Is Chattanooga a Good Market??

Question

Hello!

This is my first post and I’m a newbie lol

My main question is about Chattanooga in general when it comes to whether or not it’s a good or not so good market to invest in. (Residential or Multi Family Commercial).

I live 30 mins south of Nashville and our property values have shot up over the last 5-7 years or so and finding a duplex in my city is gonna run at least $250,000 and I notice property values are much much lower in Chattanooga which will give better cash flow and higher ROIs (even though the rents are cheaper). For example, I’m looking at a duplex with two 3 bed 1 bath units and it’s listed for $115,000 and its current GMI is $1,000. So even with 20% down of full asking price, if I cash flowed $400 a month it’s a 20% ROI...not shabby.

I am mostly curious about the market growth because appreciation is where bigger leaps are made when generating wealth, and if these cash flowing properties aren’t appreciating much I’d rather find another market. I have noticed new and hip restaurants popping up which to me is a good sign, and properties are generally getting under contract in about a week after being listed. Also a good sign.

Anyone have any insight into this market?

Thanks!!

Jessica Lombardo · Answer

@Kelly Rastatter do you know any good wholesalers here in Chattanooga?

Kelly Rastatter · Answer

@Chase Prater There are very very few deals that sit on the MLS in Chattanooga. Most are gone before they hit the MLS. Typically, not always but typically, you are only seeing the ones that no one wants either because the price is too high for the condition or the area is rough. Chattanooga has attracted investors from Cali, NY, Hedge Funds, as well as having a healthy amount of us locals who are watching the MLS and buying off-market too.

I'm 99.9% sure I know which duplex you are looking at on the MLS and I can tell you that the area brings low-quality tenants. For that, I don't play in that playground but to each his own. I will say, for those who do play there, they are looking for much much better than 1% rule to cover the additional headaches that come with the high crime, poor tenant quality areas. The numbers you posted give you lower than 1%. I'd keep looking.

Get on the lists for the wholesalers and start working with a good property management company to help you vet the areas. They are going to be the ones handling most of that tenant headache. You don't want to buy and then figure out that you can't find a PM who will work that area for normal rates.

Jessica Lombardo · Answer

Chattanooga is growing like crazy right now. I work as a home inspector right now so I see people struggling to find something to buy. There are a lot of people moving to the area from other cities because it is more affordable and with
people being able to work from home they can afford more here than where they are from.

I chose Chattanooga in part because it hadn't grown a ton over the last few years (this was when I looked into it about a year ago, prices have risen a lot in that time). My thought is that the best time to catch a wave is when it is as its gaining momentum and I think that is where Chattanooga is right now. It's not a major market for investors like Memphis or Atlanta but it has the income growth, job growth, and the right business climate for it to continue to grow.

I would be curious where that duplex that you are talking about is and what the condition is though because that still seems low for Chattanooga and some that I have inspected with higher asking prices than that needed a LOT of work. But overall I think its a great market to look into and great deals do come along just gotta be ready and have a little bit of luck.

Luka Milicevic · Answer

@Chase Prater

I looked into the Chatt market a few years ago. For cash flow, yes it's much better than Nash. I will say that all the folks in Nashville have moved their money into chatt in the last 3 years that it's definitely driven prices up some.

Still, better cash flow than you will find here that's for sure.

Alison Spatz · Answer

Any updates? @Chase Prater, did you end up investing in Chattanooga? Curious forum reader here!

Rik Hunter · Answer

I agree with @Jessica Lombardo. $115,000 would have been a good price in an okay area 5-6 years ago, so it might need a load of work and/or be in a less-desirable area.

Chase Prater · Answer

@Lynnette E.

I definitely agree. I’m working with a local real estate investor who also owns rentals so he has a similar mindset to investors. He did say this was in a somewhat tougher area but I plan on going to look at it just to get a better idea.

In my opinion, if it’s a rough area but down the road there has been a recent flip by another investor then that’s a good sign the neighborhood may be turning around over the next few years.

Chase Prater · Answer

@Jessica Lombardo

Thank you very much for all the info! All of that is definitely encouraging to hear!

Lynnette E. · Answer

You will need to work with someone who knows the areas as some are much better/safer than other.  It may be that your duplex is at the price it is because the neighborhood is not that good.

Is Chattanooga a Good Market??

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