Strategic Property Management: Unleashing the Power of Location in Selecting Neighborhoods for Investment Properties

Lee Blackburn

Most Nashville real estate investors understand the importance of location. It drives pricing, it determines whether your property is attractive to prospective tenants, and it dictates how you’ll proceed when it comes to buying, selling, listing, and marketing. 

The location of your property will impact what you earn in rent, how well you retain tenants, and how much the value of your investment increases over time. 

These are the basics. 

When you understand the importance of strategic property management, you’ll focus on location as you look for potential investment properties. The neighborhood you choose has to be desirable to tenants. When you’re setting rents and looking for the best residents, you can make improvements to your home. You can put some fresh paint on the walls, upgrade the floors, and install new appliances. 

But, you can’t change your location. 

Location is powerful. Here’s how to find the right neighborhoods when you’re considering investing in Nashville real estate. 

Location and Pricing Strategies

We know that real estate appreciates based on the market, which is influenced by supply and demand. The location of a property will influence whether your future tenants find it desirable. As the demand for a particular neighborhood or area increases, so do the local prices. 

As you hunt for an investment property, expect to pay more for the properties in excellent locations. The higher purchase price isn’t necessarily a bad thing because it also indicates that you’ll earn more in rent. Your home value will also be worth more.

A property’s location has a larger impact on home prices than anything else.

When you purchase a residential investment property, the amount of rent you can charge will depend on that property’s location and how convenient it is for your tenants.  The more you have to offer renters, the higher your rents, and it starts with location.

Neighborhood Features and Amenities: What Makes a Neighborhood ‘Good?’

How do you know you’re looking at a good location? 

You’ll notice that the location provides:

• Easy access to grocery stores, restaurants, shops, and other conveniences. 
• Natural traffic patterns and easy parking. Residents in and around Nashville want to be within a quick drive of major roads and highways that take them to work, school, and social activities. 
• Safe neighborhoods. Tenants are looking for neighborhoods with low crime rates. They want to feel safe walking around their neighborhood and they want to be sure their children can play without being overly concerned. 

Tenants, in general, prefer quieter, residential areas. They do not want to live next door to commercial businesses or industrial warehouses. Think about the neighborhood and what it offers before you buy an investment property. 

Choosing Your Neighborhood: Where Do Your Ideal Tenants Want to Live?

Nashville has a lot of diverse neighborhoods, many of which make great locations for investment properties. This is the right place to invest. But, when it comes to choosing exactly the right street or building, what are you looking for? 

Evaluate the following when you’re considering a neighborhood with good tenants in mind: 

• Demographics. What’s the average income of the area residents? Do most people own or rent? Buying in a neighborhood that has a higher median income means you’ll likely get higher rents, but you’ll also buy at a higher price point. While a neighborhood with a lower price point will also have a lower median income, you can save money at the point of purchase, but you may lose money by collecting less rent. 
• School districts. A good school district is important even to tenants who don’t have children. It contributes to the health and wholeness of a neighborhood to have good schools in the area. Rents will always be higher.
• Transportation. Tenants want low commute times. Will they have an easy time getting to and from work?

Think about whether the neighborhood is older and more established or newer and yet undiscovered by a lot of local residents. How easy will it be to market this neighborhood to prospective renters when you list your home for rent?

Location and HOAs in Nashville

More and more properties can be found in HOA neighborhoods. Even rental homes. 

While HOAs have a set of unique challenges, they also offer a lot of great benefits. You’re likely to attract high-quality tenants who are looking for a well-maintained home in a fantastic neighborhood with a lot of amenities. 

Before you buy an investment property in a neighborhood governed by an HOA, ask these questions:

• Are rentals permitted?

One common mistake that real estate investors make is to purchase a property in an HOA without reading the rules and regulations regarding rentals. Some associations won’t allow you to rent out a property. Others will require you to wait for a year. In some HOAs, there is a limit to how many homes in the community can be used as rentals, so you may be on a waiting list to rent yours out. 

• What will you pay in dues and assessments?

HOA dues are the owner’s responsibility, not the tenant’s. You’ll have to consider this when you’re determining how much to charge in rent. You will likely get services in exchange for those dues, such as landscaping and security. This can help make the location more attractive, but also more expensive. 

Tenants may be looking for the ease of an HOA, but you’ll need to share all the rules and regulations set forth by the HOA. When you’re discussing the lease agreement with your tenant, make sure you include a copy of those rules and regulations and double-check your lease agreement so you know it reflects what’s required. Any time a tenant violates a rule, you’re ultimately going to be held responsible as the property owner and association member. 

Choosing an investment property within an HOA makes it easier to maintain your property and its value. The rules enacted by the governing body keep the properties looking pristine and the property values intact. It’s extremely important to stay in touch with your HOA, even if you’re not occupying the property within the association. 

We can help you decide on the best location for your next Nashville investment property. When you’re ready to buy, let’s talk about location. Contact us at Omni Realtors & Property Management.