OOS investor interested in Chattanooga market

17 Replies | Chattanooga, Tennessee

Hello Chattanooga investors,

I'm an OOS investor based in Seattle. I've been looking to buy and hold a rental property in the area. I've searched in signal mountain, north Chattanooga, and Hixon areas finding no strong cash flow properties. I recently came cross a few downtown properties near the UTC campus within walking distance to restaurants and city vibes. But, the current rent is kind of low (3bed 3 bath 1700sqft for $1700), which make the cash return minimal. What about the appreciation potentials? Is the downtown area rejuvenating?

Many thanks,

Eric

I am also an oos from Seattle! I have a rental in Nashville and 2 houses under contract in Chattanooga right now. The good cash flowing spots seem to be C markerts right now. If you are willing to do a fixer upper in a c market you can get a solid return. However every once in a while a solid rental with good numbers comes through in a b market, but since it’s a sellers market you have to be quick and willing to pay a bit over asking for those ones. DM me if you want to connect and want help building your team. 

Hi @Eric Huang! I am a Realtor who helps out of town investors in the Chattanoga market.

My first thought about the situation you shared is where are you pulling those rental rates from? If that's what the place has been rented for, be aware that there are a lot of owners here who charge under market rent, and/or who never raise rent, so when they go to sell after having the same tenant in there for years the rent is very low.

If I was to generalize the Chattanoga market, I'd say often in C class neighborhoods you can meet or excited the 1% rule. In the A or B class neighborhoods, that's not happening. 

There are also certain popular neighborhoods where return will be lower because purchase price is higher, like Highland Park or Northshore.

As far as appreciation, 2020 median purchase price showed 13% increase over 2019.

Please reach out if you'd like to discuss further!

If I was to generalize the Chattanoga market, I'd say often in C class neighborhoods you can meet or excited the 1% rule. In the A or B class neighborhoods, that's not happening

Probably can apply to any market that isn't super high-cost. @Eric Huang curious why you're looking at Chattanooga specifically especially if the deals aren't cash flowing for you? I started looking in Chattanooga as an investor in Atlanta that found good deals in my own market fewer and farther between. 

@Joe Delgrosso Do you know Nick Hodge and/or Kevin Ramsey? They are business partners and own SFR, Apartments and storage. They are always looking for other investors to connect with in Knoxville. We all went to college together. Happy to connect you if you're interested.

Hey Eric! Nice to connect. I'm a Realtor here in the Chattanooga market that works with out-of-state investors all the time.

Right now, much like across the country, inventory here is obviously very low, which has pushed prices up for the time being. So while this does make cash-flowing deals a bit more challenging to find, they're still out there.

I will say, generally speaking, a 3/3 at 1700 square feet within walking distance to UTC/downtown should be getting $2,000+ in rent, easily. Obviously each property is different and it's a case-by-case basis, but unless there's a good amount of work needed on the property, there's no way rent should only be $1,700. If you haven't connected with a good property manager in our market yet, let me know - I have an excellent one that I can recommend that is an excellent resource for my clients as it pertains to rental values and rental comps. The UTC/downtown area has been steadily growing for a while now, and it's one of the hottest spots in Chattanooga. The city continues to attract more and more college students and young professionals, which continues to increase demand for housing in the downtown area, helping the short-term and long-term outlook. While Chattanooga has already shown significant appreciation in the last couple of years (19% increase in median sales price since 2018), there's still plenty of room for growth, and the downtown area will continue to benefit as the city pours more money and resources into its rejuvenation. 

The last thing I will say is that owning rental properties around blooming colleges allows you to think outside the box a bit. I had a client land a rental property 2 minutes from UTC - it was a 4 bedroom and the initial rental estimate was $2400. But instead of settling for that, we were able to successfully implement a rent-by-room strategy with 4 UTC teammates on a sports team there. Each of them pay $850/month, which adds up to $3400 gross rent... not saying that's always attainable, but it's a creative way to maximize rent in an area with a large pool of possible tenants. The college scene presents a really unique opportunity with rent-by-the-room that I feel is under-utilized. I've heard of investors doing the same strategy with Cleveland properties near Lee University. Just an idea :)


Anyway, hope this helps! Feel free to reach out anytime, would love to connect further and help however I can!

Originally posted by @T. Daly, Sr :

Hello @Eric 

@Eric Huang and @Keith Rocha or anyone else on this thread.  I have a residential lot in the North Brainerd area of Chattanooga if your interested.  I live right outside of Nashville and really like the Chattanooga area and market.  

Can you send me the address of that lot in Brainered via direct message. Thanks 

Hi folks, I'm also an OOS investor...now looking at the Chattanooga MSA market.  We are looking for larger MF properties and would appreciate hearing about the areas we should consider looking for this asset class.  Any information will be helpful as we start this part of our journey.  Thanks.

It’s good to hear that investors are looking to invest in Chattanoga. I am 30 minutes south of Chattanoga in Dalton Ga where I own both single family and multi family units. Dalton is growing and new jobs are coming to the area after a new inland port was built 15 minutes from Dalton.  I am mostly buying off market deals. Rent is lower, but prices are lower as well.  Feel free to message me if you’d like to connect. 

@Charles Jabaley

  1. If you haven't connected with a good property manager in our market yet, let me know - I have an excellent one that I can recommend that is an excellent resource for my clients

I'd appreciate hearing about the property manager also.  Does he/she handle multifamily apartment buildings.  Thanks.