Knoxville investors & homeowners — how are you adapting to the current market?

Question

Been away from BP for a while and getting reengaged — good to be back.

I'm based in Knoxville and spending a lot of time right now thinking about a dynamic I'm seeing play out locally. Home prices in the area have held stubbornly high, and rates haven't given much relief. The math on acquisition is harder than it was five years ago for almost everyone.

So I'm genuinely curious what people are doing in response — on both sides of it.

For homeowners: are you seeing people stay in place longer and invest in improving what they have rather than trading up? Anecdotally it feels that way here, but curious if others are seeing the same pattern.

For investors: how are you thinking about acquisition right now? Are deals still penciling in this market, and if so where — what asset types, what neighborhoods, what strategies are actually working?

I'm particularly interested in East Tennessee perspectives but curious about broader patterns too.

Cory King · Answer

@Richard Lee here in knoxville w/ my out of state investors we're aiming for newer inventory. many of them are used to investing in markets with little and possibly negative cashflow. so if we can clear PITI and make $500/mo they're stoked!

they're looking big picture at the market and see an area here in knoxville where the cost of ownership is relatively low with newer inventory. Talking 90's - new build type stuff. appreciates steadily w/ most importantly, low maintenance.

personally i buy in 37912 and 37921 zip codes. effectively west knox adjacent, close to the true west knox amenities yet 10%-20% under those prices and schools are decent enough. google where target and aldi are in knoxville and within 2-3 miles of them, solid spots to buy and hold. they do their market research well before a store ever goes in.

build to rent is a good model at this point, i'm doing my first one now and working with some investors and builders about scaling this play out more. good overall margins $130-$170/sqft in build cost w/ strong equity on the back side.

i've done pretty good also nicheing down with some of my rentals. stuff closer to downtown i use as students and other co-living styles. those cashflow great, $1k/mo or more.

further out into the burbs 2+ year leases for families, again typically 1990+ inventory and those i'm just playing the long game with. i don't need the cash right now to fund my lifestyle.

wholesalers are eating up most of the margins and wild enough there's still buyers paying em so no pressure to stop. many are buying at 80% ARV - repairs.

there is still opportunity out there though, i know of a duplex on market right now in north knox that's pretty damn close to the 1% rule.

for homeowners, yes i'm generally seeing people camp out longer. those who bought since 2023 and now trying to sell, unless they have made significant updates we've had real conversations about getting out with their down payment intact and MAYBE some extra cash to move on with.

my 2 cents.

Garrett Crosby · Answer

Good questions all around and you're seeing the same patterns that are playing out in a lot of secondary markets right now.

On the homeowner side — yes, the lock-in effect is very real and Knoxville is not immune to it. People with 3% mortgages are not voluntarily trading up to buy at 7%. That's suppressing inventory and keeping prices sticky even as affordability gets harder. We're seeing the same dynamic in most of the markets I track. The improvement spend you're noticing makes total sense — people are renovating in place rather than moving.

On the investor side — in markets like Knoxville where prices have held, the deals that still pencil tend to require some form of value-add. Buy-and-hold at stabilized MLS pricing often doesn't cash flow at current rates. What's working is finding distressed or off-market situations where you can manufacture equity through renovation, ADU addition, or a change in use. As a contractor you're actually well positioned for that approach since your renovation costs should be lower than average.

Happy to dig in further if it's helpful. Feel free to DM.

JD Martin · Answer

I'm in ETN (Tri Cities). Our tenants are staying put a lot longer than they used to that's for sure. It doesn't hurt that most of our units are below market rates at this point so there's nowhere really for them to trade to unless they're buying or moving away.

Garrett Crosby · Answer

Richard, that's a great analogy actually — shale extraction takes more work per barrel than a gusher ever did, but it still pays if you know what you're doing. That's basically distressed/value-add investing in a market like this in a nutshell. No more free money sitting on the surface, but there's still oil down there if you're willing to do the work most people skip. Appreciate the visual, that one's going to stick with me too.

Richard Lee · Answer

Yeah, finding distressed properties or those in marginally desirable areas has been a tactic that seems to still have legs. Rather like shifting from a deep oil well over to fracking shale oil, eh? Still makes money, but it's not as easy or quick as 'the good old days'.  "Roll up those sleeves and dig in" I can still hear my midwest elders saying things like this as they got up at 4 AM to feed the livestock and do field work before it got too hot. Easy and quick aren't necessary for closers, anyway - eh?

Richard Lee · Answer

It's been sobering hearing tales of folks needing to find new apartment options as their existing ones have jacked up the rent again... and again... and again... Or folks just moving into town, or just leaving the nest for the first time, etc.   I'm all for REI owners staying current vs. leaving a rate untouched for 20 years, but at a certain point it's not reasonable rent and doesn't feel sustainable at all.   Markets can only bar so much.

G. Brian Davis · Answer

If I had a 3% mortgage, I'd think long and hard before giving it up.

On the investing side, it feels like the deals that get people excited today are different than they were a few years ago. I'm seeing more focus on seller financing, assumable loans, and properties where there's a clear path to adding value. The opportunities are still out there, but it seems like investors have to be a lot more selective than they did when rates were lower.

Knoxville investors & homeowners — how are you adapting to the current market?

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