Rentals in Nashville are soaring for another year to all-time highs, and with more and more people moving to the city every day, it doesn’t look like there’s an end in sight! So more and more individuals are taking the leap into landlording. If you’ve thought this might be a great investment for you, here’s some important information to consider before you take the plunge!
Landlording in Nashville
Read up on landlord/tenant laws in your area before embarking on this journey! Every state and city has their own quirks, and you may find that it’s better to be in the city proper, or in a certain suburb. For example the city of Nashville has its own city laws, but the adjacent cities of Brentwood, Franklin, Mt. Juliet, or even non-Nashville communities can have their own regulations.
When you are hoping to live in one of the units yourself, if that unit is not vacant at the time of sale it is important to know what your rights are as the owner, and what the rights of the tenant(s) are. In most cases their lease continues after the sale, and if you want to occupy a unit you will need to follow certain procedures that may take up to 90 days, though your loan may require occupancy within 60 days. You might even have to pass on a property we really loved because you could not legally occupy the unit we liked best. In most areas a live-in landlord has more rights than an absentee, but there is still a lot to learn.
The best rental investment deals don’t have pictures
There are two housing markets—one for owner occupants, and one for absentee or investor landlords. A couple shopping for a single-family home may see a duplex they like and talk themselves into it so that they have an office space or a place for aging parents. But the market for a fourplex, for instance, features almost exclusively a different type of buyer—an investor who doesn’t need to envision themselves making the building into a home.
Because of this dichotomy of the multi-family market, while duplex listings look more like single-family home listings (with plenty of pictures, clean spaces, and lots of information to help get you excited), the listings aimed at investors are often quite sparse. Often they’ll include no more than a single photo (pulled from Google street view no less) and the most brief description. Make no mistake: This is where the deals live. In the investor market ROI (return on investment) is king, and emotions don’t factor into the price.
You may think of it as your house, but to your lender it’s a business
Don’t fall into the trap of emotional decision making after making up our minds to buy a triplex in a great neighborhood. You might find your offer was accepted, only to find that the bank (who you could be were pre-approved through) would not finance the purchase. Why not? For example, if you are using an FHA loan, which requires potential triplexes or fourplexes to be self-sustaining from day one. That means that the rent incoming from the rented units plus the market value of the unit had to cover the mortgage with just a bit of room for the occasional vacancy. It can be a shock to the system to realize that even if you could talk ourselves into sinking more money into a property you loved, the rest of the world simply wouldn’t see it the same way.
