Getting Started and Sharing

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I listened to the Podcast interview of Josh and felt the motivation to start sharing on this community that has given me so much.

I have an offer in on a duplex that will cash flow at around $500 per month.  That deal will close in 30 days.  But I just last night looked at a 3+2 in the downtown area that has me considering to pull the trigger again.  Too fast?  But Nashville is a busy market.

I am a little nervous about this new one because the neighborhood in pre-transition but is close to other areas that have been turning bad into good.  It is a 3+2 1200 square feet for $115,000.  The rent average is about $950 and that should cash flow out to about 200 per month with a 20% down conventional investor's loan.

The hesitation is the poor, working class neighborhood (no pitbulls or drug dealers though), that may or may not transition.  Possible section 8 tenants. There is a community church right across the street.  There is also a few boarded up homes in the neighborhood but I cannot see that lasting long in the booming Nashville market.  The rental market is very strong, especially this close to downtown - great 5 minute commute to downtown.

Any thoughts from other investors about this type of situation.  Do I just trust the numbers?  I completed the buy and hold rental calculator on BP.  The numbers seem to work without having to rely on appreciation but that would be a bonus in a few years if this neighborhood follows what has happened just 5 minutes away.

Thanks for your thoughts.

Where it is? North Nashville? I own two properties in East Nashville but am looking more and more to North Nashville and Antioch to try and buy before the areas start really transitioning. 

It is in North Nashville so it has been historically a bad neighborhood.  But I think that is changing quickly.

I love East Nashville, good spot for some rentals - probably no problem in finding tenants to live there.

You know our issue in Tennessee - there is always a church on the corner...what are your thoughts about it being right across the street?  Good, bad, not an issue?

I think North Nashville is definitely a good appreciation play/buy and hold area. It's bound by the river to the north, downtown to the south, and germantown on one side and sylvan park on the other. It's going to be forced to gentrify if Nashville keeps swelling with people coming in (which I have no reason to think that it won't).

I haven't dealt with the church thing yet, but I don't think it would bother me. Personally, I would like it if my house was really near a church, because (as a musician) it would mean ample parking for my gatherings/studio sessions/webshows.

Hi Fene
Congratulations. I am familiar with North Nashville , but I do not have a feel for its historical appreciation rate . Are you familiar with the weekly paper called " Ledger"
Here in Nashville ? It is a free paper , but you can also subscribe. The January 16th to Jan22 issue has info on page A-8 about different zip codes in Davidson county and their appreciation/ depreciation rates. I think there is a way to look up crime index online too.
That may be on Metro Nashville . Gov site.
A Multi Family unit I bought in a more transitional neighborhood ( near a church and school ) cost me some
Money early on because someone tried to steal the air conditioner for copper scrap.They did
Not get AC but did some damage and the repairs hurt my return rate . However , it is renting well.

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If I were investing $115,000 in a home I would take my time and find something in east Nashville, Cleveland Park, Hope Gardens, or Salemtown if something came available.  North within close proximity to Charlotte Pike might be a play also depending upon the price.

Any property can be a good deal depending upon your time horizon.

You are so right Steve, I have kept looking and I found another home for $90K that was really more what I was looking for.  Better rents, closer to downtown and much faster transition occurring.  It is easy to get caught up and excited about a property but as you say, patience may sometimes present a better opportunity.  I just have to believe the numbers and just a little bit of intuition.

I am a long term hold investor so the horizon for me does allow for patience in my expected return.  But I still want it to make sense in today's numbers just in case.

I still don't know how some people are getting the 2% rule.  My next property is $90K and $1,000 average rent in the area.  I can't imagine this renting for $1800.  Am I looking at this wrong

Originally posted by @Fene Cartlidge :

I still don't know how some people are getting the 2% rule.  My next property is $90K and $1,000 average rent in the area.  I can't imagine this renting for $1800.  Am I looking at this wrong

 It's because they are not investing in Nashville?  Not all areas of the country can you achieve the 2% rule.

I own a rental in Nashville and get 1%, but there is no way could get 2%

That said.....Ive been looking at some multi-family duplexs and such in certain parts of Pittsburgh and I still think 2% maybe a stretch...but i think could get close.

best I've had in Nashville is a 76k property that rents for $1225 

interested to know - where are folks getting 2%? 

I get 1% on both of my rentals in East Nashville, but I can't imagine getting 2% here. Maybe if I snagged an amazing deal at a foreclosure auction or tax sale, but I think even those are all locked up now by the hedge funds.

Good to know that it is not just me.  I find the tools and rules of thumbs are invaluable but are certainly not set in stone.

I will stay on the prowl. So far I have a duplex in Donnelson and a SFR near downtown. I'll just keep my powder dry and work on my patience...LOL.

Hello fellow Nashvillian investors. This is a good discussion, and a problem I recently wrote about on in an article titled, "The Dwindling Supply of Cheap Houses in Nashville, TN." The reason it is harder to get a better return on investment right now in town is totally because purchase prices have appreciated dramatically. Rental rates have increased as well, but not enough to keep up and achieve this 2% goal. I don't think there are ANY properties on the market in Nashville proper where one can get that return unless it needs A LOT of work. Even then it is a stretch. I have some houses where I am getting those returns, but I bought them in 2009-2011. It is a completely different market now and for those of us who have been in Nashville awhile, it is hard to adjust. Houses used to sell in the $20-$30k range in North Nashville, and now there is nothing that cheap. It is inner Nashville's final frontier, but the shift is already taking place.  

Now is a great time to be a builder in Nashville.

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