Nashville investors market discussion

Nashville investors market discussion

Investor · Nashville, TN · Member since 2016 · 88 posts · 66 votes

I have my entire portfolio invested in the Nashville area. It is a mixture of single and multifamily.  I would like to start a discussion on the incredible increase in inventory of new build condos. I realize someone will respond that " if you buy at a good price and cash flow you will be fine" . I agree with this. My intent is to start a discussion on over supply. I feel the market is at a tipping point. I would like someone to offer their wisdom on how other markets have faired after over supply creeps in and meteoric rises in appreciation and rents have passed. One can make the arguement that we have a lot of people moving in, but eventually supply will catch up. There are many house and corners where one or two houses were and condos are going  in.  Infill one would say. This greatly affects supply. I am starting to see rent prices cooling a bit already. I am ambivalent about selling because I have no idea where I would reinvest, but have anxiety that the market will crash and I should have sold. What do ya'll experience?  Thanks community! 

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Investor · Nashville, TN · Member since 2016 · 76 posts · 73 votes
9y

Hey @Carrie Carlton 

My partner and I talk constantly about this. Here is the way I see it. Rental demand is still really strong for normal people. We just turned over tenants in a 2/1 in Hadley/Washington for 1200 and had 4 strong applicants in the first day. The higher end of the market, however, is seeing noticeable oversupply. There are only so many people who want to/can spend 2100 a month for a two bedroom in the gulch. You are definitely starting to see more and more move in specials and the like, a sure sign of a softening market. 

That being said, the rate at which we are delivering high end inventory is staggering. I'm part of the problem with the urban infill houses, as I've never built a spec that sold for less than 500k. The problem here is that poor people are being displaced and there just aren't any good options for places for them to go in town. We are actually talking to a councilman about developing affordable housing on a city lot because the government sees this as a huge problem. You have to compartmentalize demand between different income ranges to have an effective conversation. 

As a result, I would avoid high end apartments and condos as they are overbuilt, but I would be investing like crazy in anything affordable right now. The combination of people being pushed out of the city by infill with the massive inflow of people (not all of whom earn 200k+) means that the affordable suburbs are primed to boom. Single family also seems fine, except for East Nashville which has absurdly overdeveloped considering it is a difficult place to live with awful traffic, no jobs, and limited basic amenities like grocery stores and such.  We have almost completely written off East Nashville for now, but I'm bullish on most of the rest of the city. 

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  • Investor · Nashville, TN · Member since 2016 · 76 posts · 73 votes
    9y

    Hey @Carrie Carlton 

    My partner and I talk constantly about this. Here is the way I see it. Rental demand is still really strong for normal people. We just turned over tenants in a 2/1 in Hadley/Washington for 1200 and had 4 strong applicants in the first day. The higher end of the market, however, is seeing noticeable oversupply. There are only so many people who want to/can spend 2100 a month for a two bedroom in the gulch. You are definitely starting to see more and more move in specials and the like, a sure sign of a softening market. 

    That being said, the rate at which we are delivering high end inventory is staggering. I'm part of the problem with the urban infill houses, as I've never built a spec that sold for less than 500k. The problem here is that poor people are being displaced and there just aren't any good options for places for them to go in town. We are actually talking to a councilman about developing affordable housing on a city lot because the government sees this as a huge problem. You have to compartmentalize demand between different income ranges to have an effective conversation. 

    As a result, I would avoid high end apartments and condos as they are overbuilt, but I would be investing like crazy in anything affordable right now. The combination of people being pushed out of the city by infill with the massive inflow of people (not all of whom earn 200k+) means that the affordable suburbs are primed to boom. Single family also seems fine, except for East Nashville which has absurdly overdeveloped considering it is a difficult place to live with awful traffic, no jobs, and limited basic amenities like grocery stores and such.  We have almost completely written off East Nashville for now, but I'm bullish on most of the rest of the city. 

  • Investor · Nashville, TN · Member since 2016 · 88 posts · 66 votes
    9y

    I have a single family in East Nashville that I have been giving serious thought of selling for that reason. Thanks for your insight. Would love to chat with you and your partner if you have time! 

  • Investor · Nashville, TN · Member since 2016 · 88 posts · 66 votes
    9y

    Do you not think that if the high end market is saturated that will cause vacancies and drive the rents down everywhere? 

  • Investor · Nashville, TN · Member since 2014 · 6 posts · 1 vote
    9y

    The same thing is happening in what used to be the affordable suburbs. I live in Mt Juliet and the new builds of both apartments, town homes and single family homes is getting out of control. I have two rentals here and had more trouble finding a good tenant for the one that turned over a few months ago than I had in the past. I would like to invest in another buy and hold, but ROI as far as rent goes isn't there. Any suggestions for nearby areas?

  • Realtor · Smyrna, TN 37167 · Member since 2013 · 248 posts · 147 votes
    9y

    Have you considered the Murfreesboro area as an alternative to Nashville?

  • Investor · Nashville, TN · Member since 2015 · 688 posts · 607 votes
    9y
    I don't think you can generalize the Nashville market as a whole. You have to look at sub markets within each area and price points in those markets. For example let's take east Nashville: last week I pulled inventory and found 151 active new builds (without contingency) on the market in 37206, sounds high right? Yeah but you have to go deeper. Out of those 151, 110 of them were priced above 400k and over 2100 sf, so almost 73% of the inventory is priced above 400k in 37206. Those properties as you can guess are sitting. However, east Nashville is a place a lot of buyers want to be, so if you have something "affordable" (and remember this term is relative to each area), it will sell pretty quickly. For example, I had a rehab that was priced at 299k, we had 17 showings in 3 days. My builds under 400k go quickly. I agree the supply is creeping up, but you have to see where the supply is. Alternatively I've noticed something interesting. There is not much inventory above the 700k mark. Those houses aren't lasting long on the market because they have nothing they are competing with. The demand is there but buyers have more options to choose from. Prices in a couple of areas have decreased because of the over supply but nashvilles market isn't going anywhere because of the strong economy we have locally. You still have 100 people a day moving here, they have to go somewhere.
  • Professional · Nashville, TN · Member since 2015 · 29 posts · 25 votes
    9y
    Great response Devan Mcclish and I agree mostly with it. Although I haven't done a deal yet, I just purchased a home in East Nashville and agree that it is one of the few "affordable" areas in Nashville, which again is relative. I think the ~$300k home is becoming a new normal in Nashville as the affordable price point. Everything I've seen built around that point is bought fairly quickly. The sub $300 price point is becoming a difficult price point to build at in the core. Bellevue may be another market to look towards for that. The development of One Bellevue Place is sure to attract families to the area. Overall on their market, I can speak from the commercial lending side. We see Nashville's fundamentals and agree we don't see a crash coming. Most people are thinking about 2008. Remember that is a once in a generation crash. A correction is what will most likely happen. We're seeing it now in the Class A+ apartments space, especially in Germantown where rent concessions are everywhere now. That's the only sector we think has gotten two hot, primarily driven by out of town developers chasing yield in hot markets like Nashville and Austin. But, so long as jobs keep coming and people keep coming (100+ a day), places to live will be needed. Considering millennials are moving here the most, apartments and affordable housing will continue to be a major need.
  • Nashville, TN · Member since 2016 · 10 posts · 1 vote
    9y

    @Jarrett King - any suggestions on where or how to search for hard lenders for a 2 house one lot in Greenhills?

  • Investor · Nashville, TN · Member since 2016 · 76 posts · 73 votes
    9y

    Why hard money? Banks will take those deals all day long and are much cheaper. 

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