Low cash flow build to rent, keep or sell?
I spent 2 years working on high end townhomes specifically for the purpose to Short Term Rent them in Nashville. Well, now the GC blew 4 months and clearly will not get them done for this year's deadline to get permitting. So I'll be stuck deciding on selling them or long-term renting. The units were valued at 600k last year and based on market prices going up 10%+ I'd only assume they could be 650k+ when completed. I am able to keep one as my second residence and get an owner-occupied short-term permit there, but the other three calculate basically 0 cash flow (with 35% expense margin, $4400/mo rent). Now things could be OK if I can get more rent.
I hired a financial analyst and after a 10 year period I'm showing (assuming sale after 10 years):
- - Leveraged cash flow as $1.8M,
- - Unlevered IRR 12%,
- - Levered IRR of 44%,
- - Multiple of 10.3,
- - NOI of about $1.3M.
- The growth mostly comes in the later years due to increased rents and inflation (assumed at 3% which is much higher now). I am not a financial analyst so I really almost don't know anything more than cash flow.