent of dwelling units per neighborhood. Grandfathered legacy operators usually fill that cap in built-out neighborhoods. New permits are functionally zero in most desirable areas. Confirm eligibility for the specific property before underwriting anything else.

2. Real STR demand in the geo. STR demand in Memphis clusters around downtown (FedEx Forum, Beale Street, the river), Cooper-Young, Midtown, East Memphis (the Audubon Park and University of Memphis corridor), Whitehaven (Graceland adjacency), and the convention center / airport drive ring. Suburban housing stock without proximity to one of those clusters does not pull nightly rates that justify the operational overhead.

3. Compatible neighborhood norms. Primarily owner-occupied neighborhoods with active HOAs and neighbor pushback patterns will fight an STR operator regardless of permit status. The cap rate math says nothing about this.

Within our cap rate table, two neighborhoods clear all three filters cleanly.

• Rozelle. LTR real cap 14.3 percent. STR cap stacks to 21.2 percent. Edge of the downtown drive ring. Modest housing stock so the math actually works as STR product. Active comp activity. A real STR neighborhood.

• Sherwood Forest. LTR real cap 8.7 percent. STR cap stacks to 15.2 percent. Small east Memphis neighborhood inside the broader Audubon Park / University of Memphis corridor. Housing stock fits short-stay guests, crime profile sits at 9.1 violent per 1,000, real comp activity in the polygon. Different demand pattern than Rozelle (more business travelers and event guests than walkable urban tourists) but the math holds.

A third can work for the right operator profile.

• Hickory Ridge. LTR real cap 8.9 percent. STR cap stacks to 16.5 percent. Suburban, but inside the convention center / airport / Graceland drive ring. STR demand comes from business travelers and event guests, not walkable urban tourists. The math is real if you position to that market specifically.

Several Tier 3 premium neighborhoods (Hein Park, Audubon Park, Chickasaw Gardens, High Point Terrace, Southwind) show high Airbtics STR cap on paper. They are not STR plays in practice. Primarily owner-occupied. HOA restrictions. Housing stock too large or too expensive to pencil at sustainable nightly rates. The math is operational fiction in those areas.

The biggest Memphis STR markets (Center City, Cooper-Young, Midtown, Whitehaven) do not appear in our cap rate table because they did not all clear the sale or rent density gates. Active permit-holders dominate those areas. New permits are scarce. If you want to operate STR in those neighborhoods, the path is usually buying an existing grandfathered listing, not new permit pursuit.

Live STR ADR, occupancy, and revenue per neighborhood live on the Memphis STR statistics page. Our Memphis STR case study walks through five properties across fourteen months of LPS operational data if you want to see what the operational math looks like in practice.

Before you underwrite STR in any neighborhood, do the permit eligibility check first.

How We Built This

Three independent data layers underneath every number.

Sale prices come from the Shelby County Assessor's QualifiedSales feed. About 43,000 arm's-length transactions (no quitclaims, no intra-family transfers, no foreclosure deeds), spatial-joined to neighborhood polygons and aggregated to a median. Monthly refresh. This is the same database the county uses to set property tax assessments.

Rent comes from one of two sources. Where 5 or more PM-direct listings sit inside a neighborhood polygon, we use the polygon median pulled from our scraper of 23 Memphis property management portals (AppFolio, ShowMojo, Propertyware, Buildium, CrestCore via Tenant Turner). About 873 active rentals captured every Monday, Tuesday, and Wednesday. Where polygon depth is thinner, we backfill with Rentometer's regional radius sample. Both sources are real listings. We annotated each tier above with which source applies.

Crime per 1,000 residents comes from the Memphis Police Department daily incident feed, divided by Census ACS population for the polygon.

Density gate: before we publish any neighborhood, it has to clear 30 or more rent observations AND 5 or more qualified sales in the trailing window. About a third of Memphis neighborhoods do not pass that gate yet. We do not publish noise.

Caveats Worth Stating Out Loud

The rehab adders are midpoints. A specific property can need $15,000 of cosmetic work or $90,000 of full gut. Use the midpoint as a starting baseline, then adjust to the actual condition of the house you are looking at.

The real cap rate is still a gross cap rate. It ignores operating expenses (taxes, insurance, vacancy, capex, management). Your net unlevered cap rate is roughly half the gross number. Do not lend against the gross number.

The rent numbers are configuration-weighted medians. A 2 bedroom / 1 bath house cannot rent above the 2BR/1BA Memphis configuration ceiling no matter how nicely you renovate it. If you are underwriting a 3BR/2BA house in a neighborhood where the median rent reflects 2BR/1BA stock, your actual rent ceiling sits higher than the table number. The reverse also holds.

What To Do With This

Three steps.

1. Open the Memphis neighborhoods hub and look at the neighborhood you are interested in across cap rate, sale velocity, rent density, crime trend, and permit activity. The hub is the live data layer this report sits on top of, refreshed weekly.

2. Use Tier 2 as your investment band. Real cap 9 to 14 percent. Violent crime under 15 per 1,000. Real permit activity. Tier 1 is for experienced local operators with non-conforming financing and a maintenance crew. Tier 3 is not rental investment territory unless you fit one of the narrow appreciation or tax profiles above. Anyone showing you a Memphis cap rate without the rehab adjustment, or selling you a Tier 3 property on the basis of "cap rate," is either new to the market or hoping you are.

3. If you want to model the math yourself before reaching out, the Memphis rental investment calculator takes all-in basis, rent, and operating expenses and computes net cap and break-even rent. If you are underwriting a specific property, send the address to andrew@staywithlps.com. We pull real LTR and STR comps for the polygon, an Ordinance 5631 permit eligibility check, and a realistic rehab scope walk for the specific house. 24-hour turnaround.

Memphis is one of the very few American markets where you can still find genuine cash flow on single-family rentals at sub-$200K all-in basis. The trick is doing the math correctly, with the rehab gap closed and the source of every number visible. Most operators showing you a Memphis cap rate are pulling from Zillow Zestimates and city-wide rent surveys and rounding. We pull from the Shelby County Assessor's QualifiedSales feed and 23 PM-direct portals and label every row.

How LPS manages long-term Memphis rentals
Our Memphis short-term rental management approach
The Memphis crime map by neighborhood

Andrew Glisson, LPS (Memphis, TN)

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