Nashville Newbie: STR vs. Flips vs. ???

Question

Hello All,

I've recently relocated to Nashville. I'm about to sell my house in TX and am looking to invest the $...somehow. I'm in a great rental situation- affordable/great neighborhood- and so I'm looking to work with the proceeds from the house instead of buying a home to live in here. I own a STR cabin in northern MI, where I'm from, that's been doing pretty well and so I've had the idea to buy another similar property up there (I do have a great husband/wife team that takes care of the place, pure gold), or something similar outside of Nashville that I could manage and occasionally enjoy myself! But now I'm saturating myself in REI info and realizing that another STR may not be the best choice, and I'm overwhelmed with possibilities. I'll basically have around $170k cash to work with and I could use some direction. One of my bigger questions is is it better to passively invest with that amount since I'm not very experienced, or dig in and try to do the work to get the most gain? My career has all but evaporated with covid and I have no idea when I'll be able to get back to it, so I have time, and also a pretty decent basic knowledge of cosmetic household fixes. In other words, I'm open to getting my hands dirty but also don't want to get in over my head. I'm definitely looking for folks to connect with and possibly partner with in this area. Any advice appreciated!

Luka Milicevic · Answer

Nashville isn't much for cashflow. The market has exploded and rental prices haven't been able to keep up with the price of real estate. Your best bet is renovations and new construction. Those are difficult to find but seems to be the only thing that makes sense now. You can build to rent which is what I"m starting to do. NOO STR is going to be commercial zoning only starting next year.

Luka Milicevic · Answer

This reminded me of a difficult time haha.

Luke Hartselle · Answer

Hey Leslie! Welcome to Nashville! I have many investor clients who have invested in short-term rentals recently. However, as others have pointed out in this thread, Nashville has very strict STR laws, and they can be very difficult to work around. With that said, I would recommend going the fix and flip route. We've been seeing some incredible margins on investment properties outside of Nashville, depending on who you source your deals from. I hope this helps! Shoot me a personal message if you have any more questions about investment properties!

Tim George · Answer

If you are good at branding/instagram/etc I imagine this could work. Most folks want to STR in the city center but it might be worth looking around the lakes in the area. There are a number within an hour or so and the property is pretty cheap on them at the moment. I imagine that will be changing over the next 5 years as people get comfortable living further outside of the city as the suburbs grow. The smokies aren't that far and there is some great outdoors closer to Chattanooga. That being said you could look for property around Ashland City, Joelton (which probably still falls under the same zoning restrictions), Fairview.

Leslie Beia · Answer

Thanks! I may have not said it clearly enough, but I am definitely looking outside of Nashville for STR’s. I am well aware of the permitting issues and also I think Nashville has plenty- I’m not really interested in being part of that problem (I know we all have our views, doesn’t need to be debated). I’m also looking outside the city at flips- as I said with $170k to work with, I can’t do a lot in this market. I’d also love to hear about investing passively. Thanks again!

Cullum Stirling · Answer

@Leslie Beia, the rules are constantly changing in Nashville. As of Jan. 2022, here are the NO-STR eligible zoning types: NO-STR ELIGIBLE ZONES (as of Jan 2022): MUN, MUN-A, MUL, MUL-A, MUG, MUG-A, MUI, MUI-A, OG, OR20, OR40, OR40-A, ORI, ORI-A, CN, CN-A, CL, CL-A, CS, CS-A, CA, CF, DTC NORTH, DTC SOUTH, DTC-WEST, DTC CENTRAL, SCN, SCC, SCR If you need help figuring out financing options & budget, let me know and I can connect you. Have an awesome day!

Tony Clark · Answer

Hi @Leslie Beia, welcome to Nashville! It really depends on your strategy, as an agent I do a lot of work with clients in both the flipping and the STR space. Because of the strict zoning requirements for a non-owner occupied STR, the prices have been bid up substantially - there are new changes coming from the city that will restrict zoning even further starting 1/1/2022. You can still find short term rentals that provide a healthy cash on cash return especially if you’re willing to self manage, but your point of entry will be higher than if you’re purchasing a home to flip (I’m looking at average $400k-$500k for a 2 bed non owner occupied str, $500k minimum for 3 bed). If you go the flipping route you may be investing less cash up front, but be careful because labor is expensive right now so you’ll want to spend time making sure you get great contractors and incentivize them to hit the deadlines you set. I think either route you go has potential to make very good money, and you have a healthy budget for either - feel free to message me if you want to talk further about STR zoning or flipping!

Gerald Pitts · Answer

I love STR for cash flow, but I would research the STR laws in Nashville. Very strict. I prefer vacation areas where STR is established and welcome.

Christian Espana · Answer

This post has a good summary if you’re thinking NOO STR:https://www.biggerpockets.com/...