Real estate investing in Tennessee has plenty of perks if you’re on the hunt for your latest and greatest investment. Not only is TN a fantastic location to live in with the Great Smoky Mountain National Park, but it also has so much to offer. Accompanied by some incredible climate and cultural hubs like Memphis and Nashville, it’s also an ideal location for people of all lifestyles.
Tennessee has a thriving job market and is home to almost a dozen Fortune 500 companies, including Tractor Supply, Dollar General, International Paper, HCA Holdings, AutoZone, and Lifepoint Health. The growth of the energy, manufacturing, healthcare, and film production sectors has been substantial in recent years and continues to attract more people to the state. As a real estate investor, this is excellent news.
Perks of Tennessee
Some of the most significant benefits that real estate investors should consider when looking at Tennessee for their next investment are:
- Tennessee has a lower unemployment rate compared to the national average.
- The state is home to the lowest cost of living in the country.
- Excellent healthcare facilities and plenty of healthcare jobs.
- No Social Security Tax.
These benefits are significant in drawing attention to Tennessee. With new residents arriving daily, the need for rental properties is notable.
Buying an Investment Property in Tennessee: Do’s
When purchasing a second property as an investment, the process is slightly different from choosing your primary home. Especially if you’re purchasing in Tennessee but you live in a different state, there are a few things that are “must-do’s” to consider.
Do: Seek Out the Best Location.
As with any real estate purchase, location is always pivotal. Of course, you want your primary home to be close to what you need and want, so pinpointing your ideal neighborhoods can be simple. For a tenant, you don’t know their ideal location, so finding a home in a popular area is an excellent place to start.
Depending on the city you choose to invest in, finding a home in a good neighborhood close to transit and schools is perfect. For example, there are many high-priced communities sought-after by renters in Nashville, so finding the smallest house in an affluent community that you can still afford is fantastic because renters will have access to the best amenities.
Do: Overestimate Your Budget.
Many first-time homebuyers or investors tend to save up the minimum amount they need to get into the housing market and don’t leave any room for extras. When purchasing a rental property, there are absolutely things that can go wrong, so you should always have a buffer to make sure you can cover any immediate maintenance, expenses, and updates you want to make to the property before renting it out.
Do: Use the Help of an Expert.
When you work with an expert in Tennessee Real Estate, you can rest easy knowing you’re in good hands. Realtors with plenty of experience have faced and overcome many challenges in their careers. They can help you through any issues that may arise. You risk making costly mistakes when you try to tackle investing in real estate alone, so having experts on your side can only save you money. Suppose you’re looking to purchase in Gatlinburg, Pigeon Forge, or Sevierville. In that case, Theresa Raymond can help you find your dream investment property.
Do: Consider All Your Options.
When looking for rental properties, the world is your oyster. There are so many options to choose from, whether that happens to be a condo, apartment, townhouse, single-family home, multi-family home, or luxury property. You could even opt for a retail space for commercial use. Discuss your goals and ideas with your realtor, and they can help make a recommendation based on those. Their job is to help you find the right investment property for you.
Once you’ve decided what kind of property you want, you can budget accordingly. Your choice of property type will help determine where your starting point should be. Depending on the market and timing of your house hunting, you may be forced to put in offers more quickly than you’d like due to heightened competition. Your realtor can guide you through tough markets, so you still end up with a property you love.
Do: Consider areas outside of Nashville and Memphis.
While Nashville and Memphis are excellent options for real estate investing and have some excellent value in terms of home price and property size, they’re not the end-all-be-all for Tennessee real estate investing.
Gatlinburg is a beautiful community next door to the Great Smoky Mountains, and is equipped with plenty of options for all budgets. Gatlinburg offers big city benefits while being close to nature.
Pigeon Forge is a mountain town that is a huge tourist spot. As the home of Dollywood, if you love entertainment and excitement, Pigeon Forge is a great place to purchase a rental property. If you’re looking to make your investment property a short-term rental, Pigeon Forge is where to do it.
Sevierville’s claim to fame is that it’s the hometown of Dolly Parton. It’s another fantastic option if you love the outdoors as the mountain town is the perfect starting place for any adventure in the mountains.
Do: Buy Something You’re Familiar With.
If you own a property already, seek out a Tennessee home similar to yours in a similar community. Having first-hand experience in single-family homes or a condo and sticking to what you know is ideal for a first-time investor. You might be taking on a big challenge if you decide to purchase a multi-family home that you have no experience managing.
Do: Make the Property Move-In Ready.
Add a little extra room in your budget to make some easy renovations to make your property desirable and ready to rent. Minor upgrades can help improve your property’s overall look and feel, making it a place that people are interested in viewing from the photos online.
Do: Have a Property Management Plan in Place.
If you’re buying from out of state, you’ll want to ensure that you have a property management company lined up to take care of things that need urgent attention. Suppose your home is priced right, and you’re putting it up for rent at the right time. In that case, you’ll likely have many interested applicants, and a property management company can also help with that.
Buying an Investment Property in Tennessee: Don’ts
Don’t: Skip the Inspection.
In any market conditions, even the most competitive, skipping your inspection is a recipe for disaster. Many sellers can get away with huge issues going unnoticed without a professional inspection. Whether purchasing a rental property or a primary property, you always want an inspection done - full stop. You don’t know what the future holds for your rental property, and perhaps one day, you may want to take it over as your primary residence, so you want to treat it as such. A thorough inspection by a professional with an excellent reputation will help you avoid buying a property that is riddled with issues.
Don’t: Forget About Your Future Renter.
While you may be prepared to spend a lot of money on a home, you have to consider your future renter and keep your rent prices low and competitive. If your prices aren’t consistent with the rest of the area or the demographic, it won’t matter how beautiful the home is; you’ll likely be stuck with an empty property.
Don’t: Put Too Much Stock in First Impressions.
Spotting a bargain versus a risk is a huge positive in real estate investing. If you’re a person who can do minor renovations and handiwork around a property, you likely know what easy upgrades you can make to your property without sacrificing too much time or money. The smallest details can make a massive difference in the value of your rental property. Make the most of your investment by opting for easy fixer-uppers.
Don’t: Buy Something High Risk.
A high-risk property as your first investment property or if you plan to be an out-of-town landlord isn’t a great idea. If you’re investing everything you have into something, you want to make sure you’re hedging your bets. Something risky may require more attention, maintenance, and money than a solid investment home that might cost a bit more upfront.
The Best Real Estate Markets in Tennessee
Overall, Tennessee is a pretty great place to seek an investment property. Here are some of the best markets in the state.
When people think of Tennessee, they think of Nashville. It’s a huge tourist destination, so the economy is booming. Nashville is considered one of the best places to invest in real estate and has one of the highest ROI for Airbnb rentals in the country. With an incredible food scene, exciting nightlife, live music on every corner, and international events, Nashville is the place to be.
If you’re looking to invest in real estate in Nashville, the money is in short-term rentals. While legislation seems to be constantly changing for these rentals, it’s essential to do your research beforehand to ensure you’re abiding by all the rules. Values are expected to rise in the near future, so now is the time to invest in Nashville.
If you’re looking for one of those places you visit and never want to leave, Gatlinburg is it. The Great Smoky Mountains are a huge draw for residents of Gatlinburg, and owning a rental property here is perfect for outdoor enthusiasts.
There are four distinct seasons near the mountains, so residents can enjoy every activity for each season. Traffic can be a big deal in other Tennessee cities, but it’s no issue in Gatlinburg. While there’s an increased population during the busy months, the city planning has helped ensure the roads are in great condition. Even in the most congested times, it’s not that bad.
Just a short drive southeast of Nashville, Murfreesboro is tucked away from the hustle and bustle of the big city. With around 100,000 residents, Murfreesboro offers plenty of great amenities without big-city life. Housing prices have continued to rise in recent years, but homes are in high demand. Rental prices are slowly rising, so it’s a great time to get involved in the market.
Located at the foothills of the Appalachian Mountains, Chattanooga is only becoming more and more popular among real estate investors. Between excellent schools, post-secondary education, amenities, and access to all the outdoor activities you could want, Chattanooga seems to have it all. In recent years, Chattanooga has seen a jump in home prices. However, homes are still affordable, and the inventory is outstanding. If you’re a real estate investor, now is the time to jump into the market.
This mountain town is in a fantastic location and offers a great lifestyle and low cost of living to its residents. Surrounded by the Great Smoky Mountains, those here love to call it home. Due to its location and being the home of Dollywood, it sees plenty of tourists each year.
The natural beauty of Pigeon Forge is enough to make anyone want to move there. It’s an ideal place to retire due to the laid-back lifestyle and access to the outdoors. For those who want to live an active life, it’s one of the best places to live.
Knoxville is home to unique southern charm, beautiful natural scenery, and a historic downtown that draws in a crowd. The city has plenty to offer its residents as it becomes more of a tourist hot spot. The University of Tennessee’s main campus is located in Knoxville, so plenty of students are looking for rental properties during the school year.
There’s so much to see and do in the mountain town of Sevierville, and you’ll never run out of activities to enjoy. There are plenty of museums, tours, outdoor adventures, and even an alpine coaster, so there’s never a dull moment. If you love to learn or are a history buff, there’s plenty of history to take in.
Sevierville has a diverse real estate market that has something for every real estate investor. If you want an affordable single-family home, there are plenty. There are plenty of luxury properties if you’re in the market for that as well.
Germantown is part of the Memphis area, and it’s the destination for many people who want to live outside the big city and commute to work. It offers a quick commute to the city and airport, sporting events, and great amenities while retreating to a quiet and laidback community.
In recent years, Germantown has seen explosive growth and rising home prices but still offers affordable housing options for those looking. While there isn’t much for work in the community, it’s only about 25 minutes to Memphis’s downtown core, so it’s an easy commute as long as you have a vehicle.
Tennessee has some of the lowest living costs. It has so many incredible amenities and one of the best lifestyles if you want to live close to the mountains. Tennessee is quickly becoming the best place to invest your real estate dollars with every outdoor activity within reach, the bustling culture and entertainment scene, and the real estate market.
Why Should You Buy a Tennessee Investment Property
In many cities in the US, real estate investing or even homeownership is out of the question unless you’re already wealthy. Tennessee investors are lucky enough to have world-class amenities, reasonable home prices, and a growing economy, so real estate investing is hugely beneficial to the homebuyer.
Return on investment is a key factor in real estate investing that makes it worth your time and money as an investor. Successful real estate investors can maximize their ROIs while keeping their expenses low.
Buying a Property in Tennessee When You’re Out of State Tips and Tricks
Real estate investing is not for everyone. Especially when you’re buying a property from across the country, it comes with its own unique challenges. If you don’t currently live in Tennessee, you’re not looking at the real estate market with the same lens that someone who lives there has. You don’t know about any of the neighborhoods, where the popular spots are for renters, or who are the best realtors to contact. You don’t have the privilege of word-of-mouth or direct experience.
As an out-of-state buyer, you will need to rely heavily on research and your instincts. While you can find some great information on forums, you may consider vetting all the professionals you need to work with beforehand. Booking zoom calls with your realtors is recommended to get a good sense of whom you’re dealing with. When you’re relying on a professional so heavily throughout an investment transaction, you want to ensure you’re in good hands.
Each state has different laws and regulations around investment properties, so having first-hand knowledge is helpful. Hiring a well-versed property management company in the laws will be a huge asset for you as an investor.
To have a successful investment, you’ll need to have a solid team of professionals behind you, especially if you’re out of state. Not only will you need the help of an incredible real estate agent, but you’ll need a property manager, maintenance person, and contractors.
Unless you know someone who lives in the area that you trust and can refer you to businesses they’ve used, you will have to do research and ask to book some meetings to build relationships with these professionals.
An excellent property manager will help you when there are vacancies, collect rent, ensure repairs are taken care of, and the list goes on. Having all of these items taken care of by a professional company can be quite successful and result in an easy investment for you.
It’s always recommended that you visit the property once a year or so. Once you’ve seen the property for the first time and purchased it, you should return to see it every so often to ensure your property is in the condition you’re being told it’s in. At this time, you can make any changes you see fit or determine if you want to make any upgrades. It’s important to consider travel costs and time off to visit your property while you’re in the process of buying.
It would help if you also planned for the potential of higher insurance rates, interest rates, and different down payment requirements for out-of-state mortgages. Since you won’t be residing in the property, you won’t qualify for an owner-occupant mortgage, which means you’re a higher risk to the bank.
Before investing in real estate, you’ll likely need the help of a tax professional to keep your books balanced since you’ll be earning income in more than one state. During your research phase, before you start house hunting, you’ll want to get pre-approved for a mortgage to find out what you can afford, speed up the closing process, and help you prepare.
Suppose you’re buying your first property as an out-of-town investor. In that case, you might be met with some hesitation at the banks, as you’re considered extra risky.
With this knowledge of the ins and outs of owning a property in another state, one of the most important tips we can provide is never to buy a property sight unseen. There are so many horror stories of people who see a home online and purchase it without even viewing the property.
Photos can be easily manipulated online, and often times they don’t show the whole story. The property can be staged to hide issues. Even homeowners who see the property first-hand can still have issues. You never know how accurate the photos or listing may be, so even with the help of a third party or professional, you should take the time to view the property yourself.
If you try to buy a home sight unseen, your real estate investing days could be limited. You could end up with a property that requires more repairs than you have the time or money for. You could also end up with a property with some serious violations that are expensive to fix.
An inspection is a critical piece of the puzzle with any real estate purchase. Even in the most competitive markets, never forego an inspection because you want the property. You’re accepting a considerable risk and liability without an inspection. You could find yourself in a home with some hard-to-fix issues, like poor foundation.
As a landlord in another state, that can deter many renters because if they have issues, you’re not just a few minutes away. Hiring a property management company can at least help with that, but knowing you’re out of town might mean that the tenants would be more careless than usual. Property managers can vet the best tenants, so you shouldn’t have any issues with damage or past-due rent.
While these challenges may seem daunting, being an out-of-town real estate investor in Tennessee can be quite rewarding. If you are familiar with the Tennessee area, that will work in your favor. If you don’t have any prior knowledge of the area, book a trip and explore.
Finding your team of experts may take some legwork, but meeting virtually is typical these days, so as long as you can interact with them and get to know them and their customer service style, that is ideal.
There are many reasons why Tennessee is the perfect place for real estate investors. With a growing and thriving economy, students who need rentals throughout the school year, and the demand for short-term rentals, it’s a prime location for investors. When accounting for the incredible lifestyle, amenities and perks, and natural beauty, it’s easy to see why the area is deserving of all the attention it receives.