Nashville has solidified itself as one of the strongest markets in the United States. For the third year in a row, Nashville was one of the top 10 “Markets to Watch” in the PwC/ULI Emerging Trends in Real Estate Report, coasting in at number 9. It dropped three slots from its perch at number 6 last year, but the Music City is still expected to have yet another strong year.
While some are alarmed by the three position drop, there is no reason to be, according to PwC partner Mitch Roschelle. According to Roschelle, Nashville dropped because two new cities entered the top 10. Fort Lauderdale and Salt Lake City made it onto the list, and that is the main reason Nashville dropped down. The city is still in the top 10, and that’s the most important takeaway. It is still expected to be as hot as ever, so now is a good time to entertain the idea of investing in Nashville real estate.
Why Nashville Made the Top 10
Nashville made it into the top ten for several reasons. First, you need to consider the cost of doing business in Nashville. The cost of doing business in the city is 88 percent of the national average, and that attracts businesses to the already blossoming city. The low cost of business is also good for the economy, which in turn is good for real estate.
It’s not just about the cost of doing business, though. You also need to consider the projected growth in disposable income in the city. Over the course of the next five years, Nashville’s disposal income is expected to be a whopping 40 percent higher than the national average. That makes the market incredibly attractive. People have more money to spend on everything, including real estate. That makes it much easier for investors to get a solid return on their investments. That, of course, means they are more likely to pick up investments. They know people have money to spend, and they want them to spend it on their properties.
Millennials and gen Z are also flocking to the city, which helps the real estate outlook. People between the ages of 15 to 34 are coming to the city in droves. In fact, Nashville is expected to see a growth among that age group of around four times the national average in the next five years. These are no longer the people of the future. They are the people of the present. Baby boomers are holding onto their current homes, but millennials and gen Z needs to find places to live. That means people who need property are coming to Nashville, which makes it a great spot for real estate investors.
Colleges and universities also make the city appealing. Real estate investors see the students as a potential new market. Many choose to stay in Nashville after graduation, and they take on new jobs and have disposable income. They often look to rent or buy property in the city, and those real estate investors are on hand to provide them with what they need.
The city’s affordable real estate is also a reason the city made the list. The national median single-family home price is $255,000, and Nashville is $5,000 below that. While other cities have bloated real estate prices, Nashville has remained reasonable. That makes it easier for people to invest in the city.
It’s not just a great city for buyers, either. It’s a hot real estate market in part because it’s affordable for renters. When looking at the country as a whole, renters spend 26.6 percent of their income on rent. They only spend 20.6 percent of their income on rent in Nashville. That means it is much easier for people to afford rent in Nashville. If you own rental property, that is music to your ears.
Add these items up, and it’s a great time to invest in Nashville real estate. The market is hot, and it will likely stay that way well into the future.
The One Issue
All of this is great news, but Nashville does have one problem in terms of real estate, and it’s not a problem that is unique to the city. There is a shortage of homes available for sale. This is hurting all buyers, but it hurts first-time buyers the most. They are often shut out of the buying process because the market is so competitive.
Fortunately, there is a solution to this problem. Nashville has lots of rentals available, and more are on the way. Those who want to live in the city can still find housing, even if they aren’t able to purchase it.
Best Investment Opportunities
Although there has been talk of the bubble bursting, home prices decreasing, and more properties hitting the market, you shouldn’t expect that to happen in Nashville anytime soon. The market will likely remain hot for quite some time, making it difficult to invest in single-family homes. If you are lucky enough to get one at a fair price, pick it up, as it can net you quite a profit on the back end.
If you want to get into real estate investment quickly, though, multiple-family real estate is the best option. The housing shortage and influx of millennials and generation Z in Nashville means apartments are the hot commodity right now. You can reach the thriving market with multifamily dwellings, meaning you can make a killing with your investment.
Tips for Investing in Multifamily Real Estate
Even if you’re a seasoned real estate investor, you might be a little confused when it comes to investing in multifamily real estate. It’s a little different than investing in single-family real estate, so you need to make sure you’re prepared.
Know the Lingo
“Multifamily” is an umbrella term. There are various types of apartments that sit underneath that term. You need to know the lingo before you start investing.
Garden apartments are one-and two-story buildings. These buildings often contain a courtyard.
Walk-up apartments have three to five stories, and they don’t have an elevator. They are often older and might contain various unit types in the same building.
Mid-rise apartments have six to ten stories, and they have elevators. These apartments are popular in Nashville.
Then, there are high-rise apartments. Nashville also has some of these. They have more than 10 stories and have elevators.
Check the Location
Location is incredibly important when it comes to multifamily real estate. This is true all around the country, including Nashville. Nashville has several popular neighborhoods that are good for investors, and you should pick one based on your investment style.
The Gulch is an excellent place if you want to attract the young, hip crowd. It is also upscale and trendy and is known for being walkable. Residents easily walk to restaurants and shops, and they can even walk to music venues. This spot is popular with young adults, but it doesn’t tend to attract families.
Downtown Nashville is an excellent spot if you want to attract people who are new to the area. It gives them the complete Nashville experience in one spot, especially if they want to experience the music. The downtown area has a lot of high-rise buildings that can make a nice investment. Keep in mind that downtown Nashville isn’t a popular spot for families, and a lot of the people who have lived in Nashville all their lives would rather stay in one of the other neighborhoods.
If you want to dive into multifamily rentals but you aren’t interested in high-rises, check out Hillsboro Village. It has midsized apartment complexes, along with houses, townhomes, and duplexes. It is located by Vanderbilt University and Belmont University, so it’s popular with college students. It also attracts families.
Germantown is one of the city’s oldest neighborhoods, and it’s known for its electric vibe. It hosts the annual Oktoberfest and also has some of the best restaurants in Nashville. It has a nice mixture of single-family homes and apartments. You will also find duplexes and townhomes here. You can easily reach families and singles when you rent in Germantown.
These are just some of the popular neighborhoods in Nashville. Think about who you want to reach and then pick a neighborhood that has the vibe you’re going for. That will help you make a sound investment.
Then, include the neighborhood in your property vacancy advertising. It should take center stage, so you attract people who are interested in the neighborhood.
Understand You’re in it for the Long Term
Most investors don’t turn a profit quickly with multifamily real estate, even when the market is as hot as it is in Nashville. In fact, the first several years might just be about making mortgage payments. Over time, though, you should start to net a nice profit with your property. Eventually, you can even sell it and make a huge return on your investment, as long as the market is hot. You need to understand that this isn’t the same as investing in single-family homes, though. You probably aren’t going to go in, flip the property, and turn a profit just like that. It’ll take a little more time, but it will be time well spent.
Hire a Property Manager
You need to have a property manager if you don’t live in the Nashville area. Actually, you might want to have a property manager even if you do live in Nashville. It’s always nice to hand the reigns over to someone else so you don’t have to mess with the day-to-day management duties.
This is a spot where it’s actually easier to handle multifamily units. If you own several units in the same building, a single manager can handle all of them. On the other hand, if you own several single-family dwellings, you might have to hire multiple managers to handle them.
Find the Best Renters
Multifamily dwellings can see a revolving line of tenants, and you don’t want that to happen to you. It costs money to find new tenants, so you want to find people who will stay put. That means you need to fill your property with reliable people who pay their bills on time. You aren’t a mind reader, but you can do a little checking up on potential tenants to find out what type of people they are.
Start with running a background check. That way, you’ll know if the person has a criminal history or has been evicted in the past. Tenant background checks are quick and easy to perform, and you can get important information in no time at all.
You also need to pull the person’s credit report before offering up the rental. Tenant credit reports allow you to find out if the person is responsible with money. If a tenant has a bad credit score, it is less likely that he or she will pay rent on time.
Have a Collection Plan in Place
Most people don’t stop with a single multifamily rental. They add one after another to their portfolios, and that can make collections difficult. Don’t have people send checks to your home, and don’t waste your time picking them up from the various tenants. Instead, use an online rent collection service. Tenants can log into the system and pay their rent from home. You don’t have to go anywhere to collect it, and you don’t have to spend your time depositing checks. It’s easier for everyone and essential if you’re going to manage multiple properties.
It’s Time to Visit the Music City
Now is the time to look at Nashville if you’re interested in investing in real estate. You don’t need to live in Nashville to take advantage of the hot market. Many investors pick up properties in cities and states that are far away from where they live, and you can do the same. Get the right tools in place to help you manage your investment, and you can shine in Nashville.
About the author
Matt Angerer is the Founder and President of VerticalRent. He enjoys writing on a variety of topics that help Landlords, Property Managers, and Renters across America. He is particularly interested in helping renters understand their local marketplace, pick the best places to live, and find an awesome roommate. Since 2011, VerticalRent has grown to service over 100,000 landlords and renters across America.