STR investment in Knoxville - thoughts?
Hi all -
First of all, as the forum would imply, I'm an REI newbie. Currently live in Denver, CO in a SFH my wife and I bought last year. We're looking to begin investing in Knoxville--where her family is--and I think I'd like to start with a STR so we can possibly generate a little cash flow, or at least cover costs and have our own place in Knox to visit family. We're thinking about a condo / townhome in west Knox around $200-250k. I recognize that we'd likely need property management since we're not local.
My questions - For those familiar with the market / STRs, is this a reasonable strategy? I understand that a permit is required to operate a STR in city of Knoxville, how tough is that process and would that apply to larger Knox county? Any other ideas / insights would be greatly appreciated!
Thanks! Go Vols!
Hey @Tanner Sandoval!
I'm not involved in the Knoxville market but best of luck! If there is any advice I can give it is that you really do some due diligence before taking that next step. Make sure to call your city's office building to verify if there is any hotel tax and to figure out what the overall process is when starting/operating your STR legally. Here's the link to their website if it helps! : https://www.knoxvilletn.gov/
Also, when working with a PM company I would make sure to find someone that is a one-stop shop for all of your STR needs. When working with very large management companies remember they will still make you do a large amount of work with your house keepers and property managers.
I hope this helps and If you have any questions feel free to let me know!
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Josh
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Real Estate Agent Pennsylvania (#RS364365 )
- 484-986-5012
- [email protected]
Thanks, Joshua! Appreciate that advice!
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#2 Managing Your Property Contributor
- Property Manager
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@Tanner Sandoval start calling some PMC's and pick their brains! They'll know the market.
Even if someone give you a referral, what meets their expectations, may not meet yours.
In our experience, the #1 mistake owners make when selecting a Property Management Company (PMC) is ASSUMING instead of CONFIRMING.
It's often a case of not doing enough research, as they don't know what they don't know!
Owners mistakenly ASSUME all PMCs offer the exact SAME SERVICES and PERFORM those services EXACTLY THE SAME WAY, so price is the only differentiator.
So, the first question they usually ask a PMC is about fees - instead of asking about services and HOW those services are executed.
EXAMPLE: PMC states they will handle tenant screening – what does that specifically mean? What documents do they require, what credit scores do they allow, how do they verify previous rental history, etc.? You’d be shocked by how little actual screening many PMC’s do!
This also leads owners to ASSUME simpler is better when it comes to management contracts.
The reality is the opposite - if it's not in writing then the PMC doesn't have to provide the service or can charge extra for it!
We have a 14-page management contract that we've added our real experiences to over the years, with the intent of protecting both us AND the landlord. Beyond the Monthly Management, Placement & Maintenance fees, all other fees in our contract are IF EVENT -> THEN fees.
We don’t know any PMCs to recommend in the area mentioned, but since selecting the wrong PMC is usually more harmful than selecting a bad tenant, you might want to read our series about “How to Screen a PMC Better than a Tenant”:
We recommend you get management contracts from several PMCs and compare the services they cover and, more importantly, what they each DO NOT cover.
EDUCATE YOURSELF - yes, it will take time, but will lead to a selection that better meets your expectations & avoids potentially costly surprises!
P.S. If you just hire the cheapest or first PMC you speak with and it turns into a bad experience, please don’t assume ALL PMC’s are bad and start trashing PMC’s in general. Take ownership of your mistake and learn to do the proper due diligence recommended above😊
Hey Tanner, I'm moving down to Knoxville later this winter with my Fiance. You absolutely could do a STR long distance and the permit process wouldn't be tough as long you go through a PMC. I love the idea of having a STR so that way you can occupy when you come and visit family. I've had the same thought with the Philadelphia area and my family. Send me a PM. I'd love to help your hunt.
Hey Tanner - I commend your desire to get your feet wet in the world of real estate investing. SFH is a great way to start. I started with SFH as well, and now primarily focus on larger apartment deals. If you are looking to maximize cash flow or capital growth, I am happy to connect as I offer complementary training to new investors
@Tanner Sandoval I'm a local agent in the Knoxville area but sell primarily in the Smoky Mtns. A good friend of mine runs an STR property management company in Knoxville and has shared with me the particulars of STR regulations. Send me a DM, and would be happy to explain over the phone- too much to type!
@Tanner Sandoval Why not buy a STR in Denver instead? Demand is higher hands down over Knoxville and you could self manage, save money, and LEARN more. Real estate would be more expensive but assuming constant mountain/city tourism I could see a greater ROI.
Quote from @Jaron Walling:Hey Jaron! He’s interested in having an STR in Knoxville to use for him and his partner when they come and visit family. His partner’s family lives in the Knoxville area. Totally agree that Denver would be a hotter spot though.
@Tanner Sandoval Why not buy a STR in Denver instead? Demand is higher hands down over Knoxville and you could self manage, save money, and LEARN more. Real estate would be more expensive but assuming constant mountain/city tourism I could see a greater ROI.
Quote from @Jaron Walling:
@Tanner Sandoval Why not buy a STR in Denver instead? Demand is higher hands down over Knoxville and you could self manage, save money, and LEARN more. Real estate would be more expensive but assuming constant mountain/city tourism I could see a greater ROI.
Denver is not actually a home run market for STR's anymore. They banned the purchase and operation of non-owner occupied short term rentals, and the market is extremely saturated when it comes to separated basement units/bedrooms for rent.
Hello, I am in my first 2 years of real estate investing in knoxville. I have a sfh that I rent out right now by the room. I've been watching the market like a hawk for the last 2 years and have a good grasp on the market currently. The demand in west knoxville is great and the appreciation is not going to stop. However if I was in your shoes I would get a sfh instead. The demand for condos is much lower than those of sfh. If you were to try to sell in the future it might be difficult and also appreciation will not go up as much. You could get sfh that will appreciate much fast in value and have more added potential in the future. Right now people can't find a sfh to rent in the knoxville area. One other pro tip for knox county is that if you purchase a sfh you can always add an adu under county code and use that for your str. Just a little info, I hope this finds you and helps in some way.
Hey @Tanner Sandoval - I'm an investor and realtor, and not involved in the Knoxville market, but had some general thoughts to share.
Have you considered not doing a STR and just placing tenants in there for the long term? Based on what you've described and your distance from Knoxville, a long term option might be better since most of your work is going to be upfront in order to source and place the right tenant.
Once tenants are in place, there isn't much you need to do except be responsive if anything happens. Since your wife is already from Knoxville, likely you'll have an easier time finding a network of handymen, contractors, etc. to rely on if you ever need to make repairs to the house.
Just my $0.02. I'm a long distance landlord, and can't fathom paying someone 10-15% of my money every month to manage my property if I can do it myself.
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Broker New York (#10401359681)
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- http://www.ClosedByMo.com
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If you're doing STRs in Knoxville, watch it like a hawk. Watch the town council meetings, setup email alerts for "overnight rentals Knoxville" or whatever you can think up to keep watch on the headlines. One city council vote can change your entire investment model from STR to LTR, which happened in Nashville several years ago. Not trying to scare anyone in any way, just do your due diligence.
LTR market in Knoxville is beyond crazy and it sits next to one of the best STR markets in the US (aka Smoky Mountains).
@Brett Deas Well that throws a wrench in my plans!! Geez Denver. No fun.
Tanner-Welcome to Knoxville :) We do have great LTR opportunities here in the city, and many many STR in the surrounding area/Smoky Mountains. Please be aware that a rental within the City Limits is incredibly tough/near impossible to get a permit for short term/airbnb and the like because of restrictions. You need to make sure you are looking just a tad further within the County and the surrounding areas. Let me know if you have any questions-I'm local and always viewing properties so I know the area well.