Newbie Investor Looking for Insight into the Nashville Market

[Samantha Meyer]

Hi BP Community! 

I am just starting out on my real estate investment journey. I am currently looking at the feasibility of investing in the Nashville, TN area. So far, I have seen high prices and poor rent to purchase price ratios near the metro area, which are making cash flows low. I see potential in the suburbs like Gallatin and Mount Juliet, where prices seem to be lower but rent remains relatively constant compared to the metro area. I am looking to gain insight into what suburbs and neighborhoods are seeing significant growth in the industry, as well as what metrics are important to consider when analyzing the market.

Thank you in advance for your knowledge and time! 

[Ashley Salisbury]

Samantha, Greater Nashville area Realtor here, and I have to agree that cash flow ratios are low in the Nashville market if you are analyzing properties that are currently on the MLS (includes realtor.com and zillow.com). We are sitting in a seller's market that hasn't slowed down much with the pandemic lockdown. Buyers are still hot to purchase anything under $350k with multiple offers often over list price. In some areas the purchase price can be even higher (closer to $450k) and still have multiple offers and over list price! I focus my real estate business in the Gallatin area, and you are also correct that rents have stayed rather stable over the past few years. In addition, there have been multiple (at least 4 just thinking about the drive I made over the weekend) very nice, A and B class apartment complexes that have been built in the past 3 years, making it difficult to compete on amenities like pools and fitness rooms. I am not as intimate with the Mt. Juliet market, but it is overall a similar price point/type of single family homes in existence or being built (tons of new construction!) as the Gallatin market. There are big apartment complexes and not many smaller multi-family properties in either city.

I know of another local Realtor who has had great luck in the Madison area (37115 zip code) where she and her clients do renovations before renting the properties. (I don't know for sure if they are using the BRRRR method, but chances are high.) Donelson/Hermitage or Old Hickory with their older (1940s and up) homes probably also have potential for multiple exit strategies, but there are a lot of first time home buyers that are willing to pay over list price just to get into a home and do updates on their own timeline. If you go out to Lebanon, east of Mt. Juliet, you might find properties to analyze that will fit your criteria, it is still considered a commuter city. This is not to say that finding what you want in Nashville metro can't be done, but for the majority of investors, especially if you're new or don't have a lot of ready capital, a first time home buyer might out-bid you on a house because they are not worried about cash flow and returns. Your best bet is to find an off-market deal. The tricky part of that right now is that sellers here know the market is still hoppin' and they can get a great sales price by listing on the MLS and having buyers fight over their property. If you look at a map, any city that is within 5 miles of any interstate (I-40, I-65, or I-24) would be worth it to analyze properties in, people travel sometimes over 30 miles into the city for work.

I hope these answers help! Let me know if you have other more specific questions about the market here, and good luck!