Recent visit to Chattanooga and not sure what to think.

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Recent visit to Chattanooga and not sure what to think.

Matthew Swearingen
CA · Member since 2018 · 124 posts · 33 votes

Last week I went to Chattanooga and mainly looked in the 37404 zip codes. Im from Sac CA. I could not believe seeing a home that looked like it was falling apart, couch in front hard and then a house literally next door that was probably like this dump rehabbed and selling for over 200k. And then on the same street 3 more homes being rehashed next to a dump, etcetera. Some were sold, rehashed and turned into Airbnb. 

When I did real estate in Sacramento, it was entire neighborhoods that were constant as far as condition. I was ready to buy a couple of them. Agent gave me comparable and all the data. It seemed many opportunities to buy, fix and flip. For example tere was home on the exact street i mentioned next door to 2 nice Airbnb, and home next door that wasceehabbed and lusted for $225k. This home was in,bad shspe and asking 49k. It was a triple 3/3 each with own electric meter. Front unit rented, and 2 other units not habitable 2400 as ft.  Agent says if I got it for even asking price of 49k I should just do a complete renovation. Put 80 to 100k. So know I'm in for say 150k. Based on square footage and 2 cute homes on either side I could sell conservative for 250k. Based on those number with 20% down I'm,walking away with a nice profit. Am missing something?

I have never seen people rehabbing or putting in New construction next to a distressed home. Typically you avoid cuz it brings down the value of the nicer home. I left Chattanooga more confused. Yet it appears investors are fix flip, Airbnbing these rehab, ect. 

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Luke CarlPro Member
Rental Property Investor · Tennessee Florida · Member since 2016 · 4k+ posts · 5k+ votes
7y

sometimes I wish there was a law against people that live in CA investing in other states. 

Podcast Guest on Show From Surviving on $30/Day to 30+ Properties Thanks to Blue-Collar Skills
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  • Matthew Swearingen
    OP
    CA · Member since 2018 · 124 posts · 33 votes
    7y

    Sorry for typos. This is what happens when you text on your phone at work....lol

    0Reply
  • Luke CarlPro Member
    Rental Property Investor · Tennessee Florida · Member since 2016 · 4k+ posts · 5k+ votes
    7y

    sometimes I wish there was a law against people that live in CA investing in other states. 

    Podcast Guest on Show From Surviving on $30/Day to 30+ Properties Thanks to Blue-Collar Skills
    10Reply
  • Benjamin Bleasdale
    Contractor · Spencer, TN · Member since 2018 · 56 posts · 30 votes
    7y

    Chattanooga is definitely a crazy town as it can be one block is nice. One block not. I don’t know exactly which part of 37404 you’re looking at buying but I personally wouldn’t buy a 250k house in that part of town. 

    1Reply
  • Damaso Bautista
    Rental Property Investor · Hawthorne, CA · Member since 2018 · 655 posts · 900 votes
    7y

    @Matthew Swearingen

    I was just there last weekend.  I spent all day Saturday and Sunday looking at houses.  I was mainly looking for a primary residence because this is one of the cities I have been looking at moving to.  

    I am very hands on and need to have eyes on for me to really feel comfortable.  I hate to trust someone with managing a property when I am 2000 mile away.

    That being said if was was to move there, I would be investing in Eastlake.  This area to me looked good for the investor ok with a lower income area.  I drove every street on either side of Dodds from 48th to 37th and every street on either side of Rossville from in the same area.  

    The area reminded me of Inglewood  or Compton back in the day when the latinos were starting to move in and take over streets.  I saw many latino kids playing in the front yard.   Several groups of latino men hanging out in their front yards enjoying Sunday beer drinking.  They all looked like regular working people. I saw many black families having a birthday parties for their kids on the front lawn. There were also white families scattered in the mix.

     I also did see a few rough streets with some guys street hustling their spot with their pitbulls. 

     All in all this looked like the place I would buy rentals in.  Target rich with renters.   It reminded me of the environment I grew up in Inglewood (90302) in the 80's.   

    I also saw some other areas in higher priced areas that might make sense because many of the homes have mother in law quarters which can be rented out.  

    Just a few thoughts. Overall I loved Chattanooga and remains my first choice as of now over Atlanta, Greenville, SC, Knoxville and Nashville.  My wife might have a different order but that a fight for another day.

    1Reply
  • Curt Smith
    Rental Property Investor · Clarkston, GA · Member since 2012 · 2k+ posts · 1k+ votes
    7y

    You guys are missing the biggest plus of Chattanooga, besides it being a great place for tourists, a place I love to vist.   IE the Musium district next to the river, the walking bridge and parks on each end, the nice walking/biking.

    The real reason to buy in any of the hot TN cities; Knoxville, Chatt, Nashville is jobs jobs jobs, growing good jobs!! Rentals or all REI runs on the backs of jobs. No jobs no rent being paid. Just jobs by the rent rate for a modest 3/2 rental. Look? $1300-$1500 on up. This is rather high for a blue collar town. Its due to demand. I buy at the middle blue collar end of rentals, the permanent renter class. I avoid white collar!!! They only stay 12 mo and buy, rinse and repeat, I don't run that kind of rental model.

    Read my Bullet Proof paper off my profile.

    Compare Chat's jobs with indeed.com, 2800 jobs:  https://www.indeed.com/jobs?q&l=Chattanooga%2C%20TN&radius=5&vjk=e86d713e9c7d04d9

    Compare to a loosing jobs city of somewhat higher pop:  https://www.indeed.com/jobs?q&l=Columbus%2C%20GA&radius=5&vjk=bff2dfb8d4afb3dd

    only 1700 jobs.

    Compare to your 200k ish city pop jobs?  And your knowledge of that city being a good place to buy rentals.

    As an example of where NOT to buy look at zillow rentals filter on just house, 3/2:  Macon, Miledgeville these are both dead cities and 3/2 houses rent for:  $800 ish (unbelievably!!)  where good growing hotish towns like the 3 hot towns in TN rents are much higher (where they should be):  $1200-$1400 for a 3/2 house.   Atlanta is hot for rentals too.

    The problem in Chatt as the original poster mentioned is old inventory.  Our job is to filter deals for being solid houses with moderate rehab and moderate to low maint cost during ownership.   Personally my oldest house I will buy is 1960+.  I won't buy a house that needs plumbing/elect swap.  I'll walk if fuse box (vs circuit breakers) unless some other big set of plusses. 

    I target lipstick rehabs;  paint+carpet+fixtures = $10k.  Add an HVAC now $15k, add a bit more fix up my max I will buy is $20k.   I'm moving in a tenant in 4 weeks after closing!!!!  Only one rehab that spanned the holidays AND I was working another rehab has taken more then 4 weeks and I show during rehab and move a nice family in, 2 incomes, kids and a dog.  All my rentals have fenced back yards and one of my hooks is that a take dogs.  Almost every one of my rentals has a dog.  :)

    I have bought only one 1963 3/2 brick with a fuse box but all else was great so I swapped the fuse box for a breaker box for $1500, other then this one I have not bought those old run down rickity houses.   Read my Bullet proof paper, and filter what you go look at.

    5Reply
  • Damaso Bautista
    Rental Property Investor · Hawthorne, CA · Member since 2018 · 655 posts · 900 votes
    7y

    @Curt Smith

    Nice Curt! That is great info.  I will definately be in touch.  I will be back in Chattanooga in late August for more house hunting.  This time I am going to spend about 4 days there for more exploring.

    Thanks!

    0Reply
  • Dan BeaulieuPro Member
    Lender · Knoxville, Tennessee (TN) · Member since 2016 · 427 posts · 672 votes
    7y

    Chattanooga is rapidly changing, and a lot of out of state investors are facilitating that. As soon as one brave soul rehabs a house on a street filled with old / rough houses, others will follow! Right now many of these neighborhoods are in transition and will be for a while! It's great opportunity right now to gain some serious equity in these houses. AAAAND they cash flow! 

    1Reply
  • Scott Keith
    Member since 2019 · 1 post · 1 vote
    7y

    You need to understand the South to understand what's going on here.

    Mainly, the neighborhoods in transition have Architectural roots. There's a lot of Craftsman design and old construction that can't be had in the 60's and up houses.  These are 1800's, to  1940's homes.  2-3 story Victorian homes, etc.  These are in neighborhoods where (as I've been told in the 60's) middle class people fled the downtown areas, and built homes elsewhere.  This gave way to lower income owners.  In the last 20 yrs here, these homes have been bought and fixed in popular areas around city tourism development, and people from states with high cost of living came and lived at a discount. Price/sqft is crazy now around the waterfront in new construction.

    So I like to see these old, forgotten homes flipped and taken care of once again.  And there's money in it.

    1Reply
  • Matthew Swearingen
    OP
    CA · Member since 2018 · 124 posts · 33 votes
    7y

    Thank you. Makes a little more sense. I 'll loved the area. 

    0Reply
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