Nashville is quickly becoming one of the hottest real estate markets in the United States. With its strong job market, attractive cultural scene, and increasing population, this is one market that can offer an array of opportunities for real estate investors.
If you’re looking to build a profitable property portfolio in Nashville, we have some good ideas that will get you started.
Profitable Portfolios Start with Solid Investment Goals
The most important thing you can do as you prepare to become a successful real estate investor is to establish a clear set of investment goals. These will focus not only on what you hope to earn, but also what you hope to accomplish in the short term and the long term.
Some of the things your investment goals should address include what you’re seeking in terms of income. Are you hoping to fund your retirement? Would you like to earn as much money in rent as possible, or are you more interested in steady appreciation and equity build-up? Your goals will give you a set of standards by which to measure your own success. They’ll also help you make decisions as you increase the size and strength of your portfolio.
Decide what a profitable portfolio looks like to you.
Before taking any concrete steps, spend time reflecting on your long-term financial goals, desired cash flow, risk tolerance, and the level of involvement you wish to have in managing your investments. You will find that having serious, measurable, and ambitious goals will guide your investment decisions and keep you focused on the bigger picture. These goals will also hold you accountable. It’s very easy to begin chasing any potential real estate opportunity that pops up. Your investment goals will keep you strategic and intentional.
Research the Market So You Know Where to Invest
Understanding the Nashville real estate market is an important first step before making any investments. When you want to build a profitable portfolio, it’s beneficial to understand the most desirable neighborhoods and what’s available there. Get to know the home prices, the inventory, and the days these properties have been on market. Talk to a Nashville property manager so you can establish how much rent you’re likely to earn and what kind of maintenance you’ll need to complete before the property is ready for the rental market.
Location is key in real estate investing. Focus on neighborhoods with strong growth potential, good schools, and low crime rates. Popular areas for investment in Nashville include East Nashville, The Gulch, and Germantown.
Here’s how to identify profitable investment properties:
- Location, as we mentioned, is an essential factor. Properties in areas with strong growth potential, employment opportunities, and desirable amenities tend to appreciate in value.
- Property condition is equally as important. This will impact what you have to spend on improvements before you even list the home on the rental market.
- The strength of the local real estate market also impacts what you’re able to earn in the short and long term.
In a fast-moving market, you have to act quickly to buy an investment. It’s competitive in Nashville, and you want to make sure you’re ready to move when the right opportunity presents itself. But, don’t skip the necessary due diligence. You never want to waive an inspection, for example.
Network with Local Experts
Building relationships with local real estate agents, property managers, and other investors can provide invaluable insights and opportunities. Attend local real estate meetings and join online forums to connect with Nashville’s real estate community. Network as much as you can so you grow your circle of experts and friends.
Who will some of your most important resources be?
- Nashville property managers. It’s important to partner with a property manager before you buy your first rental property because not only can your property management partner help you navigate the eventual leasing and managing of your property, we can also provide some advice before you buy. We’ll be able to tell you about how a specific neighborhood attracts tenants, and who you can expect to live there. We’ll tell you about the rental competition, and what kind of vacancy length you’re looking at. We can discuss what kind of renovations might be needed before it’s ready for the rental market. We can estimate ongoing maintenance costs and let you know what kind of tenants will most likely want to rent the home. Don’t wait until you’re ready to rent out the property to hire a property manager. Get that relationship in place as soon as you can.
- Real estate agents. Unless your property management partner also acts as a broker to help you buy and sell, you’ll want to work with a real estate agent who specializes in investment properties. This will help you identify opportunities, arrange to see potential properties, and negotiate the best price and terms. Looking for and buying a property that you plan to rent out is a lot different than buying a property that you’re expecting to live in.
- Mortgage brokers. Are you paying for your investment property in cash? You likely won’t do that every time, so it’s important to network with brokers who understand investment lending. You’ll have several options available to you when it comes to choosing how you pay for your investment properties. A good broker will be able to discuss the pros and cons of each loan you consider.
Be open to forming professional relationships with everyone. You’ll benefit from advice from a savvy real estate attorney, a tax professional familiar with real estate investments, and an insurance agent who can help with landlord and liability insurance.
These professionals can help you make informed decisions, avoid common pitfalls, and keep your investments on solid legal and financial footing. They’re instrumental in helping you build a profitable portfolio.
Profitable Portfolios are Diverse Portfolios
Diversify your investments across different property types, such as single-family homes, multi-family units, and commercial properties. This strategy can help mitigate risks and maximize returns. The markets always shift, and there will be times where it’s better to have one property type. When you buy exclusively single-family homes, there’s a greater vacancy risk. When you buy only multi-family units, you might find that you’re dealing with a lot of tenant turnover.
Create a good mix in your portfolio to ensure it remains profitable no matter how the market is behaving.
Be willing to diversify not only property type, but financing, too. Different geography can diversify a portfolio, too, and make it more profitable. Remember that the real estate market is inherently cyclical. Economic conditions, interest rates, and demographic trends can all influence property values and rental demand. While it’s impossible to predict these cycles with certainty, being prepared for them is within your control. That’s another way that diversification can be beneficial.
Continually Improving and Maintaining Your Nashville Investments
You can have a profitable real estate portfolio by adding to it regularly. Acquisitions definitely give you more to earn. However, you can be profitable with the investments that you currently have, too. You can earn more by improving those properties, and making them more valuable.
A well-maintained property always earns you more than one that’s deteriorating. You don’t have to be a real estate investor to know that. Regular renovations and upgrades not only contribute to tenant satisfaction and retention but can also help you bring in higher rents.
Whether you’re investing in energy-efficient appliances, ripping out the old carpet to install some hard surface flooring, or giving the landscaping a complete makeover, these property improvements will provide a great return on investment. They’ll make your property and your portfolio far more profitable.
As long as you continue to improve your investments and keep them occupied, you can count on recurring and consistent rental income as well as appreciating home values. This is the key to investment success and a profitable collection of assets; balancing short term income with long term returns. It can be done when you’re strategic and thoughtful.
Monitor Your Investments
Finally, make sure you know how to measure success and profitability. Regularly review your portfolio’s performance and make adjustments as needed. Keep an eye on market trends and be prepared to sell underperforming properties and reinvest in more lucrative opportunities. You might be well-positioned to increase your portfolio’s strength with a 1031 exchange. Maybe it’s time to look at different neighborhoods or to refinance a loan that comes with a high interest rate.
By monitoring your investments regularly and auditing their performance, you can see some areas where improvement might be needed. That’s going to lead to higher earnings and better results.
Building a profitable property portfolio in Nashville requires careful planning, research, and strategic decision-making. By following these steps, you can tap into Nashville’s growing real estate market and achieve long-term success in your investments.
We would love to be part of your investment journey, and we think we have a lot of great advice to offer. When you’re ready to start thinking about portfolio growth and profitability, please contact us at Apex Ventures, Inc.
