How to Get Started in Real Estate Investing
It’s official: Nashville’s hot. And while our spring temperatures are already flirting with the 90s, we’re not talking about the weather. We’re talking about Nashville’s residential real estate market and you just might want to get in on the action.
Earlier this year, the popular real estate website, Zillow, ranked Nashville as the hottest real estate market in the country. “In the same year renting becomes more affordable and the homeownership rate bounces back from historical lows, the country’s housing market superstar will be—drumroll, please—Nashville! Music City has moved beyond its country roots to become a fast-growing economy with employment by the healthcare industry and big corporate names including Nissan, Randstad, and Kroger—plus the popular chain of diners, Shoney’s.”
The Zillow article goes on to note that “Home appreciation is expected to rocket in Nashville this year by 4.3 percent, while incomes recently grew by 1.1 percent and unemployment is a healthy 4 percent.”
If you’re thinking about investing in real estate, there’s no better place to do it than Nashville.
Here’s how you can get your start in investing in real estate:
Assess Your Finances
If you do it wisely, your very first foray in the world of real estate can offer a great return on investment. You need to be realistic and well-prepared, however. Most financial professionals and lenders advise (or may even require) buyers to put down at least 20% of a home’s purchase price. To avoid bearing the weight of multiple mortgages, many first-time investors wait until they can pay for a property outright or plan on living in the home while they quickly prepare the home for flipping.
If you’re lucky enough to have the funding to purchase one or more income properties, be sure to find the right financing. Leverage your investment capital by finding the best 30-year fixed-rate mortgages on the market and buy as many income-producing properties as you can.
Let’s face it, though, it’s pretty unlikely that as a first-time investor you’ll have the capital to pay for a property in full or the expertise you need to renovate a home quickly and inexpensively. If this sounds familiar, you may want to consider finding a foreclosure that’s in good shape and that’s listed well below the local market average prices.
If you’re having a tough time finding the right property in the right neighborhood for the right price, then you may want to consider joining with other like-minded individuals and invest with a local real estate investment group. Let’s say that you have approximately $100,000 to invest. It’s a significant sum, but it might not be enough to acquire the kind of property you need to see the kinds of returns you’re hoping for. When your investment dollars join forces with others in a fund managed by an experienced real estate investor, though, you’ll suddenly find yourself with the kind of capital you need to invest in a diverse real estate portfolio.
Think About Your Cash Flow
When many young investors consider house flipping, they’re influenced by HGTV miracles and are blinded by the concept of a quick renovation and an even quicker sale. While flipping can be incredibly rewarding and lucrative, it’s not always the best solution. In fact, many homeowners don’t profit from a quick turnaround. Unless you really know your way around a hammer, large-scale home improvements are not a smart bet for the novice investor.
Instead, you may want to consider renting the property. This will allow you to work on renovations at your own pace while covering the costs of home ownership. You’ll want to carefully price your property so it attracts the right number (and the best quality) of tenants. Nashville’s rental market is booming and occupancy rates are at a near all-time high. Becoming a landlord may be a great entry point for an investor.
What Kind of Investment Is Right for You?
Before you dive into the landlord waters, decide if you have the temperament to become a landlord and if you’re ready for the responsibility and potential risks that come with the title. If it all sounds a little too messy, then you may want to consider investing in a real estate investment group (REIT). A REIT is sort of like a miniature mutual fund for rental properties.
If a REIT takes things too far in the other direction, however, and you want to feel the thrill of your investment in action, join an organization like Real Estate Investors of Nashville to network with other investors or partner with Canopy South Capital Management and put your dollars to work in Nashville real estate.