Green Hills Town Home Lease Option

[Jeff Prather]

Hey, I'm coming to you all for some opinions and advice. I was talking to a local REIN networking contact who's opinion I value and received some advice. Here is the background info and advice:

I'm a newbie investor (3 months of reading/surfing bp) with no properties under my belt. I'm renting a town home in Green Hills (half way through my 2nd year of leasing the property. The zillow Value around $300,000. The owner lives out of state. She has owned it for 10 years and has a mortgage. I pay $1,700 per month. Market rent is $1,800 - $1,850 and climbing (based on nearby rentals and based on rentometer.com). 

The advice I received was to approach the out of state owner to try to lease option the property even though it wont cashflow. My friends argument is based onthe fact that its a very desirable property - good location in green hills - its a nice property in good condition. I pay $1,700 and the PITI + HOA will be around that same amount so, again, it wont cashflow (my goal as an investor is to cashflow $200 per door per month and build passive income). I understand buying based on appreciation is speculative and doesn't get a lot of love on BP, however that's why I'm asking you Nashville investors specifically. We've had a ton of appreciation already. But net population inflow is still high. The unit has increased in "Zestimate" from 2015 to now form about $285k to $300k. In summary, does the advice make sense or am I right to question it?

p.s. I would also appreciate any advice on how to consider repairs and CapEx. There is an HOA so roofs and exterior are covered there and as far as interior, in my 1.5 years its been nothing notable. It was constructed in the 80's and seems in very good shape.

Lastly, I really love living here. Its a perfect location for my commute and social life. My alternative plans are house hacking a duplex - through my analysis, it appears I'd have a lot easier time doing this in suburbs that are further out - spring hill for example. Additionally, I could just continue to rent and then invest in properties that don't live in. 

[Sean Davidson]

We have specific language in our leases protecting us from people trying to make money subletting or short terming it. I personally frown upon the practice, especially as an investment strategy. As for betting on green hills appreciation, I wouldn't count on getting rich off it at this point. We have seen our fastest growth, so my guess is growth will begin to moderate. I also wouldn't tie up a ton of capital in a single expensive townhome that you can't get a crazy good deal on. Look for cheaper properties to cut your teeth on that have better margins. No shame in continuing to rent in the meantime where you want to live. Househacking isn't the only way to get started.