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When is the Best Time to Invest in Real Estate?

Ashley Boykin | July 6, 2023

The real estate market has seen its fair share of changes over the past two decades. If you’ve been in your adulthood for most of these years, you’ve likely been aware of multiple unprecedented whiplashes in the market. Home values were high before they bottomed out in 2007, stabilized a couple of years later, whipped up into a frenzy during the pandemic, then stabilized (somewhat) again.

If you’re starting to browse through homes for sale in Franklin, TN, you might be wondering when you should take the plunge into the buyer’s market. It’s never easy to predict the best time to invest in real estate, but if you take stock of your circumstances and the market, you’ll be better positioned to make a sound decision.

Know that the market will never be what it was in 2007

Understandably, you might be concerned about a sudden, dramatic devaluation such as that which occurred in 2007. But there’s no reason to fear a repeat of that scary time, especially since legislation was passed that set the market on a much firmer foot. After the Dodd-Frank Act became law in 2010, the Consumer Financial Protection Bureau was born. This national agency reformed mortgage lending, and now lenders must make a “good faith” determination that a would-be borrower can repay a loan.

Fewer foreclosures on the market over the past decade mean that the Franklin, TN, real estate market is stable and capable of handling minor fluctuations, including ongoing shifts in mortgage rates. Therefore, any property you purchase now will likely be a good investment and will only accrue in value in the long run. It’s unlikely that we’ll see a sudden unbelievable increase in value as occurred during 2020. Still, if you plan to hold onto your property for more than three to five years, the likelihood of an increase in value only rises.

Consider your own financial goals

You might be in search of a primary residence, a secondary residence, or an investment property. Each of these forms of investment comes with its own considerations.

Purchasing a primary residence

If you’re currently renting a property, you can consider temporarily leasing a property below your means to save money for a down payment. A sizeable down payment will reduce your monthly mortgage payment significantly. Of course, you can purchase a home with a smaller down payment, but your offer will be less competitive in the marketplace. Sellers want to see that a buyer isn’t overly reliant on financing. Aim to save at least 20% of your “goal home” price tag (if you can) before investing in a primary residence.

If you don’t have at least 20% saved for a down payment, you’ll likely need to purchase mortgage insurance. Lenders want to know that you’ll be able to pay your monthly payments, and mortgage insurance ensures that they’ll get paid. The price of mortgage insurance varies, but it’s typically between 0.58% to 1.86% of the entire loan amount, as paid annually.  

Purchasing a secondary residence

Maybe you have an apartment in Nashville, and you’re searching for a secondary residence in Franklin. Or perhaps your primary home is somewhere else in the country (or world), and you’re looking for a comfortable place in Franklin when working in the area or visiting for leisure. If either scenario is the case, congratulations on your aspiration to purchase a secondary residence! It’s exciting to have options regarding your real estate holdings.

The best time to purchase a secondary residence in Franklin is when you can comfortably afford to make payments on both of your homes. Of course, there’s the possibility that you can rent out a room, suite, or outbuilding at your secondary residence to make up some (or all) of your mortgage payments, but short-term renters aren’t guaranteed. (Note that Franklin requires short-term rental properties to be owner-occupied, so you won’t be able to rent out your secondary residence while living elsewhere.)

Purchasing an investment property

Franklin is an attractive area for renters, with its highly-rated school districts, access to shopping, recreation, and more. Single-family homes in Franklin can command high rents, especially those that are updated and spacious. But as with short-term rental situations, it’s important to note that tenants aren’t guaranteed, especially immediately. If you want to become a landlord, it’s essential to have “backup funds” to be prepared for a vacancy, whether it lasts for one month or more. Also, budget for repair costs when considering your ability to hold down a rental property.

The answer is different for everyone

Your financial situation is unique, requiring a thoughtful, tailored approach to investing. Try not to compare yourself to anyone else because you can’t be sure how anyone else is doing financially (unless they share their balance sheet with you).

The best time to invest in real estate is when you feel comfortable making the payments you’ll be required to make, either in a lump sum or monthly. Before making any specific investment decisions, you should fill out a budget worksheet to determine how much you can allocate for real estate. Make a realistic assessment of your wants and needs in different spending categories. Also, be sure to allocate funds to set aside for liquid savings to prepare you for any unexpected scenarios.

Ashley Boykin is pleased to work with buyers and sellers in the Nashville area. Her unwavering dedication to each client sets her apart from the rest. Ashley appreciates the opportunity to help each client discover the scenario that will work best for their long-term financial goals. Contact Ashley today to set your investment plans into motion.

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*Header photo courtesy of Ashley Boykin

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Their industry specialities include luxury homes, relocations, estate sales and investment properties. With 16 years of experience in the real estate industry, she has been through multiple market cycles as an agent, buyer and investor, and has a deep understanding for the often-complicated process that her clients will encounter.

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