The Nashville real estate market has long been one of the top-performing markets in the country. As a matter of fact, the Nashville housing market has been surging for over a decade now, surpassing even the most optimistic projections. But is investing in Nashville real estate a good move in 2019? And what are the investment strategies that are better suited for this market? In this article, we will answer these questions in detail and provide you with the most effective tips for buying a house in Nashville.
What Makes Buying a House in Nashville a Good Idea?
For a market to be attractive to potential real estate investors, several factors have to come together. The most critical ones are the economy of the city and its demographics. These two variables are extremely important when it comes to determining the solidity of the market. In fact, real estate markets that are not anchored by these fundamentals tend to be volatile, unpredictable, and more likely to fall subject to intense speculation.
Nashville has all the qualities that we like to see in a real estate market. Moreover, the local housing market is steadily shifting towards a buyer’s market, which is a good sign for any real estate investor who’s planning on buying rental property in the city.
Let’s go over some of the key factors that make buying a house in Nashville a profitable venture.
1- The economy is doing well
This is one of the main reasons why you should consider buying an investment property in Nashville. The city boasts a booming healthcare industry and the local IT sector is growing at a rapid rate. The healthy economy coupled with the strong job market is guaranteed to sustain demand for Nashville investment properties.
2- The demographic trends are encouraging
Like we stated above, the demographics of a housing market play a determining role in its viability. In the case of Nashville, the population is young and growing at a decent rate. The average age in Nashville is 33, which is significantly lower than the national average. Buying a property in Nashville can, therefore, be seen as a safe real estate investment since the growing population of the city will continue to boost demand in the foreseeable future.
3- Home prices are low
Low prices are without a doubt the biggest selling point of the Nashville real estate market. While the median property price is over $400,000, many of the top-performing neighborhoods in Nashville have a median property price between approximately $150-300,000 (as seen below from Mashvisor’s data). This allows you to buy multiple properties for the price of a small condo in major real estate markets like New York and Los Angeles. Furthermore, the low prices mean that buying a house in Nashville will be easy to finance.
4- The market is remarkably stable
Another reason to consider buying real estate in Nashville is the immense stability of the local housing market. Despite the low vacancy rates and positive demographic trends, the market has managed to avoid the over-saturation that plagues some bigger housing markets. This is in part aided by the strict permitting requirements that limit the construction of new units. As a consequence of this, prices have remained stable and relatively predictable.
Related: 4 Important Factors Affecting the Real Estate Market
Let’s now check out some of the valuable data (provided by Mashvisor) that you need to review before buying a house in Nashville.
Data for the Nashville Real Estate Market
- Median Property Price: $432,789
- Price per Square Foot: $4,646
- Price-to-Rent Ratio: 21
- Traditional Rental Income: $1,726
- Traditional Cash on Cash Return: 1.8%
- Airbnb Rental Income: $3,643
- Airbnb Cash on Cash Return: 5.6%
Data for the Best Neighborhoods in Nashville
Southside
- Median Property Price: $284,975
- Price per Square Foot: $206
- Price-to-Rent Ratio: 12
- Traditional Rental Income: $2,030
- Traditional Cash on Cash Return: 3.9%
- Airbnb Rental Income: $5,977
- Airbnb Cash on Cash Return: 16.6%
Glencliff Estates
- Median Property Price: $235,000
- Price per Square Foot: $130
- Price-to-Rent Ratio: 11
- Traditional Rental Income: $1,780
- Traditional Cash on Cash Return: 4.2%
- Airbnb Rental Income: $4,208
- Airbnb Cash on Cash Return: 12.2%
Porter Heights
- Median Property Price: $334,933
- Price per Square Foot: $165
- Price-to-Rent Ratio: 9
- Traditional Rental Income: $3,025
- Traditional Cash on Cash Return: 5.8%
- Airbnb Rental Income: $4,298
- Airbnb Cash on Cash Return: 8.8%
Turtle Creek
- Median Property Price: $149,000
- Price per Square Foot: $133
- Price-to-Rent Ratio: 11
- Traditional Rental Income: $1,130
- Traditional Cash on Cash Return: 3.0%
- Airbnb Rental Income: $4,372
- Airbnb Cash on Cash Return: 19.4%
Related: Airbnb Data: What Real Estate Investors Need and Where to Get It
5 Tips on Buying a House in Nashville
There are several best practices that can help real estate investors maximize their return on investment and generate positive cash flow. Here are some effective tips that you need to keep in mind when buying a house in Nashville.
1- You should consider implementing a long-term investment strategy
Nashville is an ideal location for long-term investment strategies. This is due to the wide variety of long-term trends that characterize the local housing market. Factors such as the stability of the prices, the very strong job market, and the robust economy make Nashville real estate a sure bet in the long run. Investing in long-term rentals in areas with solid fundamentals is the most effective way of hedging against market uncertainties.
This is not to say that short-term strategies can’t be implemented to great effect. As a matter of fact, the appreciation rate of Nashville properties is around 1.3% per quarter, which will allow you to profit from flipping properties.
2- The Porter Heights neighborhood is perfect for long-term rentals
This area is one of the best places to buy a house in Nashville. More specifically, it is a perfect location for renting out a house for a long period of time. The low median price of the properties coupled with the high rental income that they yield guarantees a high return on investment. Investors can expect to generate positive cash flow within months of buying a house in Nashville in this neighborhood.
3- Review short-term rental laws carefully
While traditional rentals are our preferred option for the Nashville real estate market, we recognize that short-term rentals can be extremely profitable if you invest in the right location. However, there are stringent laws in the city. Non-owner occupied rentals of certain types (namely single-family homes and duplexes) are banned in many residential zones. Although we have listed data for the above neighborhoods, be sure to check the local laws before buying a house to rent out on Airbnb.
4- Taxes should be taken into account when assessing the profitability of your investment
Taxes are a key component of investment property analysis. Having a clear idea of the taxes that you have to pay will allow you to make accurate projections with regard to income and profits. It is worth noting that Tennessee has a different tax system than most states. For example, the state does not collect income tax. Instead, there are several other taxes that are imposed on the real estate investor, namely franchise and excise taxes. Real estate investors who are not familiar with these types of taxes should read up on taxes in the state before buying a house in Nashville.
5- Keep an eye on the Opportunity Zones
Opportunity zones are without a doubt some of the best places to buy a rental property in Nashville. As its name suggests, the Opportunity Zone program is an initiative that seeks to boost the economies of several regions across the US. Nashville is one of the regions where this initiative is paying dividends as developers continue to undertake massive projects in these zones. What’s more relevant to real estate investors is the fact that these projects are situated in close proximity to most of the city’s hottest hubs.
Related: How to Invest in Real Estate in an Opportunity Zone
The Bottom Line
Buying a house in Nashville is one of the smartest real estate investment decisions you can make in 2019. The positive market trends will continue to drive local real estate growth and the city’s robust economy will always provide a safety net for investors. To start looking for Nashville properties right now, there are no better tools than the Mashvisor property finder. Click here to learn more about this product.
To start looking for and analyzing the best investment properties in Nashville, click here.
