It’s no secret that real estate is a great investment and that Nashville’s real estate market is on fire. The good news for investors is that the city isn’t showing any signs of slowing down, and in fact, the Nashville Area Metropolitan Planning Organization believes that the Athens of the South is poised to grow tremendously over the next 10-20 years.
As one of the fastest growing cities in the nation, it makes a lot of sense to invest in Nashville real estate, but it can be tough to find sound real estate investment strategies that fit your individual situation, location, interests, and level of investing experience.
5 Strategies for Investing in Nashville Real Estate
What makes a good real estate investment strategy? While investing in real estate is a great way to diversify your portfolio, the rules are a little different than, say, investing in the stock market. Here are a few sure-fire tips for doing it the right way.
Smart Real Estate Investing Starts with a Plan
When it comes to real estate, you need a clear roadmap. You either need to know exactly what you’re getting yourself into or you need to work with a team of experienced real estate investors and developers that you can trust. Once you have a sense of your boundaries, you need to understand where the exits are. How long can you expect to own a property? How long are properties in the neighborhood typically on the market? How much can you spend on improvements to achieve an optimal ROI? What are rental rates in the area? How much have they increased per square foot over the past 3-5 years?
Whether you’re investing in multiple properties for ongoing rental income or looking to flip a house, look at the market carefully, consider all the angles and develop a plan that includes a well-defined exit strategy.
Learn From a Community of Peers
Save yourself some time and money and avoid costly crash-courses on real estate investing. Instead, look for educational workshops, lunches, and information sessions led by experienced investors. Or, join a local group of like-minded folks and become a member of an organization like Real Estate Investors of Nashville. Recent events have included a landlording focus group, information on self-directed IRAs, and real estate financing. Networking is a great way to make new friends and learn about the industry, but it’s also a great way to find new investment opportunities.
Establish Your Real Estate Investing Goals
Once you have a sense of the market and have developed a network of trusted friends and colleagues, it’s time to start thinking about what kind of investing appeals the most to you. If your entrepreneurial and outgoing nature lends itself to managing properties and caring for potential tenants, then becoming a landlord is the way to go. If working with your hands is more your speed, consider purchasing a fixer-upper in the right neighborhood and flipping it. If you’re an accredited investor, but lack the experience or the time that it takes to be a good landlord or to restore a property for flipping, consider investing with capital a management group that specializes in real estate.
The Certainties of Taxes
Purchasing a rental property or flipping a property at a profit has a considerably different impact on your tax liability than investing in a REIT or with a capital management firm with that focuses on developing a diverse real estate portfolio on behalf of its investors. Be sure to discuss your situation with your accountant or financial advisor before settling on a particular strategy.
Look for the Millennials
If you’re looking for a great place to invest, look no further than the areas to which Millennials are flocking. According to the PEW Research Center, these young professionals between the ages of 20-36 have surpassed the legendary Baby Boomers as the largest living generation in America.
U.S. News and World Report suggests that it’s wise to invest in the areas to which members of Generation Y are flocking. Like, say, Nashville. “Many members of this generation are renting now, but that doesn’t mean their habits won’t change as they get older. Real estate experts say investors can make money by renting to millennials and then selling to them as they decide to become homeowners.”
Why Real Estate is a Great Investment
There are a number of reasons why real estate is a great investment. Generally, it’s a highly liquid asset and typically pays a great cash-on-cash return. When you work with the right partners and perform thorough due diligence by researching trends, reports, titles, and the parties involved in the transaction, then the risk of investing in real estate is greatly reduced. And finally, when you work with well-qualified developers, investors, and capital management partners, your time involvement can end up being pretty minimal.
To learn more about investing in Nashville real estate, contact Canopy South Capital Management.