4 Benefits of Investing in Tennessee 

Tennessee is growing in population, attracting new residents from across the United States each year. Its strong economy is thanks partly to its affordable housing, hot job market, and low cost of living. As a result, many investors are wondering if it's worth investing in Tennessee and what type of return they will get.

Investing in Tennessee offers many benefits, and we’ll explore four of the biggest in this article. 

Real Estate Market

According to Redfin, the median sales prices for houses have increased nearly 6 percent over last year. Even with that in mind, the housing market remains affordable compared to other states. They have lower-than-average property taxes, which adds to the state’s affordability. 

Of note, the number of homes sold has decreased slightly, and the houses have stayed on the market for longer than last year. This can indicate that the market is becoming a buyer’s market, giving investors a stronger foothold to negotiate better prices and rates.

These better property prices may also give you more favorable terms on your loan. Investment properties can use DCSR loans over conventional loans. DSCR loans look at credit scores and income streams, but it’s more than that. If anything, those traditional elements factor in less than usual on DSCR loans.

Lenders consider what income you can generate from your rental property and if it’s enough to cover the monthly mortgage, property tax, insurance, and other incidental costs. Typically, Tennessee lenders look for a minimum DSCR of 1.25 to assess a person’s default risk. That means the income you generate is slightly more than what you owe. It will give you wiggle room should units become vacant or unexpected costs arise. 

The real estate market is attractive to buyers and sellers, allowing both to profit from their investments. 

Job Market 

The Tennessee job market is stronger than the national average. Tennessee's unemployment rate is just 3.3 percent, almost one percentage point lower than the national average of 4.1 percent. Tennessee is popular for healthcare, retail, trade, and business jobs, and these sectors have consistently added jobs year over year. 

Unlike other sectors, they are not slowing down, and prospective residents view this job stability positively. The positive job growth and stable industries can help individuals understand if they can get a job when they move to Tennessee.  

Additionally, this stability is also a positive sign for investors. The real estate market in Tennessee will likely continue to grow. The demand for rental properties, retail storefronts, and industrial complexes will increase to meet the need. It is less likely that the units will stay vacant, allowing you to make a consistent profit. 

Low Cost of Living 

The cost of living may vary depending on where you live within the state, but overall, it is under the national cost of living index. Metropolitan areas like Nashville may be more expensive than rural areas; however, Tennessee may be a good choice for those looking to reduce their overall cost of living expenses without sacrificing their quality of life. 

For those who need to travel, it’s also accessible by highways, public transport, and an international airport. You can live there and still get where you need to go at a fraction of the cost.

Tennessee does not charge state income taxes, meaning individuals have more discretionary income. This is often pumped back into the economy, and local businesses benefit. The state has a vibrant restaurant, retail, and entertainment scene, providing many of the amenities of larger cities that people love.

Financial Incentives 

The lack of state income tax is just one of the many financial incentives for investors in Tennessee. They may also be able to write off more of their taxes, including mortgage interest deductions and depreciation. These savings can impact your overall rental income potential, though it is important to note that this will vary depending on your investment property location.

Tennessee residents pay a premium to live in the Nashville area, so you can charge more for the same property type as you would in a rural area. The state has other economic and development incentives that make Tennessee attractive to investors, including lower operating costs, grants, and more. 

Conclusion

The big four reasons to invest in Tennessee include a strong real estate market, a growing job market, a low cost of living, and various financial incentives. The benefits residents feel can also be reflected in your rental property income, allowing you to generate a positive cash flow no matter where your property is located. 

Tennessee is becoming an affordable hub for many businesses and shows no signs of slowing down. It demonstrates great potential for positive long-term returns and short-term gains, so it’s worth exploring if you want to purchase a new investment property and make a solid profit.