Thoughts on my plan to get started?

Question

i'm in the Nashville area, a relatively expensive market compared to other places in Tennessee, where I own a home and a solid turn key property would require a minimum of $50k down and might not cash flow more than $500 or so. To get to that point, I'd need to save for another 4 or 5 months. While it'd be expensive, Nashville as a market is sky-rocketing compared to other cities in the south and people just keep moving here along with the jobs. Anything bought within a 50-mile radius will appreciate quite a bit over the next 3 or 4 years, but it's the barrier of entry that's the problem. I know for a fact I could have 1, maybe 2, properties in this area in the next 12 months, it's just going to require a lot of hard cash to get started.

I currently am in conversation with other investors and agents in my area, as well as lenders, but I've recently been considering getting started on less expensive properties in the area of TN where I grew up, where there are multi-family units for under $100k that I could move on right now.

I'm considering moving on a less expensive property in about a 100-mile radius of the area of TN where I grew up. I know all of the towns in the listings and am around the area to see family often enough. It would also allow me to get some experience managing multiple properties, since I could probably acquire 2 or 3 before the end of the year without any issue.

I've been talking to investors and agents in that area as well, and there's clearly money to be made in being a small-town investor, especially in a place you know. I know there are some hidden costs in the less expensive properties, but my wife and I do well enough that any issue that came up wouldn't break us.

So, just to recap, I'm deciding between...

1. Wait for about half a year, acquire a property near Nashville, and try to get on the path to a property per year in an area that's pretty certain to keep thriving
OR

2. Start out now, buy some less expensive properties in an area I know, get my hands dirty, and learn the trade that way. Could probably afford multiple multi-family units throughout that area within a couple of years, then look to scale out and THEN enter the Nashville market once I have capital to put into something here.

Any insight or experience you could share, I'd appreciate. I've got a great group of people I've been talking to to help me along this process, but the more I can hear from different actual investors, the better.

Daniel McDonald · Answer

@Jalen Sowell what are your goals? Are you more concerned with long term wealth or just cash flow? I don't think either is necessarily a bad plan but definitely depends on what you are looking for. It can be very tempting to buy cheap properties but you're right Nashville will likely continue to grow where as the other place may not. I bought in an expensive area that has made me appreciation rich, not cash flow rich. However, for my lifestyle, job, etc. it's not the end of the world and the house will likely be my retirement fund someday. If I bought a house for a 100k, in 30 years it's worth maybe 300? 400? My point is you gotta figure out what you're trying to get out of this first.

Robin Simon · Answer

I think option 2 is definitely the right path - especially if you are confident in the knowledge of the local markets, always best to get started and more/better opportunities tend to be in smaller markets than more competitive ones like Nashville

Luka Milicevic · Answer

@Jalen SowellIf you're putting 50k down, you're looking at a 250k property. Are you saying you found a turn key property in Nashville for 250k that cash flows for $500 and you're not happy with that deal? If I'm understanding correctly, you found yourself a unicorn....

Jamie Jones · Answer

@Jalen Sowell I find myself in a very similar situation as yourself with comparing investing in Nashville versus my small and cheap hometown. I own a primary home and 2 long-term rentals in the Nashville area that have done GREAT in appreciation growth but just okay in cash flow, and I own a duplex in my hometown that has done GREAT in cash flow, but probably not appreciated at all. It all comes down to what your goals are. Why are you wanting to invest? What gets you more excited: getting some extra income each month in the form of cash flow OR building huge amounts of wealth over the long term from holding property in one of the fasting growing metros in the country? The best thing is you don't have to choose one option in exclusivity to the other. It sounds like you have a solid savings rate with your current income, so maybe if you buy a couple cheap properties in your hometown that cash flow really well, you can increase your savings rate and buyer a Nashville property. That way you can get your strong cash flow from the cheap properties and the long-term wealth building from your Nashville property. Let me know how you decide to proceed!