East Nashville Duplex

[Luke G.]

Looking at an east Nashville duplex. Put in a few bids, but the seller says 340k is the lowest they will go.

Both units have two bedrooms and one bath for a total of 4 bedrooms two baths. It's in decent shape, but not a rehab. Near Shelby Bottoms and Downtown. Rentometer says 1166 for 2 bdrms in the area, not sure how much I should lean on that number. I'll be doing an FHA loan (3.5 down).

The property will negatively cash flow at that 340k (with the FHA loan), BUT...I am going to owner occupy. And, they provided good documentation on the short term leasing they have been doing. Year round average ~1600/month a side. And I would probably short term rent the place. I want to move out in 5-6 years once I have children. At that time, I would like to rent instead of short term rentals. Wondering if by that time rents would increase enough to make it positive cash flow. Is this too speculative?

Again living at the location, so please factor in that Nashville has a strong sellers market and I do not want to live in a bad area or really far from town.

Thoughts?

[Leo K.]

@Luke G.

Hey Luke, $340k for a duplex is ridiculous in my opinion. Although you're going to owner occupy, I suggest basing your valuation under the assumption that you're not - you want the duplex to be self sufficient. At $340k, it's not going to work and I wouldn't speculate about escalating rents or appreciation - not guaranteed, period...

Nashville is very hot right now and the only way someone will make money on this duplex is if they tear it down and rebuild to flip.

To give you another comparison, I just put in an offer for a 10 unit in Dickson for $300k - only 45 min's from Nashville. For $340k you can get at least 6 units in Nashville if you're patient and put in some sweat equity.