Is Tennessee Land a Good Investment?

Tennessee's rugged beauty and diverse landscapes have long captivated visitors, but lately, they've been catching the eye of investors too. From the misty peaks of the Smoky Mountains to the fertile valleys of Middle Tennessee, the state offers a wealth of land investment opportunities. Recent data suggests this interest isn't misplaced. 

The USDA reports that Tennessee farm real estate values jumped 8.1% in 2023, reaching an average of $4,700 per acre. It's not just farmland either - the state's agricultural land values also saw a healthy 7.8% boost, hitting $4,150 per acre. With over 10.8 million acres of farmland spread across the state, there's no shortage of options for potential buyers. But does all this add up to a smart investment? Let's dig a little deeper and see what makes Tennessee land tick in today's market.

Population Growth Driving Real Estate Demand

More people moving to an area naturally increases housing demand. Tennessee has enjoyed steady population growth for many years, averaging over 80,000 new residents annually this past decade per U.S. Census data. Much of this growth has centered on major urban regions like Nashville, Memphis, Knoxville, and Chattanooga as people flock to Tennessee’s vibrant cities seeking jobs, amenities, and an affordable cost of living.

Nashville, for example, has absolutely boomed, growing over 25% since 2010 to now over 700,000 residents. Neighboring suburbs like Murfreesboro, Franklin, and Brentwood have exploded as homebuyers seek more affordable housing options outside Nashville’s hot urban core. Other cities like Knoxville, Chattanooga, Clarksville, and Cleveland have also realized double-digit population gains.

This Urban growth puts obvious pressure on housing supplies, making land for residential development highly sought after in these areas. But increased housing demand ripples through the entire marketplace, driving commercial development too. More residents mean greater demand for shopping, dining, offices, healthcare, and entertainment. This comprehensive real estate expansion pushes land values upward across the board.

Job Growth Spurs Economic Momentum

In addition to population gains, Tennessee has enjoyed tremendous job growth in recent years. Major companies like Amazon, AllianceBernstein, Oracle, and Ernst & Young have all announced plans to add thousands of new jobs in Nashville alone. Volkswagen, Google Fiber, Electrolux, and other large firms are also expanding elsewhere statewide.

With unemployment rates at or below national averages, this influx of new jobs continues attracting talent to Tennessee. The state has become a true economic hub, with target industries including healthcare, automotive, finance, and technology. A diverse mix of thriving industries provides economic stability through fluctuating business cycles.

Robust job growth naturally lifts the entire real estate market. People moving to Tennessee’s booming urban centers creates housing demand, while expanding companies require new offices, manufacturing plants, and retail locations to support their growing workforces. This comprehensive increase in real estate demand pushes land values higher across metro regions.

Factors Influencing Land Valuations

While positive demographic and economic trends provide tailwinds for investors, specific parcel traits drive individual property valuations. Some key factors investors should analyze when assessing a Tennessee land deal include:

Location 

Proximity to growing cities where demand is highest, or situated near recreational amenities like lakes and forests. Land in rural counties without attractions generally has lower values.

Access 

Frontage and visibility from major thoroughfares, ideally with roadway improvements already in place. Limited access hampers valuations.

Improvements 

Land that is cleared, graded, and utility-ready has significantly higher valuations than raw, unimproved land in Tennessee.

Surrounding uses 

Nearby residential, commercial, or industrial properties indicate land is development-ready. Remote parcels have fewer potential highest-value uses.

Zoning 

Land zoned for higher density housing or flexible mixed-use development invites greater end values than strict single-family or agricultural zoning.

Competing inventory 

High supply amid low demand hampers price growth. Low inventory amid high demand creates upwards pricing pressure.

Natural attributes 

Riverfront, lakes, forests, views, etc. can lift values, especially for recreational land. Topography and soils also impact costs/feasibility.

Beyond physical traits, broader influences like mortgage rates, construction costs, and overall economic conditions also sway real estate investing returns. Evaluating both micro and macro market factors is key to projecting a site’s ultimate investment potential.

Popular Tennessee Land Investment Types

The specific class of land an investor targets can produce vastly different rewards and risks. Some common Tennessee land asset types include:

Residential 

Land designated for housing, either subunit or multifamily, generates fairly reliable long-term gains as population growth continues. Sites near expanding suburbs see high demand from builders.

Commercial/industrial 

Land for offices, retail, medical centers, and light industrial uses is highly sought after in metro areas. Values are susceptible to business cycle fluctuations.

Recreational 

Rural land for hunting, ATV riding, fishing, etc. Produces stable appreciation but requires greater hold times for buyers to materialize.

Agricultural 

Cropland and cattle ranches offer low-maintenance holdings that benefit from rising food/commodity prices over time. Returns are vulnerable to volatile crop markets.

Timberland 

Managed tree farms can provide yearly income from timber harvesting while the underlying land value appreciates over decades.

Multi-use 

Land zoned for a mix of housing, retail, and offices enjoys flexible development options and higher values in high-growth areas.

Risk Factors to Consider

Despite positive trends, investing in Tennessee land still comes with considerable risks that investors must plan for. Here are some important considerations:

• Holding Periods – Raw land takes patience and can tie up capital until sold, developed, or leased. Target longer-term plays.
• Limited Valuation Data – Vacant land has fewer valuation metrics than existing properties. Appraisals require adjustments and market expertise.
• Development Costs – Land suited for commercial projects or housing requires infrastructure improvements that add costs before vertical building.
• Surrounding Influences – Adjacent developments, local politics, and NIMBYism can impact approvals and values unexpectedly.
• Natural Disasters – Tennessee’s climate brings risks of tornadoes, flooding, wildfire, and storms that can damage land improvements.
• Market Shifts – Evolving economic conditions, migration patterns, and housing preferences heavily sway real estate at times.

Should You Invest in Tennessee Land in 2023?

Strong Population and Job Growth

Tennessee has seen robust population growth in recent years, especially in major metro regions like Nashville, Memphis, Knoxville, and Chattanooga. The state has also experienced significant job creation, including corporate expansions by Amazon, AllianceBernstein, and Volkswagen. This has supported a thriving housing market and broader economic expansion.

Factors Driving Demand

Ongoing migration and employment gains generate steady demand for both residential and commercial real estate across Tennessee. This fuels rising land values over time. Proximity to growing urban centers typically correlates to higher property appreciation.

Manageable Risks

While the Tennessee real estate market remains attractive overall, investors should still research local conditions carefully and build contingencies into acquisition offers. Factors like zoning limitations, surrounding uses, access constraints and natural disasters can affect land values.

Final Take – Invest Wisely for Solid Long-Term Profits

Considering Tennessee’s appealing quality of life, low cost of living, and position as a growing economic hub, real estate fundamentals remain highly constructive for investors. Both urban and rural land offer opportunities to generate excellent returns over time.

However, profits require diligent research and understanding of Tennessee’s distinct local market nuances. As with any real estate deal, thoughtful planning and risk management is key to amplify upside and avoid pitfalls. Working with an experienced local broker to assess options and make strategic acquisitions is highly recommended.

For investors who put in the work to identify promising parcels suited to Tennessee’s demographic trajectory and economic growth, the state offers a compelling long-term investment environment. Though never without risks, Tennessee real estate stands ready to provide opportunities for substantial gains to savvy land investors in the years ahead.

Frequently Asked Questions (FAQs)

What are the main factors driving the Tennessee land investment market?

The major drivers boosting land values across Tennessee are steady population growth in cities like Nashville, Memphis, Knoxville, and Chattanooga combined with robust job creation. More people moving to the state's urban centers increases housing demand. Corporate expansion also fuels commercial real estate development. This comprehensive rise in real estate demand pushes land valuations up over time.

Which regions of Tennessee offer the best investment potential?

Land located near rapidly expanding urban centers generally provides the highest potential returns. Nashville, Knoxville, Chattanooga and other metro areas with strong population and job growth will continue seeing high demand for developable sites. Some rural and recreational markets also remain appealing for investors seeking long-term holds or specialized assets.

What risks should investors be aware of in the Tennessee land market?

Risks include market volatility, local zoning changes, long sales timelines for remote parcels, surrounding developments that could impact values, natural disasters, and due diligence challenges on vacant land. Investors should research local conditions thoroughly and make conservative projections when evaluating deals.

What is a fair price per acre for land in Tennessee right now?

Pricing varies dramatically based on location, zoning, access, improvements and local market dynamics. In top-tier suburban growth areas, improved land may trade above $100,000 per acre. In rural counties, prices can be below $5,000 per acre. Working with a broker who understands micro-market nuances is vital to appropriate pricing.

Should I plan to develop Tennessee land myself or hold it for appreciation?

Most investors choose to hold land long-term since development requires major capital reserves and expertise. Near-term projects may make sense on commercial parcels in high-demand areas if infrastructure is readily available. Holding land as an appreciating asset over 5-10+ years is generally the safer, more passive route to profits.

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