NASHVILLE, Tenn. (WKRN) — It is known that homeownership is the greatest vehicle to wealth creation, but to play in this market, you’ll have to spend a pretty penny.
Nashville’s median sales price for a home just hit $410,000.
In order to find and get a home for a good price, you’ll have to compete with not only wealthy out-of-towners but corporate investors who are interrupting the American dream.
A Real Estate Investment Trust (REIT) is defined as a company that owns or finances income-producing properties. Essentially, they’re corporations that buy up homes and rent them out.
In the Nashville region, they own about 10,000 homes and are growing.
“This is a big issue,” said Ken Chilton — associate professor at Tennessee State University. “In some neighborhoods within the Nashville region, especially around Murfreesboro, they own 30% – 40% of the housing stock.”
One house after another, they scoop them up and rent them out.
“These are college-educated renters, typically household incomes above $80,000 a year, but for whatever reason, student loans, childcare… they can’t afford to own a home or come up with down payment. So, they’re taking advantage of opportunities of renting homes in suburban settings.”
Chilton says the corporations focus on the Sunbelt and Southeastern U.S cities that are growing, like Nashville. Their prime concentration here is homes in the $250,000-$350,000 range, mainly on the I-24 corridor from Antioch through Murfreesboro with pockets in Thompson Station and Spring Hill.
“There is a reason they’re not buying in Brentwood and Greenhills. When you’re spending $700,000 – $800,000 a home and have to charge $3,000, $4,000, $5,000 in rent, there’s a much smaller market that can afford that,” Chilton said.
Corporations use algorithms to find homes. They do so quickly and pay with cash, competing with the average buyer for a home.
The REITs, with more resources, often come out on top.
“You have no chance,” Chilton said. “None.”
The practice drives up prices, leaving little room for first-time buyers, forcing them instead to rent, with generational wealth nowhere to be found.
All of the cash, instead, flows to the REITs.
“Given the cost of housing and cost of land and the increase, you will see more and more of the investment activity going toward Wilson County, Fairview in Williamson, Maury County, where land is cheaper and you can build on large tracks of land, build to rent neighborhoods,” Chilton said.
If you were wondering: yes, this is legal. If there’s a contract between a willing seller and a willing buyer, there’s nothing you can do about it.
Some HOA’s have attempted or are attempting to limit the growth of investors in their communities.