Is House Hacking Even Still Possible In Nashville?

Question

I am trying to buy my first duplex in Nashville and almost everything on the MLS is $300k and up. The few properties I've seen below 300k won't accept FHA or conventional. In addition to that these things are currently rented at $800 - $900 a side. I'm no math major but that doesn't add up to 3k or even 4k a month. Has anyone else been able to buy a duplex recently in this market that does cash flow? Should I just give up on house hacking?

David Goodman · Answer

Wayne - My first house hack was in 2014. I too was looking for a duplex, but quickly realized it didn't make sense. It was WAY too competitive, and the price/sqft was much higher than a single family home. I had to change what I was looking for. What worked for me was looking for "finished basement" in my home search. Eventually I found a 1960's ranch that had a completely finished mother-in-law suite in the basement with kitchenette and bathroom. These days, you may have a hard time finding a mother-in-law apartment, but you can find a finished basement that you can add those components later.

Yes, this market is extremely competitive. But we were saying the same thing back in 2014. My neighbors thought I was crazy for paying $164k on a 2800 sqft single family home in south Nashville. Even back then, house hacking didn't even cover the mortgage because I was just renting the basement. But it was still the best way to get started. Only a couple years later my home was worth %50 more than I bought it for, and the rents had caught up for there to be cashflow after expenses.

You've got live somewhere. And unless your living rent free, you're paying someone's mortgage. Might as well work towards purchasing you're own property where a tenant can help you pay off that mortgage. And do it in a market like ours, which will continue to appreciate exponentially over the next few years!

Luka Milicevic · Answer

@Wayne Woodson

Firstly, you're at the most competitive price point....

An FHA loan won't work in the Nashville market with the current competition. Your offer will go straight to the bottom of the stack of other offers.

You won't have any cashflow either. A 1% deal on the MLS does not exist in Nashville. If someone listed it as a 1% deal, it will get bid up to where it is no where even close to that.

Keep looking for duplexes, look in the surrounding areas, and add single family homes to your search that have some sort of separate living quarters.

You can give up on house hacking now, and when you pick up again in a year, two, three you will just have to pay much more than the current prices....

Dev Conboy · Answer

@Wayne Woodson I bought a duplex in East Nashville on market for $340k about 6 months ago. Conventional financing, a little under ask price. Maybe I got lucky, but you know what they say about luck. I set alerts and pounced on the seller (owner / agent) immediately. I built rapport and convinced her to sell to me. This property needed around $70k in rehab, the tenants were paying $750/mo and I expected to house hack with rents from the other side coming in around $1500/mo. The reality is I could probably get $650k + for this house now, and rents are now looking like $2200/mo. What I thought would be a .6-.7% deal / house hack became a 1% deal pretty quickly based on Nashville's off the charts appreciation. It's important to asses your risk / reward appetite and many conservative investors would tell you don't buy a .5% property. However, as Luca and Michael said... Those people are not investing in Nashville. The population is exploding and everyone wants a house. It's an appreciation play and if you look on Facebook and the MLS, you can see nicely rehabbed 2 beds renting for $2500 a month close to desirable locations in Nashville. IMO if you can still find houses within 10 mins of downtown cheaper than the price to build, you will be in a really good spot if you have the discipline to hold onto it.

Allie Robertson · Answer

Hey Wayne! I bought a duplex 30 minutes outside of Nashville in Cheatham county last September and am living in one side, it needed some work and had been sitting on the MLS for a little while, so the FHA loan did the trick. It’s not cash flowing at the moment since I’m living in one side, but the tenants cover about 85% of the mortgage while I rehab my unit. So it is possible just have to adjust expectations a little or shift strategy. Good luck!!

Wayne Woodson · Answer

The problems I keep running into with duplexes are the seller wants cash only, it is $300k+ or won't pass FHA.

Michael Sargent · Answer

I agree with @Luka Milicevic. Regardless, house hacking is typically a great financial decision. You might just need to adjust your expectations for return. There's a lot of long term residual value in Nashville property so if the tenant only covers a portion of your mortgage, you'll likely still be making a great investment decision.

Anthony Phillips · Answer

Hey Wayne there were a   few duplexs hit the market in Lebanon Tennessee not to long ago all price right around that 300k price point. Let me know if you need any help looking outside Nashville

Jaron Walling · Answer

Given it's Nashville and the real estate market we're all in right now actual cash-flow will be hard to find. DON'T GIVE UP the search though. If you can find a property that meets other criteria make an offer. It may not cash-flow today but it could in the future.

Nashville is hot! The city is growing and investors know it. Look at the multi-family development getting built. Think long term and beyond this sellers market. Buy/hold hold into the next cycle. That's all you can do as buyer right now.

Is House Hacking Even Still Possible In Nashville?

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