Real Estate Blog

Thanks to its cultural and commercial significance, the Tennessee Rental Market is booming right now. On average, city homes cost as much as $250,000 – so high that renting seems to be the most obvious option for many residents. 

In fact, according to RENTCafe, almost 50 percent of the population lives in rented premises. Additionally, this population is projected to continue growing in the future. 

So, if you are planning to buy an investment property, now is the perfect time to do so. If you do it properly, there is no doubt you can make quite a profit. 

7 Tips When Buying an Investment Property in Clarkesville 

As with any other investment, real estate investing has its fair share of risks. Failing to get something right along the way can lead to potentially costly mistakes. The following are some tips to help you make the best investment decision. 

Tip #1: Analyze Your Landlording Skills 

Do you know how to market a vacant rental? How about screening tenants? Do you understand Tennessee landlord-tenant laws? If you answered any of these questions with a “no,” managing a rental property might not be your forte. 

In such a case, you’ll need to hire someone experienced to do it on your behalf. A good property manager like Cory Real Estate Services will help you in all aspects of property management. From property marketing to tenant screening to property maintenance and everything in between, they will sort everything out for you. 

As a baseline, though, expect to pay a typical property management company between 8-12 percent of your monthly rental income. 

Tip #2: Buy a Turnkey Property

Do you have experience with large home improvement projects? If yes, then buying a fixer-upper can be a good option for you. After all, you may get a good deal as well as a chance to personalize the home. 

But if you answered with a “no”, then buying a fixer-upper wouldn’t be ideal for you. Buying a home requiring extensive repairs can go from a nice idea to a costly nightmare in an instant. 

Turnkey properties, on the other hand, don’t require any repairs and are completely rent-ready. You can buy one today and have a tenant move in the next day. 

Tip #3: Understand All the Expenses Involved

As with any other investment, a real estate investment will have expenses as well. Aside from the mortgage, expect other expenses to account for almost 50% of your rental income. 

The 50% rule is a common metric that experts use to estimate the potential operating expenses of a rental property. Basically, if you expect to earn $30,000 per year in gross rental income, expect about $15,000 to go towards expenses. This doesn’t include the mortgage repayments, either. 

Typical expenses include property insurance, vacancy rates, property taxes and maintenance costs. Others are property management fees and legal, bookkeeping and accounting costs. 

Tip #4: Buy in the Right Location 

The location of your investment property is the #1 factor that will determine its success or failure. So, before going further in the process, make sure you have chosen the right location. 

The following are some of the things you’ll want to consider: 

• The distance from where you live. Will you really want to drive for an hour each way to respond to a tenant issue? But this shouldn’t really be a concern if you are looking to hire a property management company

• Crime rates. Safety is a common concern for renters. So, make sure you buy in a neighborhood that has low crime data 

• Nearby amenities. No quality tenant would want to be in the middle of nowhere 

• Insurance costs. No two locations are ever the same. So, check to see whether you’ll want special insurance coverage before you buy. A good example is flood coverage 

• Population growth. You’ll definitely want to invest in an area where the population is growing, not the other way round 

• School quality. This should be a priority if you are looking to invest in a single-family home with more than 2 bedrooms 

Tip #5: Avoid Making Emotional Decisions 

You should never let emotions and business decisions mix. Basically, emotional decisions can prohibit you from thinking about things in a logical and clear way. 

What you want to do instead is think of the investment as a business transaction. Don’t let the neatly manicured lawn or the lush kitchen design sway your mind. Base your decisions on calculations and research. 

Tip #6: Understand Your Risks 

As already mentioned, real estate investing has its fair share of risks. So, before jumping in, make sure you have a good understanding of what you’re getting yourself into. Common risks include:

• Risk of depreciation. Not all properties are guaranteed to grow in value 

• Hidden structural problems. For example, roofing issues and foundation problems

• Risk of renting to bad tenants 

• Risk of high vacancy rates. Buying an investment property isn’t a guarantee you’ll get a tenant

• Risk of negative cash flow. You may find that your expenses surpass your income 

• Buying in the wrong location

Tip #7: Determine Your Rate of Return 

For every dollar you are looking to invest, how much profit will you get? Bonds may pay 4.5 percent cash on cash return, while stocks may offer 7.5 percent. Experts agree that a return of at least 6 percent is ideal during the first year of being a landlord. 

Bottom Line

Buying a real estate investment in Clarksville is a huge financial and emotional commitment. As such, getting it right the first time is key. With a little bit of luck, these tips should get you started in your passive income journey. All the best!