Posted onAugust 1, 2022
The Best Places To Invest In Tennessee
Asset Based Lending are experts in the local real estate markets that we lend in, and we leverage that expertise to help our borrowers stay informed on market conditions. Today we highlight the Tennessee real estate markets, using raw data from the housing market and state economy to showcase the best places to invest in Tennessee.
The Volunteer State has been experiencing a strengthening economy and expanding population for quite some time, ranking in the top 10 states for population growth during the major 2020-2021 migration. The state’s been on a growth trajectory before that time as well, boasting a nearly 9% population growth between 2010 and 2020, far outpacing most other states in the country. Many of Tennessee’s local real estate markets are currently a seller’s market, meaning average home sale prices are trending upwards and homes are selling quickly, benefitting the real estate investors who will hold more leverage and negotiating power when it comes time to sell their property or determine their monthly rent.
Currently, the average home sale price for the state is $402,600 which is a nearly 26% increase year over year and represents a five-year-high for the state. Homes are spending an average of 28 days on the market which is three less days than the previous year’s average, and more than 51% of homes are sold above asking price. These large average price increases and fast moving deals are supported by the population growth and strong economy generating well-paying jobs across the state. There are other factors at play as well, such as the lack of state income tax, allowing home buyers additional purchasing power compared to other states.
With demand continuing to rise and housing inventory at an all time low, investors should be looking towards new construction projects. During 2021, the number of new housing permits issued in Tennessee represented more than 3% of the nationwide permits issued in 2021 which is indicative of the state’s real estate market trajectory. 98% of authorized new builds in Tennessee were for single family homes, with less than 2% representing multifamily properties with 5 units or more, highlighting a potential inventory gap that investors could fill.
The rental markets are also seeing positive numbers throughout the state. For example, the state’s rental vacancy rate is hovering around 6%, which is slightly above the national average but still indicative of a healthy market where rental owners won’t have to worry about finding tenants. By comparison, Tennessee’s rental vacancy has dropped a full one percent from the previous quarter, and the trend looks to continue even as rental prices trend upward. Some of the more tourist-friendly cities such as Nashville and Memphis are also excellent options for short term rental property such as Airbnb or Vrbo rentals, with Nashville specifically holding a 65% occupancy rate across all Airbnb listings and bringing in an average revenue of $4,746
Asset Based Lending did the research and compiled it here to help highlight the best places to invest Tennessee real estate. Data for the best cities in Tennessee was sourced from reputable sources such as Redfin, Rent Café, AirDNA, and local public records in Tennessee. Please note that these Tennessee investment suggestions are based on the most recent available data as of June 2022.
Clarksville
Tucked in the northwestern corner of the state and sitting on the border of Kentucky is one of the best cities for real estate investors to become familiar with. Clarksville TN isn’t just one of the hottest real estate markets in the state- its currently ranking as one of the hottest markets in the entire country. At the start of 2022, the city was ranked the number one area in the country by total homes contracted within 90 days of being listed. Additionally, the city was ranked as fifth in the entire country for fastest growth in building permits issued for single-family homes with new construction permits up 122% between June 2020 and 2021, outperforming major cities in real estate juggernauts like Florida and Texas.
A strong local economy and unique location bordering on two states makes it an attractive living situation. The unemployment rate is on par with the national average while boasting a predicted future job growth rate of nearly 37%, which outpaces the national average. This kind of economic growth trajectory is a clear signal to real estate investors that Clarksville can provide strong returns over time, although take advantage of the current market with with fix and flips is also an investment strategy that’s sure to yield solid ROI.
As of June 2022, the average home sale price reached $304,900 which is a 24% increase year over year and a five-year-high for the city. 537 homes sold throughout the month, marking a 14% increase from the previous year. The homes are spending an average of 31 days on market, which is a slight increase from the previous year and merely a small market correction compared to a cooling-off market. These stats show a market that’s becoming increasingly competitive, but with affordable price points for investors to partner with hard money lenders to finance the upfront costs of the deal and be able to pay off their loan with the eventual profit.
Currently, the most desirable traits for home buyers in the area are covered back patios, front porches, and home offices. Homes with these amenities are receiving more attention on their online listings and receiving offers above asking price on a more regular basis. New construction projects that can work these amenities into their final product can leverage the market demands to increase their final home sale price, as well as bring more attention to the project to potentially pre-sell the build so they can begin moving their money into another project.
Murfreesboro
Located just southeast of Nashville, right outside the city’s metro area, is a small city that many people outside of Tennessee have never heard of. Murfreesboro doesn’t have the same recognizable name as some others on the list, but Tennessee real estate investors should know that this city is one of the state’s highest performing markets. By the numbers, it’s currently one of the more competitive TN markets for investors, with rising property prices and increased demand outpacing other Tennessee cities.
As of June 2022, the average home sale price for the city reached $405,000, which is a 22% increase year over year and a five-year-high for the area. Approximately 310 homes sold during the month, marking an 8% increase year over year. The market is moving very quickly, as homes are spending an average of just 6 days on market before finalizing their sales. Nearly 54% of homes sell above their initial listing price, and especially hot homes are selling as quickly as 4 days from their listing date. These fast moving sales with skyrocketing prices are dollar signs for fix and flip investors that are able to secure a property in this competitive market and quickly complete the work they need to flip their investment.
Only 37% of the Murfreesboro population rents versus owns, but with a vacancy rate hovering near 5%, it’s a very health rental market that doesn’t struggle to find tenants for its rental properties. This is a great sign for real estate investors that are looking to either begin or grow their rental portfolio in an area that doesn’t have issues filling rental vacancies. Currently, the average rent for the city is $1,406 which represents an 18% year over year increase, highlighting the growth of the local real estate market and why rental investors should consider the city as their next investment opportunity. While the average rent is slightly below the national average, that’s offset by the lower cost of living throughout the state and less taxes being paid, as well as the capital an investor will receive through their rental loan. Plus, being in commuting distance to Nashville while being at a lower price point than the main city makes rental property an attractive commodity in Murfreesboro.
Johnson City
Johnson City isn’t a surprising pick for being one of the best Tennessee cities for real estate investors, but similar to Murfreesboro its not as well-known of a name so it tends to fly under the radar. As only the ninth largest city in the state, its also one of the fastest growing populations in Tennessee with a boom of 13% growth over the last ten years. Its local economy is supported by East Tennessee State University, bringing in constant new tenants for rental units as well as stable employment for students and educated workers. Right now the unemployment rate hovering below 3%, far below the national average and highlighting the strong economic conditions in Johnson City. On top of the stable economy, the city was once ranked as the top 10 least expensive cities to live in the USA, which drives up the potential purchasing power of home buyers.
As of June 2022 the average home sale prices are up nearly 24% from the previous year, for an average price of $303,000. Johnson City homes are spending an average of 24 days on market, with especially hot homes selling as quickly as five days from the initial listing price. As demand continues without inventory to satisfy it, prices are continuing to rise and buyers are continuously putting in offers above the asking price to remain competitive in negotiations, highlighting the current seller’s market that Johnson City finds itself in.
The city maintains around a month of supply, which is far below market standards for being considered a balanced market. A balanced real estate market typically contains three months of inventory at a minimum, which means new construction is sorely needed. Single-family new construction permits increased by 110% between 2019 and 2021, with multifamily new construction seeing a smaller but impactful annual growth as well. These new construction permits continue to be issued to try and keep up with demand, but just like the rest of the country, the lack of inventory is outpacing the market. This is where new construction investors can fill a market gap and reap the rewards of a hot seller’s market, building homes that match the market trends to fetch a premium sale price.
Nashville
One of the most popular cities in the country and certainly one of the best spots to invest in Tennessee real estate is the state’s capital, Nashville. Music City, USA has been making a move towards Real Estate, USA for several years now, boasting incredible economic growth that’s fueled by a rapid population increase. Nashville is currently ranked sixth on Zillow’s list of hottest real estate markets in the country, and is in the top 10 metro areas for population & economic growth. While the market continues to remain fiercely competitive with no signs of slowing down, partnering with a fast moving hard money lender can help investors secure deals that they would have lost without the extra financing.
The average Nashville home sale price is currently $460,515, which is a nearly 17% increase year over year and just below a five-year-high for the area. Homes are only spending an average of 21 days on the market, which is six days less than the previous year’s average. More than 55% of Nashville homes sell above their asking price, and the most desirable homes in the city can sell for 9% above asking price as quickly as 5 days from the listing date! This highlights the speed of the market and indicates that real estate investors, especially fast-moving fix and flip investments, can benefit from Nashville’s ongoing demand for well-priced homes.
Rental property investments are also an excellent opportunity for Nashville investors, both for long-term and short-term rentals. Right now the average monthly rent for the city is $1,694, an over 10% increase from the previous year. Nearly half of the city rents versus owns, meaning finding tenants for a well-priced apartment shouldn’t be an issue. As stated earlier, the high tourist volume makes Nashville one of the best cities for short term rentals in the country, boasting an annual number of 16 million visitors to the city that need accommodations when they visit. Whether you’re an investor looking for long-term buy and hold property or looking to manage a small portfolio of short term rentals, Nashville is one of the best places to park your money and have it work towards returns.
Memphis
Known as Bluff City for its placement on the Chickasaw Bluff along the Mississippi River, Memphis is another top city for investing in Tennessee real estate. As the second biggest city in the state, shy of Nashville by about 100,000 people, Memphis is certainly competing with the growth of its real estate market. It boasts a sub-6% unemployment rate, which is below the national average and a great stat for a large city. The city also has a projected job growth rate of 37%, which outpaces the national average and highlights why Memphis is an investor-friendly city that can produce returns both now and over the next few years.
The average home sale price reached $217,250 which is a 9% increase from the previous year and represents a 5-year-high for the city. This affordable price point makes it attractive for home buyers and real estate investors alike, as the capital needed to acquire the property or begin their hard money loan are reasonable compared to other areas on the list. 763 homes sold during the month and spent an average of only 26 days on the market. Especially desirable homes are selling for approximately 6% above asking price and are being sold as quickly as eight days from the initial listing date. Fix and flip investors should see these stats and understand that right now is the time to move in the Memphis market, as prices are continuing to rise and are likely to see new highs, so its best to work quickly and take advantage of the current market conditions.
Approximately half of the city population rents instead of owns, making it an excellent opportunity for rental property investments. With rents rising across the country, Memphis is currently one of the kings of rising rents with a nearly 70% jump year over year. That said, the average monthly rent is currently $1,005, which is far below the average monthly rent for the country and indicates that the market had been meaning to catch up for years and finally More than 10 million people visit Memphis ever year, which has made it a top investment spot for short term rentals. Memphis has 1,363 Airbnbs listed throughout the city and they hold an average 68% occupancy rate. These Airbnbs bring in an average monthly revenue $2,338, so investors looking to start or grow their vacation rental portfolio should consider Memphis as their next investment opportunity.
Chattanooga
Last but not least on our list is Chattanooga, located next to the border of Georgia and close to the border of Alabama as well. Being near two other states while being separated from the other cities on the list gives Chattanooga its own unique flavor, which has helped boost its local real estate market over the years. Unemployment rate is hovering around 5.5%, which is below the national average, but the real impressive stat is the projected job growth of nearly 45% over the next 10 years, far outpacing the rest of the country and other cities on the list. With currently strong economy that’s set to grow exponentially over the decade, the local real estate market is going to continue producing excellent returns for investors.
The average home sale price reached $308,000 which is a 23% increase year over year 468 homes sold during the month and spent an average of 35 days on the market, slightly below the previous year average. The most desirable homes are selling for an average of 7% above the asking price and moving as quickly as 21 days from the listing date. As one of the less competitive markets on the list, Chattanooga would make a great opportunity for first time fix and flip investors. City outsiders in the nearby areas of Georgia or Alabama could also lay claim to the next great fix and flip investment in the city.
New construction investors could benefit by filling the city’s inventory gap with affordable & desirable homes, especially when planning the builds around local trends. Right now, Chattanooga homes that have high-ceilings, walk-in closets, and a rec room are receiving more attention on their listings and more often receive offers above the initial asking price. These types of details can be catered to in final builds and help investors claim a premium price when it comes time to make the sale. With a growing job market and low housing inventory, the demand is going to continue and these new construction builds are the way that investors can fill the market gap and profit from the market conditions.
Final Thoughts
Tennessee is making a strong case for being one of the best overall states for real estate investors, with affordable price points and potential for strong returns across all types of investment types. Whether its the short term rental markets of Nashville and Memphis, or the new construction needed in Clarksville and Johnson City, there are plenty of investment opportunities throughout the state.
Asset Based Lending is the premier hard money lender for real estate investors across Tennessee, providing loans for fix and flips, new construction, cash out refinancing, and loans for rental property. With loan approval as fast as 24 hours and average loan closing in just 10 days, we deliver a five-star loan experience from start to finish. ABL uses flexible underwriting to ensure our borrowers receive the best possible loan for their project, whether they’re looking for lower interest rates, maximum leverage, zero points, or something else. Contact us today if you’re looking to finance your next successful Tennessee real estate investment.
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