There’s no denying we are in a different real estate climate. Very unique things are happening on the market right now. Residentially, we have homes appreciating in areas, but days on the market are also skyrocketing. We also have the increasing wage/affordability gap that’s been a hot topic for a while now. When it comes to investing in real estate, everyone has their strategy, but several factors should be taken into account, including quality of work, location, and source of financing, especially if the end goal is to sell in the short term in 2024. There’s an inherent risk in any investment you make, but the well-prepared investors account for variables on the front end when purchasing, to reduce risk.
While some investors are holding on to cash, there are still opportunities and rewards possibly available for those with the ability to take on risk. In Nashville, sub-$450,000 is still a very hot market. There are still more people moving here than housing available, and inventory is still not there. Quality has never mattered more for those actively investing. The buyers who are in the market now are a bit picky, justifiably so, when considering the monthly payments, they will be making. Poor craftsmanship is not tolerated, as it was a few years back.
Days on the market are not your friend as an investor and will eat away at any profit margin that exists. On the flip side, no pun intended, homes that are well made are getting multiple offers, while lipstick jobs are having trouble moving. The valley between the two couldn’t be deeper.
Construction costs are high, land costs are high, and as investors, it’s easy to become too focused on the bottom line. It’s a business, not charity, but a balance must be struck with a personal touch today because for the end buyers this is an expensive investment that they will hold onto for a while.
I’m also seeing a trend of buyers choosing more established neighborhoods, instead of trendy, speculative areas. I still believe the most opportunity exists in areas that can be considered speculative and may welcome development, but as an investor, I would consider this on the front end and factor in over-improvement of a home to hedge against some of the things that come with selling a home for top dollar in an up-and-coming neighborhood.
Lastly, be mindful of alternative financing options. Many lenders are tightening and requiring more down payment from investors. Use this time to establish relationships with multiple banks instead of relying on your regular guy. Some lenders will have more of an appetite to take deals and establish a larger footprint in Nashville, especially if the fundamentals of the deal are there.
Houses will sell in 2024, that’s for sure, but attention to detail will be critical in this new market. Being up to date on trends, standing out, and spending a few extra bucks on finishes may seem expensive when initially underwriting a deal, but they will be the best decisions you make in 2024. Getting back to the fundamentals is something that Nashville is begging for, and the market is saying that.
Adam Myers is currently the broker/owner of Ten Cap Real Estate Group. He works closely with builders and investors to leverage assets in real estate, as well as educate buyers new to the market on how to make sound investments. He’s also the owner of MyersCo., a development and construction firm that specializes in infill development.
