Nashville 4-plex

[Josh Rich]

Found a property in Nashville, actually Old Hickory, with good numbers thought I'd run it by my BP friends before I pull the trigger (this is my first buy and hold cash flow property). What do you think?

Appraised Value- $135k
Purchase price- $95k
Rehab- $10k
4, 1bed/1bath units- $500/mo each ($2k/mo rent)
NOI- $16,500/yr before financing
Cap rate- 16%

Wondering if I should pay all cash, season for 6 mo's, risk rates increasing over that timeframe, pay an extra .5% to do a cash out refi to pull out all of my equity (capital)...or, buy with financing now and tie up my $35k as equity left in the deal? What would you do?

Thanks,
Josh

[Wayne Woodson]

Sounds like a good deal if the rehab is actually 10K. Old Hickory is a decent little area. Anytime I can do financing I do it.

[Richard Horton]

On the financing I expect rates to go up so lock in a rate sooner then later should be best way to go. Real estate is hot in certain areas in Nashville, but I am not familiar with Old Hickory in any detail. Old Hickory overall is a good area. I agree that 10k for rehab seems low, all it mush need is paint and some carpet.

[John Chapman]

I think you need put some more information out there. Who pays utilities? Not sure if 50% rule would apply to this one or not, but it would put you at a much lower cap rate. What's parking like? Also, I gotta say I'm super skeptical on the $10K rehab number particularly if you're rehabbing from afar. If the units are 500 square feet, you're talking only $5/ft rehab. Finally, I don't know what the market is like in TN, but 1/1's are generally notorious for high turnover.

[Josh Rich]

Thanks for the replies!

@John good point on the 1/1 having high turnover, didn't really think of it. You're probably right about rehab, but my understanding is this is 100% occupied so not sure how rehab would factor in, I guess as the tenants turnover then I'd rehab each unit separately while vacant. Can you tell I'm new at this? Haha

@ Richard you're probably right about rates, I expect them to go up also. It's more a matter of if I want to tie up less capital at a higher rate, or keep more equity in the deal at a better rate. Thoughts?

Also, this is Section 8 approved. How does that impact the deal? Better or worse?

Tenants pay utilities, and I would need 25% down.

Thanks again!

[Jimmy Moncrief]

Josh Rich looks like a good deal. I love that area.

However, all of my friends who have had 1 bedroom units tell me NEVER buy them. Just a FYI

[Josh Rich]

@ Jimmy Moncrief thanks for the advice. The 1/1 properties probably pose more issues. Which for an out of stater newbie like myself, I would be wise to avoid. Subsequently, this deal fell through as it is vacant and needs extensive rehab.

[Paul Timmins]

Josh

Expenses should be 35% gross, higher expenses could mean capital items under R&P.

Could be a value play if you can lower expenses.

Lousy unit mix should be 2 2 bds for every 1 bed.

What is the historical occupancy and turnover rates.

Paul

[Jared DeValk]

Originally posted by John Chapman:

I think you need put some more information out there. Who pays utilities? Not sure if 50% rule would apply to this one or not, but it would put you at a much lower cap rate. What's parking like? Also, I gotta say I'm super skeptical on the $10K rehab number particularly if you're rehabbing from afar. If the units are 500 square feet, you're talking only $5/ft rehab. Finally, I don't know what the market is like in TN, but 1/1's are generally notorious for high turnover.

As an agent that knows the area, 1/1's do we'll in the Old Hickory area, especially in that price range. Despite possible high turnover, it's easy to fill vacancies.

Josh, I'm new to the investing side, but I have experience as an agent. If I can provide any assistance to you on this transaction or any other transactions in the Nashville Area, let me know. This is a tough business and I'd like to be able to learn with someone.

Thank you