All Forum Posts by: Brian Levredge

@Shadonna N., my partners and I all are investors and ended up starting our own PM company four years ago to manage our portfolios and those of others.  Like anything else, the experience with PM companies runs the gamut.  There are good and bad and in between.  Also depends on what you niche you are in.  There are some that only do single family res or others that only handle certain parts of town. 

@Christopher Kolasa, we're about the same distance from both Nashville and Atlanta so we get investors from both looking here due to being priced out of their home markets.  Chattanooga is a tertiary market but it's healthy and drives itself.  There are a number of different sectors here that seem to be thriving.  Combine that with the low cost of living and you see why we're gaining popularity.  So while prices have come up a fair amount the million dollar question is what kind of adjustment, if any, will we have.  More likely we'll probably continue to come more in line with national averages.

I moved here six years ago from Los Angeles not really knowing anyone outside of a couple realtors.  If you are relocating I would recommend just networking your tail off.  Otherwise, find the wholesalers and other investors doing the bulk of the deals and network with them if plan to remain out of town.  Mailers work but if you are out of market you'll need someone working everything for you locally.  

Prices are up across the board in all sub markets here.  Value can be found in all of them but it generally requires a boots on the ground mentality or good contacts passing deals along.   While inventory is up over last year at this time it's still well down below the levels of a couple years ago.  That combined with the fact that Chattanooga is gaining more traction nationally means there's a lot more competition.  

That said the lower rent areas are East Chatt, East Lake, Alton Park, Highland Park (outside of the Highland Neighborhood Association).  You're typically 750-900/month in rent for a three bed house.  Prices are up so you're generally looking at 50-80k for a house that doesn't need much work. 

Middle rent range areas are East Ridge, Hixson, and Red Bank.  You can get about 1000-1500 or so for a three bed depending on neighborhood.  This is kind of the sweet spot in town rent wise.  Short vacancies and stable tenants.  Plan to pay around 100x rent in these neighborhoods, at least right now.

East Brainerd and Ooltewah are the upper middle to upper rent areas.  There are pockets where the rent is lower but you're generally looking at 1300-2000 for a three bed, depending.  The public schools in these areas are more highly regarded so values are higher.  Expect to pay a premium, which doesn't help a lot from the investment perspective. 

The high end would be Signal Mountain, Lookout Mountain, North Chatt, and Riverview.  Those are high, high demand areas for purchase so finding a rental is very difficult, especially one that makes sense financially.  

Seems about right for Chattanooga.  Ready for the worse news?  Hamilton County also taxes properties and that rate is around 2.7%. So combined you're looking at 5%.  That's the bad news.  The good news is that properties in TN are not assessed like they are in CA.  In CA the assessment is the purchase price. Very straightforward albeit very expensive as well.  In TN there is a different mill rate for residential (single family only) and commercial (everything from duplex up).  The counties here are responsible for assessing the properties and that happens about every four years or so with most recent being in 2017 in Hamilton County. 

Here's an example.  Say a single family is assessed at 100k.  Residential properties have a mil rate of 25%.  That's your multiplier with the product being the the amount the tax rates are levied against.  So you'd have 25,000 x .05 or $1250/year for both county/city .  As an effective rate that is about the same as you'd pay in CA.  The mil rate for commercial properties is 40% so it's a big jump from single family.  The city rate will vary as well.  East Ridge and Red Bank are both lower than Chattanooga.  If you find something in Hamilton County that is an unincorporated area then you're really winning as you'll only pay the county rate.  

From experience properties that are typically non owner occupied will carry higher assessments, sometimes even in excess of purchase price.  Single family will often carry a lower assessment than even the true market value.  Hope that helps. 

I both live in, and invest in Chattanooga in addition to owning a property management company here as well.  A couple things to consider in answering the question you laid out.  First, how much of that cash will you need to maintain for cost of living?  Second, once you've identified how much is left to invest with you'll need to talk to a couple lenders to see what you qualify for.  This will be somewhat murkier as recent move/change of income will not positively benefit you.  Regardless, once you know how much you have to invest with (the lender will want to see what you will keep for reserves) you can then identify asset classes and areas of town where the prices are a fit.  Once that is known you have to decide if you have the tolerance to invest in those asset classes and areas.  

The big issue for you as I see it is finding something at a discount while still being out of market and having limited capital to work with.  There are of course ways around all these things but in the beginning they can be discouraging/daunting.

I'm in Chattanooga TN.  Great market although it's gotten a lot more interest in recent years like many other markets.  There is no shortage of lenders here and if the deal is good enough you'll have no trouble getting financing assuming you are experienced and have a decent enough personal financial statement.  One bit of advice though.  Some lenders won't touch out of market guarantors.  There are plenty that will however.  This is a credit risk to them more than anything else.  They figure, and probably correctly so, that going after the assets of a borrower in another state is going to be costly and uncertain.  Secondly, every lender I know is hungry for deposits.  Expect to have a move a decent chunk of money over if you plan on getting a loan from one as more and more (at least here) are making it conditional.  

Heading out of town.  Hope to see everyone next month.  

@Jordan Leithart

If you want to pm me I can provide you some additional info.  I will be traveling some over the next few weeks myself, but I'm an investor, own a PM company and know a fair bit about town.  Safe travels. 

@Lee Berkwits, the economy is actually fairly diverse.  VW gets a lot of the press but there are plenty of other drivers here.  McKee Foods (Little Debbie) is, or until recently was, the largest manufacturer in Hamilton County.  Erlanger Health is the largest employer in the region.  Insurance is well represented with Blue Cross having their national headquarters here and Unum, the world's largest disability insurer.  

There are a ton of logistics companies here as well.  Chattanooga is a roughly 24 hour drive to 80% of the US population.  US Express is a top five trucking company that just went public (again) and Covenant Transport is another large trucking company.  The city is building a reputation as a regional start up for tech companies as well.  There are a number of universities/colleges regionally with UTC being the fastest growing campus in the UT system.  

Getting back to VW, they presently build two lines, the Passat and Atlas.  Many VW factories world wide build three to four lines.  With VW getting into electric cars now there is talk that a new electric car will be built here in the next year or two, and they have an option on 900 acres of land adjacent to their present site for expansion.  More importantly, a number of the suppliers that serve VW also serve BMW and Mercedes.  Chattanooga is almost equi-distant from Spartanburg, SC and Florence AL so suppliers are looking at basing their operations here in town.  

It really is a great market that flies under the radar because it's so small.  That's meant less competition for those of us here, but that's changed last few years obviously.  I do believe that in my lifetime we'll see the I75 corridor between here and ATL completely fill in, except for the mountain areas.  

Like many other markets, Chattanooga is also expensive relative to where it was a couple years ago.  C class multis could be had at 10-11 caps rather than the 7-8 caps they are trading at today.  As you can see that's quite a bit of compression, and it makes cash flow much more difficult.  Also keep in mind significant capex is generally required in addition to purchase to get rents closer to market.  

Rents have continued to increase at a pretty good clip and while there is a ton of newer inventory coming online we are still well below absorption overall, though I would caution you on a few sub markets, including close to downtown.  

Any market you choose to invest in should have strong economic drivers so as to insure you are making a sound long term decision.  Chattanooga is a tertiary market, so there is an expectation that in the next downturn prices (caps) will readjust to where they were.  I'm not sure I agree with that necessarily.  There are other market forces (demographics)  at work that are countering rising interest rates currently, and they too may also overcome and economic softening, which is typically felt harder in single family residential than multi.  We'll see.