Cost Segregation in Memphis, TN

FedEx's global headquarters, ultra-affordable entry prices, and Tennessee's zero state income tax make Memphis the ultimate cash-flow market — where $230K properties generate $20K+ in Year 1 federal tax savings and premium logistics-driven rental demand.

Population
1.3M
Median Home
$230K
Rent (3BR)
$1,400
Property Tax
1.25%
Annual Job Growth
8K+
Ranking
Logistics Capital
Overview

Value Props for Investors

FEDEX CITY
FedEx HQ: 30K+ Jobs Anchoring the Economy

FedEx's global headquarters employs 30,000+ in Memphis and anchors a massive logistics ecosystem. Package handlers to executives need housing — creating demand across every price point and neighborhood.

ULTRA-AFFORDABLE
$230K Entry with 85% Building Values

Memphis's rock-bottom land costs mean 85% of your purchase goes toward depreciable building value. Combined with zero state income tax, every cost seg dollar works harder here. $20K+ in Year 1 savings on a sub-$250K property.

ST. JUDE EFFECT
World-Class Research Hospital Drives Premium Demand

St. Jude Children's Research Hospital employs 8,000+ workers and is expanding with a $12.9B investment plan. Medical researchers and staff provide high-quality, stable tenants in the medical district corridor.

Tax Strategy

Cost Segregation & Tax Rules in Memphis, TN

Understanding how federal and Tennessee state tax rules interact is critical to maximizing your cost segregation benefits in Memphis.

Cost Seg Overview
State vs. Federal Rules
Tax Landscape
Typical Purchase
$230,000
Building Value
85%
15% land / 85% building
Cost Seg Range
22-35%
of building reclassified
Home Age
42 yrs
Built ~1982
What Gets Reclassified

A cost segregation study identifies building components that can be depreciated over 5, 7, or 15 years instead of the standard 27.5 or 39 years. In Memphis, typical reclassification rates are 22-35% of building value.

Purchase Price Breakdown
Building 85%$195,500
Land 15%$34,500
Building Value Reallocation (with Cost Seg)
5-Year Property17%
$32,844
15-Year Property11%
$21,896
27.5 / 39-Year (Remaining)72%
$140,760

5 & 15-year components ($54,740 = 28% of building) are eligible for bonus depreciation in Year 1.

Overline Study Cost & ROI
Overline Study Cost
$499 - $2,000
Avg. ROI
10-40x

The math: A $230,000 property with 85% building value and 28% reclassification yields ~$20,254 in Year 1 federal tax savings at the 37% bracket — significantly more ROI than traditional studies costing $5,000-$10,000+.

Housing Stock Advantage

With a median build year of 1982, Memphis's housing stock has identifiable components (HVAC, electrical, plumbing, landscaping) that are strong candidates for accelerated depreciation.

N/A — No State Income Tax
Tennessee Bonus Depreciation Conformity

Tennessee has no state income tax on wages or investment income, so state-level depreciation conformity is not applicable. All cost segregation benefits are captured at the federal level — 100% bonus depreciation on reclassified components.

What This Means for Memphis Investors: With no state income tax, 100% of your tax savings come from the federal deduction. This simplifies planning significantly — no state addback rules, no conformity concerns, just pure federal savings at your marginal rate.

Federal vs. TN Depreciation Timeline
PeriodFederal TreatmentTN State Treatment
Year 1100% bonus depreciationN/A — No state income tax
Years 2+Standard MACRS schedulesN/A
Section 179 Expensing
State ConformityLimited

With no state income tax, Section 179 deductions are federal-only in Tennessee. However, TN's lack of state tax means more retained cash flow to reinvest — Nashville investors often use cost seg savings to fund their next acquisition.

Key Takeaway

A $350K property with a $280K depreciable basis and 30% cost seg reclassification yields ~$31,080 in federal tax savings in Year 1. With no state income tax and 0.63% property taxes, Tennessee maximizes your after-tax return on every investment dollar.

Bottom Line

Tennessee's zero state income tax means all cost seg benefits are federal. Combined with some of the lowest property taxes in the nation, TN investors enjoy the highest after-tax cash flow potential in the Southeast.

Local Property Tax
1.25%
Memphis effective rate
Transfer Tax
$0.37 per $100 of sale price
State Income Tax
None
No State Income Tax (on wages/investment income)
Property Tax Details

Shelby County effective rate of ~1.25% is higher than the state average but still moderate nationally. The higher rate is offset by ultra-low purchase prices.

Assessment Methodology
MethodAppraised value at 25% assessment ratio (residential/farm)
Reassessment CycleEvery 4-6 years (county-dependent)
Assessment BodyCounty Assessor of Property
Appeal WindowDuring equalization period (typically April-May of reappraisal year)
Appeal Success Likelihood
Moderate
LowModerateGoodVery High

Tennessee's 25% assessment ratio for residential property keeps effective rates low. The Comptroller's office oversees county reappraisals for uniformity. Davidson County (Nashville) completed a 2024 reappraisal with significant increases. The County Board of Equalization handles appeals at no cost.

Work with Overline — Our team helps Memphis investors identify over-assessed properties and file tax appeals. A successful appeal can save thousands annually and compounds your cost seg savings.

Illustrative Example

Cost Seg Example for Memphis, TN

This example assumes a purchase eligible for 100% bonus depreciation. All factors below are based on averages from our historical cost segregation studies for TN properties. To see your exact savings, run a property-specific cost seg analysis below.

Typical Memphis, TN Property Details
$
50%95%
5%35%
2%25%
Total Reclassified28% of building
10%37%
Estimated Year 1 Tax Savings
Building Value$195,500
$230,000 x 85%
Normal Annual Depreciation$7,109
$195,500 ÷ 27.5 yr (residential)
5-Year Reclassified$33,235
15-Year Reclassified$21,505
Total Accelerated$54,740
28% of $195,500 building value
Federal Tax Savings (Year 1)$20,254
$54,740 x 37% bracket
Total Year 1 Tax Savings$20,254
7.7x normal annual deduction captured in Year 1

TN State Tax: With no state income tax, 100% of your tax savings come from the federal deduction. This simplifies planning significantly — no state addback rules, no conformity concerns, just pure federal savings at your marginal rate.

Insurance & Risk

Insurance Landscape in Memphis

Insurance costs directly impact your cash flow. Understanding Memphis's risk profile helps you budget accurately and avoid coverage gaps.

Avg. Annual Premium
$2,400
Memphis average
State Average
$2,200
4% below average (statewide) / above in West TN tornado zones
National Average
$2,300
for comparison
Key Risk Drivers
1
Tornadoes and severe storms
2
Hail damage
3
Mississippi River flooding
Coverage Recommendations
Standard homeowner's policy with replacement cost coverage
Wind/hail deductible awareness (typically 1-2% of dwelling coverage in tornado zones)
Flood insurance recommended in Nashville river corridors and Memphis lowlands
Umbrella liability ($1M+) for rental property portfolios
Cost Seg + Insurance Connection

Tennessee's severe storm exposure makes accurate building valuation critical. A cost seg study provides detailed component-level documentation that supports insurance replacement cost estimates — ensuring you're properly covered when tornado or hail damage strikes.

Revenue Comparison

STR vs. Long-Term Rental in Memphis

Compare short-term (Airbnb) and long-term rental income for a typical Memphis investment property.

Long-Term Rental
Monthly Rent (3BR)$1,400
Annual Gross$16,800
Vacancy Rate6%
Net Annual$15,792
Tenant StabilityModerate — FedEx and logistics workers provide stable base; some higher turnover in lower-income areas
Depreciation Schedule27.5 years
Residential rental property
Tax TreatmentPassive Only
Losses can only offset passive income unless you qualify as a Real Estate Professional (750+ hrs/yr)
Short-Term Rental
Avg. Nightly Rate$120
Occupancy Rate62%
Annual Gross Revenue$27,156
Net Annual (after expenses)$19,009
Management20-25%
Depreciation Schedule39 years
Classified as commercial / transient use property
Tax TreatmentActive Income Eligible
Losses can offset W-2 / active income if you document 100+ hrs of material participation and meet IRS criteria
Cost Seg + STR Loophole

Memphis is a LTR-dominant market where cost seg supercharges cash-flow returns. At $230K entry with $20.3K in Year 1 federal tax savings, your effective entry cost drops to under $210K. Build a multi-property portfolio at prices that would buy a single unit in Nashville.

Market Fundamentals

Economy & Housing Demand in Memphis

Strong economic engines create stable rental demand. Here is what drives Memphis's economy and housing market.

Median Income
$45,000
Rent-to-Income
30%
Healthy ratio
Vacancy Rate
6.0%
Pop. Growth
+0.3% annually
Major Employers
1
FedEx HQ (30K+)
2
St. Jude Children's Research (8K+)
3
International Paper HQ (4K+)
4
AutoZone HQ (3K+)
5
Methodist Le Bonheur Health (12K+)
6
Nike Distribution (3K+)
Top Industries
Logistics & Distribution
Healthcare
Corporate Headquarters
Manufacturing
Music & Tourism
Landlord & STR Rules
Landlord Friendliness
Very Friendly
Eviction Timeline
30-45 days
STR Regulation
Generally permitted

Memphis has minimal STR restrictions compared to Nashville. Most areas allow short-term rentals with a business license. The market is primarily LTR-focused given the FedEx and logistics tenant base, but Beale Street tourism creates seasonal STR demand.

Why Invest Here

Memphis is a pure cash-flow play powered by FedEx. The global logistics giant employs 30,000+ locally and anchors an entire logistics ecosystem (Amazon, Nike, International Paper distribution). At $230K with 85% building values and zero state income tax, the cost seg ROI is exceptional — $20K+ in Year 1 savings on a sub-$250K property. Buy 2 Memphis homes for the price of 1 Nashville home and double your portfolio cash flow.

Where to Invest

Top Neighborhoods in Memphis

#1
Cooper-Young / Midtown
Vibrant arts and restaurant district with walkable community feel
Price
$280K
Rent
$1,650
Yield
7.1%
Memphis's most desirable rental neighborhood. Strong millennial and young professional demand. 1920s-1960s bungalows with renovated systems yield excellent cost seg results.
$280K$1,6507.1%
Memphis's most desirable rental neighborhood. Strong millennial and young professional demand. 1920s-1960s bungalows with renovated systems yield excellent cost seg results.
Memphis's most desirable rental neighborhood. Strong millennial and young professional demand. 1920s-1960s bungalows with renovated systems yield excellent cost seg results.
#2
East Memphis
Established affluent area near hospitals and corporate offices
Price
$310K
Rent
$1,800
Yield
7.0%
Premium rents from St. Jude, Methodist, and corporate workers. Older housing stock with renovations creates strong depreciable basis.
$310K$1,8007.0%
Premium rents from St. Jude, Methodist, and corporate workers. Older housing stock with renovations creates strong depreciable basis.
Premium rents from St. Jude, Methodist, and corporate workers. Older housing stock with renovations creates strong depreciable basis.
#3
Hickory Hill / Southeast Memphis
Affordable working-class area near distribution centers
Price
$160K
Rent
$1,200
Yield
9.0%
Best cash flow in Memphis. FedEx and logistics workers are the primary tenants. Ultra-affordable entry maximizes cost seg ROI per dollar invested.
$160K$1,2009.0%
Best cash flow in Memphis. FedEx and logistics workers are the primary tenants. Ultra-affordable entry maximizes cost seg ROI per dollar invested.
Best cash flow in Memphis. FedEx and logistics workers are the primary tenants. Ultra-affordable entry maximizes cost seg ROI per dollar invested.
#4
Bartlett / Cordova
Suburban family area with strong schools and retail
Price
$250K
Rent
$1,500
Yield
7.2%
Desirable Shelby County suburbs with stable family demand. Newer construction (1990s-2010s) provides solid cost seg component breakdown.
$250K$1,5007.2%
Desirable Shelby County suburbs with stable family demand. Newer construction (1990s-2010s) provides solid cost seg component breakdown.
Desirable Shelby County suburbs with stable family demand. Newer construction (1990s-2010s) provides solid cost seg component breakdown.
Local Partners

Investor-Friendly Partners in Memphis, TN

We are building a curated directory of top investor-friendly brokers, property management companies, and service providers in Memphis, TN.

Investor-Friendly Brokers

Top real estate agents who specialize in investment properties and understand cost segregation, 1031 exchanges, and cash-flow analysis.

Coming Soon
Property Management

Vetted property managers who handle tenant screening, maintenance, and rent collection for both long-term and short-term rentals.

Coming Soon
Insurance Agents

Independent insurance agents who specialize in rental property coverage and can leverage cost seg data for accurate replacement cost estimates.

Coming Soon

Are you a broker, property manager, or insurance agent serving investors in Memphis, TN?

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Frequently Asked Questions

Cost Segregation FAQ — Memphis, TN

How much can I save with cost segregation in Memphis, TN?

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On a typical $230K property in Memphis, cost segregation can yield approximately $20,254 in Year 1 combined federal and state tax savings at the 37% bracket, with a study ROI of 579%. Overline studies cost $499-$2,000.

What is the property tax rate in Memphis?

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The effective property tax rate in Memphis is approximately 1.25%. Shelby County effective rate of ~1.25% is higher than the state average but still moderate nationally. The higher rate is offset by ultra-low purchase prices.

Is Memphis a good market for real estate investing?

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Memphis is a pure cash-flow play powered by FedEx. The global logistics giant employs 30,000+ locally and anchors an entire logistics ecosystem (Amazon, Nike, International Paper distribution). At $230K with 85% building values and zero state income tax, the cost seg ROI is exceptional — $20K+ in Year 1 savings on a sub-$250K property. Buy 2 Memphis homes for the price of 1 Nashville home and double your portfolio cash flow.

What is the average insurance cost for rental properties in Memphis?

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The average annual homeowner insurance premium in Memphis is approximately $2,400. Memphis sits in a severe storm corridor with above-average tornado and hail risk. Insurance costs are the primary headwind for Memphis investors. Wind/hail deductibles (1-2% of coverage) and flood insurance near the Mississippi are important cost factors.

What are the STR and landlord rules in Memphis?

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Memphis is rated "Very Friendly" for landlords. STR regulation: Generally permitted. Eviction timeline: 30-45 days. Memphis has minimal STR restrictions compared to Nashville. Most areas allow short-term rentals with a business license. The market is primarily LTR-focused given the FedEx and logistics tenant base, but Beale Street tourism creates seasonal STR demand.

Who are the major employers in Memphis?

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Major employers in Memphis include FedEx HQ (30K+), St. Jude Children's Research (8K+), International Paper HQ (4K+), AutoZone HQ (3K+), Methodist Le Bonheur Health (12K+). Top industries: Logistics & Distribution, Healthcare, Corporate Headquarters, Manufacturing, Music & Tourism.

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