Tips for a Newbie Investor?

Question

Hello!

My wife and I just moved to the Knoxville, TN area this year and are looking to start our investing journey here in our own backyard before venturing out to other markets - looking to buy our first investment house this year (single family residence or small multi-family). We came across BiggerPockets a few weeks ago after reading a couple of real estate investment books and are excited to learn!

What tips do you all have for someone just starting out in a brand-new area they aren't familiar with yet (new market, new climate, new job, new neighborhood & culture)? The first steps for this journey seem to be the hardest (getting the flywheel going) but we're starting to get a feel for the potential freedom ahead for our family and are excited about the possibilities!

Cory King · Answer

Hey @Colton Porter first off welcome to the wild world of real estate investing! First thing I'd say really get clear on your buy box. I see the single family and multi family, but really get clear on where. Which zip code or general area do you want to buy in. Everyone wants a good deal, but how do you know what a good deal looks like if you don't know what you're looking at. If you know the area info cold you can move quickly. For Knoxville as example, I like 37921 and 37912 zip codes the most and it's where most of my portfolio lives. Why? Bc it's a good mix of old stuff near downtown that I get my fix for classic homes for and rent to students at UT and then as you go out into the burbs it's old middle class stuff. 1970s-1990s era homes. Not too old and growing areas I won't mind holding for the next few decades. My most recent pick up I bought on the MLS day 1 for 20% off the listing price because I knew what I had and could move before anyone else could. Should be a $60k flip or we can always BRRRR. From there check out some local meetups and start making connections. Work on forming a "dream team" so to speak, happy to make some connections in this area. No one succeeds alone.

Ryan Spath · Answer

Hey, welcome to BiggerPockets and congrats on the move to Knoxville!

If you’re just getting started, one of the best entry points I’d recommend is a house hack using an FHA loan. It’s hands-down one of the most effective ways to get the flywheel moving early on. With FHA, you can:

Put as little as 3.5% down, keeping more capital for reserves or future deals
Live in one unit and rent out the others (if you buy a duplex, triplex, or fourplex)
Use rental income to help qualify for a larger loan amount
Start building equity, gain landlord experience, and position yourself to refinance or 1031 into your next property down the road

It’s a great way to reduce your living expenses (or even live for free), learn property management firsthand, and start stacking assets early. As an agent investor here is the Treasure Valley I have been able to help Clients first hand with this and it is amazing.

If you haven’t already, start by connecting with a local agent or lender who understands investing they can help identify FHA approved multifamily properties and estimate what the rents would look like in your area. Local meet-ups and Facebook groups are a good place to network as well.

Welcome again you’re absolutely right that the first deal is the hardest, but once you get that first one, the momentum really starts to build.

Drew Sygit · Answer

@Colton Porter too many newbies read old investing articles and look to apply old info to current days. Here's some copy & paste info to bring you up to speed:)

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The Real Estate Crash of 2008-2010 caused real estate prices to crash across the country - but didn't affect rent amounts. This caused a historically unique opportunity for investors - they could buy Class A properties and immediately cashflow when renting them out.

This couldn't last forever, and it didn't, as excited new investors drove up prices.

Eventually, Class A property values increased to the point that even increasing rents didn't allow them to cashflow upon purchase.

So, the flood of new investors switched to buying Class B properties.

COVID created a chaotic spike in both the sale & rental markets, attracting even more new real estate investors. According to CoreLogic, in December of 2023, almost 30% of home sales were to investors!

Investment also spiked in Class A Short-Term Rentals (STR) and investors started paying higher and higher prices based upon anticipated STR rental rates, that exceeded sustainability based upon Long-Term Rental rates (LTR).

Now we're seeing investors pouring money into buying Class C rentals - but, many are getting burned.

In our experience & opinion, the main determinant of property Class is not location or even property condition, those are #2 and #3. The #1 determinant is the Tenant Pool.

If you don't believe us, try putting several Class D tenants in Class A apartment buildings and watch what happens. Or try the reverse - rehab a property in a Class D area to Class A standards and try to get a Class A or B tenant to rent it.

Unfortunately, many newbie real estate investors are jumping into buying affordable Class C rentals - expecting Class A results.

In our opinion, Class C tenants have FICO scores from 560 to 620 - where their chance of default/nonpayment is 15-22%. See the chart from Fair Isaac Company (FICO) below:

FICO Score

Pct of Population

Default Probability

800 or more

13.00%

1.00%

750-799

27.00%

1.00%

700-749

18.00%

4.40%

650-699

15.00%

8.90%

600-649

12.00%

15.80%

550-599

8.00%

22.50%

500-549

5.00%

28.40%

Less than 499

2.00%

41.00%

Source: Fair Isaac Company

According to this chart, investors should use corresponding vacancy + tenant-nonperformance factors of approximately 5% for Class A rentals, 10% for Class B and 20% for Class C.

To address Class C payment challenges, many industry "experts" are now selling programs to newbie investors about how Section 8 tenants are the cure. If only it was that easy. Yes, the government pays the Section 8 rent timely, but more and more tenants are having to pay a portion of their rent. Then there are the challenges with Section 8 tenants paying utilities and taking care of their rental property.

Investors should fully understand that Section 8 is not a cure-all for Class C & D tenant challenges, it's just trading one set of problems for another.

We see too many investors not doing enough research to fully understand all this and making naïve investing decisions.

Once you understand the above, you still need to find a property. You’ll have to do what investors did before the Great Real Estate Crash:

• Evaluating 100 properties, to identify 10 to make offers on, in the hopes one seller accepts. - Yes, this takes a lot of work!
• Network with wholesalers who can bring you “deals” - Many wholesalers are also newbies who have no clue what a real deal is and are just time-wasters. NOTE: We often see wholesalers re-marketing MLS properties at HIGHER amounts!
• Start using your own personal network to find motivated sellers. - Start posting on your favorite social media site what you are looking for – not once or twice, but CONSISTENTLY for 6 months! Give updates on properties you’ve looked at or analyzed to keep your audience engaged, so when they stumble upon a potential situation, you are the first one they think of.

Good luck!

Basit Siddiqi · Answer

Figure out your 'Buy Box' or 'CCC(Crystal Clear Criteria)'.

What is your price point?
What type of renovation are you comfortable doing?
What class of property / tenant do you want to deal with?

Once you have this information, you can reach out to an agent to view properties.

Best of luck!

Drago Stanimirovic · Answer

Welcome, Colton, sounds like you're starting smart. Knoxville offers solid fundamentals with strong rental demand and manageable price points.

To get rolling, become a student of your local market. Drive neighborhoods, study comps, and talk to local pros. Keep your buy box focused so you can quickly filter deals and avoid overwhelm. The more deals you analyze, the faster the flywheel turns.

Plenty of potential ahead, reach out anytime if you want a second look at numbers or a plan check.

Ashish Acharya · Answer

@Colton Porter

As you begin investing, focus on setting up your tax foundation early.

Track all startup expenses such as travel, education, and research costs since many can become deductible once you actively invest.

Choose an entity structure like an LLC or S Corporation to separate income, protect assets, and open the door to additional deductions.

When you buy your first property, leverage depreciation to reduce taxable income and claim repairs, maintenance, and mortgage interest as write-offs. Over time, consider strategies like cost segregation and 1031 exchanges to defer or minimize taxes while you grow your portfolio.

This post does not create a CPA-client relationship. The information contained in this post is not to be relied upon. Readers are advised to seek professional advice.

Aaron Zimmerman · Answer

A couple tips:

1. Attend local meetups and network with other investors. At a minimum, try to find a couple lenders and realtors to interview.

2. For understanding the area, my favorite is biking around various neighborhoods. It can really give you a feel. You can also drive or walk.

3. Go on Zillow or redfin and start analyzing deals. Rentometer is good for rent prices as a starting point.

Joshua Hardin · Answer

Hey Colton — welcome to Tennessee and to the BiggerPockets family. 👋

You’re in a great place to start — Knoxville’s got strong community roots and plenty of creative opportunity if you lead with service instead of speed. My wife and I began the same way: new city, new mission, same dream of freedom.

A few quick thoughts from the field:1️⃣ Start by serving your market, not chasing it. Meet local agents, contractors, and neighbors — ask what they need, not just what’s for sale. Relationships build deal flow.2️⃣ Walk streets before spreadsheets. Drive neighborhoods, grab coffee with investors, and listen more than you talk early on.3️⃣ Keep family at the center. Real estate can buy freedom, but it shouldn’t cost connection.

You’re already doing the right thing — learning, connecting, and grounding yourself in purpose. Keep that heart posture and the right deals will follow.

Welcome to the mission, brother. Knoxville’s lucky to have you. 💪

— Joshua I "Sarge" I Renewed Legacy Group

Arman Ahmed · Answer

@Colton Porter

Welcome Colton! Starting in a new market can definitely feel overwhelming, but the key is getting familiar with neighborhoods that offer strong cash flow and long-term appreciation potential. Focus on building relationships with local investors, realtors, and property managers who understand the market and can help you spot good deals early. Research recent sales and rental comps, look for properties that need minimal work for quicker cash flow, and don’t be afraid to start small while learning the ropes. Over time, as you build confidence and knowledge, you can scale into larger deals or explore other markets for more opportunities.

Tips for a Newbie Investor?

Tips for a Newbie Investor?

Most Popular Reply

9 Replies

FICO Score	Pct of Population	Default Probability
800 or more	13.00%	1.00%
750-799	27.00%	1.00%
700-749	18.00%	4.40%
650-699	15.00%	8.90%
600-649	12.00%	15.80%
550-599	8.00%	22.50%
500-549	5.00%	28.40%
Less than 499	2.00%	41.00%