Strategies for Investing in Nashville's Single-Family Homes - Article Banner

There are a lot of investment opportunities in Nashville. We have a diverse market full of interesting neighborhoods and well-qualified tenants looking for homes. Investors are always asking us where they should buy and what they should buy.  

The answers to those questions will always depend on an investor’s real estate goals and strategies, but one thing we can tell you is this: single-family homes make the best, and often the most profitable, rental homes. 

Single-family homes are the best option for investors in Nashville right now. Whether you’re buying your first property or adding to an existing portfolio, we can tell you that single-family homes are the way to go for a number of reasons.

Let’s discuss the benefits of this kind of investment, and what you’ll need to prepare for when it comes to acquiring a single-family investment. 

Meeting Demand in the Nashville Rental Market

There’s a lot of demand for single-family homes in Nashville. When the real estate sales market got so hot, a lot of property owners sold their rental homes, which not only displaced existing tenants, but also tightened up the supply of those homes that were available. This has created an imbalance. There are more tenants wanting to rent single-family homes than there are single-family rental homes available. So, if you have a single-family home to rent out that’s in a good location, you can expect high rents and steady occupancy and retention. 

Once the interest rates on mortgages rose and the sales market hit its plateau, many buyers began to back off, which has created more availability in the market for investors who recognize an opportunity. You can find single-family homes in a number of diverse and unique neighborhoods around the area, and you can often negotiate a good deal. Now is a good time to buy.

Right now, single-family rental homes are among the fastest-growing segment of the U.S. housing market. Large, corporate investors are buying up what they can, and in some cases, they’re building entire communities of single-family homes with the intention of renting them out. That will create some competition for you, but not nearly enough to dissuade smart investors from buying the homes they find in good neighborhoods.  

Demographic changes also favor single-family homes and reflect the demand of the local market. 

Why are single-family homes so popular with different groups of well-qualified renters? 

  • Renters appreciate the extra space these detached homes can provide.
  • There’s more privacy and outdoor space.
  • Tenants enjoy access to safe, established neighborhoods that are family-friendly and usually in good school districts. 

When you invest in single-family homes, you’re ensuring that your tenant pool will be strong now, in the current market, and for many years to come. 

Provide Good Rental Experiences for Long-Term Nashville Tenants

When you rent out a single-family home, you’ll have to do so with the intention of keeping your residents for many years. You also have to consider tenant retention. Holding onto residents and renewing lease agreements is extremely valuable. 

People who want to move into a single-family home are likely to be more stable and reliable. They want to settle in for a while and probably won’t move as soon as the lease term ends. This type of tenant stability contributes to more rental income and higher ROI. You won’t have to worry as much about vacancy and turnover costs, and you can project what you’ll earn in rent from year to year.

Make sure you not only attract these tenants but keep them. Give them a reason to stay. Provide smart home technology, energy-efficient functions, and a lawn service. 

Plan for Higher Rental Values and Appreciation 

Single-family homes are likely to deliver higher profits. Your apartment units and multi-family properties come with their own benefits. But, if we’re looking strictly at earnings, the single-family home that you buy and hold will make more money for you over the long term:

  • You’ll earn more rent in the short term. Rents are usually higher on these types of homes.
  • Your long-term earnings will also be higher. Single-family homes have always appreciated in value faster than multifamily units. 
  • Your tenants continue to pay down your mortgage. 

When you’re ready to sell your property, you’ll sell it for more and turn your equity into higher returns. Property values will continue to climb when you invest in a single-family home, and that means you stand to earn more money on the investment in both the short and long term.

Make a Plan to Maintain and Improve Single-Family Homes

The improvements you make to a single-family home will increase rental values. You’ll also have the benefit of tenants partnering with you to maintain the property. 

Your tenants are more likely to help out in the care of your property. They typically feel more invested in the home. You can expect them to change the air filters regularly and potentially even help out with lawn care and snow removal.

Ultimately, maintaining your investment property is your responsibility. But, you’re likely to find that your single-family home tenants will be proactive in keeping things in good shape. They’ll want a lawn that looks nice and they may be willing to try to fix that toilet noise on their own before complaining about the problem or turning in a maintenance request

How to Do It: Acquiring Your Single-Family Home in Nashville

Once you’ve decided that single-family homes are the investment path you want to pursue, you’ll need to prepare yourself for identifying the right property, gathering your financials, and making an offer. Then, you’ll need to get into the business of renting out that home. 

  • Locating the Right Nashville Rental Properties

One key strategy in investing in single-family homes is finding properties with high rental demand. Look for homes in areas with good school districts, low crime rates, and access to amenities such as public transportation, shopping centers, and parks. Properties in these areas often attract long-term tenants and command higher rental prices. Location has always been an important part of real estate investing, and when we’re talking about single-family homes, location is especially important. You want something outside of the downtown city limits, but you don’t want your rental property to be too remote. Check for up-and-coming neighborhoods in Nashville and think about where people want to be. Usually, that’s close to parks and good restaurants. 

  • Conduct a Financial Analysis

Are you prepared to buy? It’s not terribly easy to get a mortgage these days, so make sure you can prove you’re a good credit risk if that’s how you’re planning to finance your investment. Performing a thorough financial analysis is essential. This means calculating potential rental income, operating expenses, cash flow, and the expected return on investment (ROI). You should also assess your financing options, considering both traditional mortgages and creative financing solutions.

  • Add Value and Maximize Returns

Seek out properties that offer an opportunity to add value through renovations and repairs. Improving a property can increase its rental and resale value. However, it’s crucial to calculate the renovation costs carefully and ensure that the potential increase in value outweighs these expenses. You don’t want to spend so much time getting a property ready for the rental market that you lose out on valuable rental income. Buy a property that can benefit from improvement, but doesn’t require extensive rehab work.

Invest in Nashville Property Management 

Effective property management is instrumental in the success of your investment. Decide whether you will manage the property yourself or hire a professional property management company. While self-management can seem to save costs, it can actually cost you more money and more time. It also comes with a rather large opportunity cost. Partner with a management company even before you buy an investment. That way, you’ll get an idea of how much rent you can earn, what your maintenance costs will be, and how long it might take to get your property rented. 

A property manager in Nashville is an excellent first step in building a network. Your management professional can provide invaluable insights and opportunities and also help you educate yourself on market trends, legal issues, and best practices will help you make informed decisions and stay ahead of the competition.

Successful real estate investing requires a long-term perspective. Real estate markets can fluctuate, but generally, property values tend to increase over time. Factor in potential market trends and future developments in the area that might impact the long-term value of your investments. Single-family rental investments will put you in a stronger position. 

By understanding the market, conducting a thorough analysis, adding value, managing properties efficiently, networking, and maintaining a long-term view, investors can successfully build a robust and profitable real estate portfolio with single-family homes.

As you know, every investment carries some level of risk, and it’s important to do your due diligence. With the right strategies and mindset, you can minimize those risks and enjoy a lot of success in the world of single-family rental home investments.

Contact Property ManagerLet’s talk about your investment goals and where you should be focusing your energies. Contact us at Apex Ventures, Inc. to talk about where and what to buy.