Sell or Rent a new build townhome?

6 Replies

I am nearing completion on 4 townhome builds I was intending to short-term rent in Nashville. However, due to GC incompetence, I will not make the deadline to get the permits for those townhomes anymore. I currently own a SFH as well that I short term rent while I'm away a lot of the year (owner occupied).

I'm looking for advice and how to approach determining what I should do with my portfolio now:

1) Use 1 unit as owner-occupied STR and convert my other SFH STR into a long term furnished rental for corporate or nurses. This is my baseline strategy since this unit will cash flow much greater than my SFH being that it's close to downtown and is a nicer place.

2) Rent or Sell the other 3 townhomes? 

This is my ultimate question. Given the other 3 townhomes will barely break even, if at all, on long-term rent, should I just sell them or keep the low-interest debt for equity growth? 

I'd like to select a strategy that will increase my chances of getting further deals. Obviously cashing out gives me more cash on hand, but kills me on taxes and gives me no tax deductions. I'm also not sure how banks consider income-producing debt against you while calculating your ability to get more debt. Over the next 5 years I think there will be a lot of equity growth in that area as it's being heavily developed.

@Leland Smith

I don't know the Nashville market, and I'm only responding to a portion of your post about furnished rentals. Obviously, STRs are the biggest cash-flowers, so that's always what I'm interested in for my clients. (I'm in Colorado Springs and Denver.) But if laws don't allow it, or there is some other barrier, I think the medium-term furnished rental does really well. We do it in two condos in Denver and a 4br SFH in Colorado Springs, all close to downtown, and all of them do really well for us.

Any reason not to do that medium-term thing for traveling nurses/remote workers on all four of your units? We're getting about 30% more on ours than if we ran them as traditional LTRs.

Sell. Put your money into apartments vs. townhomes. If it doesn't cash flow and you don't have a huge tax liability to shelter over the next couple of years, sell it and produce income to do something else with

@James Carlson would love to learn how you manage to get those kinds of returns. Furnishing is costly. 

@Luka Milicevic you know it like anyone

@Devan Mcclish long time no see! That's another good perspective. I'd love to develop a medium-sized apt building. I'd have to 1031 that to avoid getting shafted on tax. I'll give you a call to catch up.

@James Carlson - During covid I tried the travel nurse website for a SFH and found it was often just 1-3 nurses looking and wanted to keep things cheap. I never ended up accepting any because the dates were 3-6mo, they wanted the whole house to themselves, but weren't willing to pay enough to even break even. Thankfully STR market kicked back in gear quickly. In this case, furnishing is about 40k and it's a rather large house. I estimate market rents at 4400 which would put me at about a breakeven assuming a typical cost structure.

What websites do you recommend for the corporate housing market?