Nashville Lifestyle Investor

[Randy Davis]

My wife and I are very established in our careers with an eye on retirement in the next 5-7 years. We don't have the time to do any serious real estate investing, but did purchase a home in Franklin outside of Nashville in Sept '22. The timing was pretty good as this turned out to be a downward blip in the market but we locked at 5.25% before rates went crazy. Recent comps shows that $850K property is now worth roughly $950K. 

We're interested in mid to long-term investing and not making a quick buck so equity growth is our focus as long as we can cash flow it adequately. So far, so good - as we've kept this property pretty fully leased out since acquiring. 

We're looking at other options in the Nashville area, but are now focused on something with short-term rental potential so we can stay there on our multiple trips to Nash every year. Unfortunately, the airbnb market that was so strong 3-4 years ago has really softened, partly do to macro trends and partially due to increasing restrictions in the area. Supply has also swelled quite a bit over the last couple of years. So we did come across a condohotel option that's new. I know, I know. It's not a great investment, so many restrictions, costly management fees, etc. However, there are a few unique things about this property. 

Same old, same old
Yes, you are required to use their management co. 
Operating costs are expensive - but they handle everything
Also, locked into their FF&E package (so they create a standard rental experience)
30% down payment
65/35 revenue split on top of operating costs
HOA is about $8K per year

What's a little different
New property - to open in a couple of years
"Discounted" price before ground breaking
A new-ish model in the Nashville area
Upper-upscale/luxury residences with traditional hotel attached to this property
In a location that can help merge Nashville's growing business center with it's historically strong tourism center. Will likely pull well from both visiting populations.
A ton of amenities - everything a high-end hotel would offer, includes a lot of business space which could pull in potential renters during week, while tourist crowd would dominate weekends
Great location in midtown Nashville
A developer with a great reputation
Not part of a hotel chain (which could be a negative when it comes to bookings)
No restrictions on owner usage
Developer will retain high ownership percentage to allow him to have significant HOA control to avoid it from getting out of control

It's an interesting model in an interesting market. I know this isn't a popular investment model, as there are clearly some downsides - high costs, financing, etc. My goal is to cash-flow it in the short-term and build equity. I feel like while this is a challenge in seasonal tourist area, it might be a stronger model in the Nashville market, especially without a lot of competition in this space. 

I have some pro-forma numbers that I feel I've vetted to death. Since its a new property without similar properties nearby, the ADR and Occ % are an educated guess that I've drawn on some diligence from nearby hotel properties. 

Their projections: $675 nt/ADR with 70% occupancy. $22K net profit annually. 
My projections: $600 nt/ADR with 65% occupancy. $8K net profit annually.

High end hotels in the area with 1-br suites average in the $700-$750/nt range (or more). Overall occupancy in the county was roughly 65% last year, 74% downtown. As this is downtown adjacent, it's likely closer to that number. However, those numbers are a mix of room types and price points. My assumption is at this price point ($600 for 750 sq ft 1 br condo with kitchen and balcony vs $400 for std 350 sq ft hotel room) occupancy % would be somewhat less. I couldn't get full recon on this, so it's perhaps the weakest part of my estimates. 

Again, we're lifestyle investors looking for an opportunity that fits into our lifestyle which includes very little active involvement on our part. Also, willing to play the longer term game as long as we're roughly cash flow neutral in the near term. 

[Andreas Mueller]

Dont know what you need here but looks like a fun/lucrative endeavor. 

Is there a question you may have?

And STRs are still fantastic here in Nashville on the high end. You just can't be average. Its a professional business, you need to come correct. But those that do kill it. We had 16.8 million (yes million) on a population of 700k in 2024. 

Happy to chat anytime, DM me. I always love talking real estate.