Out-of-State Landlord in Memphis: What the Law and Numbers Say

Memphis ranked first in the country for institutional investor sales share in Q3 2024. Fifteen point one percent of all Memphis home sales that quarter went to institutional investors, per ATTOM Data. Tennessee ranked second nationally for investor purchase share at 8.9%. Investment companies purchased 29% of all Tennessee rental properties in 2022 and 2023, according to the legislative record for HB 1814, the bill the state passed in 2025 specifically because out-of-state landlords were unreachable when tenants needed them.

The capital is rational. The execution is often not. Here is what the numbers and the law actually say for out-of-state owners.

Why Memphis draws out-of-state capital

Memphis has a specific combination of characteristics. Median home prices in the investor-grade tier run $130,000 to $200,000. Three-bedroom house rents averaged $1,495 per month in 2024, up 47% over three years. Gross rental yields in high-yield neighborhoods run 8% to 12%. Single-family rental rate growth was 6.1% in 2024.

54% of Memphis households are renter-occupied. Occupancy rates across the metro exceed 95%. FedEx, Amazon, and St. Jude Children's Research Hospital anchor employment that keeps rental demand stable regardless of broader market conditions. The city ranked fourth in the country for rental yield among large metros, per Rentometer's 2024 analysis.

For neighborhood-level data on where the rent-to-price ratios actually work, the Memphis neighborhoods guide covers Cordova, Midtown, Binghampton, Frayser, and Whitehaven with data on each.

The Tennessee tax picture

Tennessee has no state income tax on rental income. This is constitutionally protected since Amendment 3 passed in 2014. Any future income tax would require a statewide voter-approved constitutional amendment. The Hall Income Tax, which taxed dividend and interest income at 6%, was fully repealed effective January 1, 2021. It never applied to rental income.

What out-of-state owners owe at the entity level: Tennessee franchise tax at 0.25% of the greater of net worth or the value of Tennessee property, with a $100 minimum. The excise tax is 6.5% of net earnings from Tennessee business activity. Both apply to LLCs at the entity level.

There is no Tennessee withholding requirement for out-of-state owners receiving Tennessee rental income. Report the income on Schedule E of your federal return. No Tennessee individual income tax return is required.

The legal structure you need

An out-of-state LLC that owns Tennessee rental property must register with the Tennessee Secretary of State as a foreign LLC. The filing fee is $50 per member, minimum $300, maximum $3,000. You need a Certificate of Good Standing from your home state and a Tennessee registered agent: a person or entity with a physical Tennessee street address, available during business hours to receive service of process. P.O. boxes are not accepted under T.C.A. § 48-208-101.

If you skip registration, you cannot file or maintain legal proceedings in Tennessee courts. That includes eviction cases. The penalty for operating unregistered is three times the filing fee per year. Many Tennessee attorneys recommend forming a Tennessee LLC directly rather than registering a foreign one, since ongoing compliance is simpler and the cost is the same.

HB 1814, the Landlord Transparency Act, took effect in 2025 and applies in all Tennessee counties with populations over 75,000, which includes Shelby County. Before a tenant signs any lease, the landlord must provide written contact information for the property owner, property manager, and emergency maintenance contact. The contact must include a physical mailing address. Non-compliance can void your ability to pursue eviction and expose you to attorney fee liability. The law was written specifically for absentee owners who were unreachable when problems arose.

What full-service management actually costs at a distance

Self-managing Memphis rental property from another state is not a realistic operating model. Tennessee's URLTA compliance requirements, the eviction process, and the maintenance demands of older housing stock require someone physically present and responsive. The question is not whether you need a property manager. The question is how to select one and what to budget for it.

Full-service management in Memphis typically runs 8% to 12% of collected rent per month, plus a tenant placement fee of 50% to 100% of one month's rent per new lease. On a $1,200 per month property, the monthly management fee runs $96 to $144. A tenant placement costs $600 to $1,200.

Add maintenance coordination markups (10% to 25% added to contractor invoices) and lease renewal fees ($199 to $250 per renewal), and full-service management runs $3,000 to $5,000 per year per property in a typical operating year. A property that shows a 10% cap rate at the purchase price often nets 6% to 7% after management and maintenance are fully accounted for.

For the specific questions that reveal whether a PM company runs real systems or just collects fees, the PM evaluation guide covers what to ask before signing a management agreement.

BlueOval City: the honest version

Ford's BlueOval City campus was announced in 2021 with projections of 5,760 direct jobs and a production start in 2025. As of December 2025, Ford scrapped the electric pickup plan entirely and pivoted to gas-powered trucks, with production pushed to 2029. Current job projections are 2,300 direct positions, down 60% from the original announcement. There are 80 employees on-site today.

BlueOval City creates a legitimate long-term thesis for the I-40 corridor east of Memphis in Haywood, Tipton, and Fayette counties. It is not a near-term demand driver for Memphis proper. Investors buying in 2025 or 2026 for BlueOval demand are at least three years early on that specific thesis.

Memphis rental demand in 2025 and 2026 is driven by the existing employment base: FedEx with 33,000 regional employees, the Port of Memphis, Amazon's distribution hub, and St. Jude. Those are the numbers that support current rents and occupancy rates above 95%.

The risks that actually matter

Memphis files approximately 30,000 eviction cases per year, involving nearly one in five renters. That figure is not a reason to avoid the market. It is a reason to screen tenants properly. Weak screening is the most common reason out-of-state owners end up in the eviction process. A rushed placement because the unit has been vacant for six weeks costs far more than six weeks of vacancy. For a step-by-step look at Tennessee's eviction timeline and requirements, the Tennessee eviction process guide covers every stage from notice to possession.

The second risk is deferred maintenance from a distance. Memphis has hot, humid summers, year-round termite pressure, and a rental stock where many homes were built before 1980. A problem that costs $200 to fix in April costs $2,000 in August after six weeks of complaints. Remote ownership requires a PM who runs regular inspections on occupied units, not just at turnover.

The third risk is misreading neighborhood yield profiles. Frayser and parts of Whitehaven offer the highest gross yields in the market. They also require the most active management. Neighborhoods with 10% to 12% gross yields are the ones where tenant income levels, turnover rates, and code enforcement activity require a PM with local systems and staff. Cap rate calculations do not capture that.

For the full cash flow math on a Memphis rental at current price points, including management fees, maintenance reserves, and realistic vacancy, the Memphis cash-on-cash return analysis models both cash and financed acquisitions at 7% mortgage rates.