All Forum Posts by: Sean Wilson

Hey @Matthew Swearingen, I'll do my best to answer your questions:

1. Let's take a hypothetical house in one of these sub-markets. Say you can buy it for 30k and it needs 20k of additional investment (work, holding costs, etc). Total investment of $50k. Let's say the property could rent for $1000/mo, so that makes it a 2% property. What you will find in certain areas of Chattanooga is that the ARV on a rental grade renovated home with these numbers could be $50k or less. Therefore, with transaction costs you would be losing money. Even if the area becomes a "hot" market for new construction sometime in the future, the best you are probably going to do with appreciation is the land value increasing and making it a good candidate for a tear down. There are certainly exceptions to this, and that is where the research and local market knowledge are extremely important.

2.  I don't know what the next "up and coming" or "hot" market is.  I don't play in gentrification areas, and I'd bet the investors that do are keeping pretty tight lipped.  Some of these sub-markets are small enough that investors can come in and shift the neighborhood, but unless you have the capacity to do that or are part of a team with that kind of capacity, you would just be hoping to get lucky and ride on some other investors' coat tails.

I can't explain why some areas are street-by-street, but that has been my observation (and the observations of others) in many of the sub-markets.

@Matthew Swearingen Chattanooga does have a lot of investors, including quite a few from out of town and out of state. As for whether or not it is saturated, that all depends on your expectations and your exit strategy. As someone who is relatively new to the Chattanooga market (<1yr), but not new to SFH investing, here are my observations:

The good

• The average $/sf is fairly reasonable compared to markets of similar growth trajectory (again, all a matter of perspective and expectation)
• The rent to purchase price ratios are reasonable (>1%) in many of the sub-markets
• Their is still an inventory of distressed properties, unlike some markets

The challenges

• The desirable areas have a large inventory of "flipped" houses currently on the market
• A lot of the sub-markets are street-by-street, and the "up and coming" areas are either very early in the cycle or are over priced
• The 2% cashflow properties don't currently have a good resale value, so recovering your initial renovation investment could be difficult
• Traffic has gotten bad, and will continue to be a challenge as Chattanooga continues to grow

If you are serious about investing in Chattanooga and want to do it successfully, you are going to have to do a substantial amount of research and invest a significant amount of time into learning the markets.  RE investing isn't what it was a few years ago, and it will be very easy to lose money if you aren't strategic and familiar with the local market.

Hey @Adam Lowe, the financing is sometimes called a portfolio loan, as it is a loan that is kept in the bank's in house portfolio.  Most small/regional banks and credit unions offer them.  The key is to find a bank where the decision is made in the local branch, and not sent off to a corporate office somewhere.  I'll send you a PM with who I've used, but also search this forum.  There have been quite a few posts about which small banks offer in house commercial loans.

Hey Adam, I've been investing in Chattanooga for a little while now, and I have to warn you that looks can be deceiving. There are a lot of 2%+ cashflow or better deals that will see very minimal appreciation, and you'll be lucky to get your money back out of them. Search through this forum, as there are threads that date back from years ago with warnings to out of town investors about things that are too good to be true. There is also a lot of investor activity going on in Chattanooga, and a lot of flipped houses on the MLS right now.

I'll second those above that suggested the BRRRR strategy, as that's what I have used for years. The key here is the R that stands for Refinance, because that is where you get your money back so it isn't wrapped up in one property. If you have a W2 job to leverage until you have cashflow, there are quite a few local lenders that will give you commercial loans with much more favorable rates and terms than hard money. You can then carry the commercial loan long enough to Renovate property to conventional loan standards and season the title long enough to be eligible for a cashout refinance.

Hey Brian, thanks for the response, it was extremely helpful. I've also learned from what may be the only STR company in Chattanooga that East Ridge is in the process of enacting their own short term rental legislation. Unfortunately, that legislation doesn't allow for STRs in R1 zoning (or industrial). Looks like my hope of having a vacation home in Chattanooga is going to have to wait a bit, but as long as the numbers continue to work, I'll keep looking for long term rentals. Thanks again! Sean

Hey BiggerPockets Chattanooga,

I'm a buy-and-hold investor, and I just picked up my first property in the East Ridge area of Chattanooga.  I worked in Chattanooga for several months many years ago, and I've been looking for an excuse to get back.  My goal is to build a portfolio of long-term B-class rental SF homes similar to what I have in Nashville.  Given that this is the first of what I hope is at least a handful of properties in the Chattanooga area, my initial thought is to furnish it, use it while I am there, and vacation rental it when I am not.  How is the AirBnB/VRBO market?  Any local regulations I need to be aware of? Are there any management companies that specialize in short term rentals (google wasn't much help)?

Also, I need some help.  If I am going to be successful in the area, I'll need a good team.  Does anyone have referrals for property managers, handymen, plumbers, electricians, lawnmowers, turn-over cleaners, window installers, roofers....you get the idea!  Any and all suggestions would be greatly appreciated, including who not to use if there are people with bad reputations in the investor network.  

Lastly, I'd like to build some relationships with other investors in the Chattanooga area, including other landlords, wholesalers, etc.  If you'd be willing to share some insight with an experienced investor who is new to the area, please reach out.  I've met some great people through this forum, and I hope that continues.

Thanks in advance!

Sean

@Brandon Cobb I've been buy and hold (BRRR) investing in Nashville for about 6 years. From an appreciation standpoint, it has been great, but I buy on cash flow and not appreciation. On the buying side the market is definitely tougher than it has ever been. Rents haven't appreciated nearly as quickly as property values, so finding SF properties that cash flow at a respectable ROI is difficult. Even a 1% single family at 80% of ARV is hard to find. There are still good deals out there off market, but there are a lot more letters going out and a lot more competition than there used to be. There are quite a few amateur wholesalers that are buying at retail prices, and to fuel that every wholesaler has a long list of novice investors who are willing to overpay for property (the latter part of that is probably a good thing for you). The local real estate investors group (REIN) used to bring 10 or 20 people in for deals meetings, and now its 60-80+.

I'd love to hear your perspective as you get ramped up. 

Hey Keri, 

As for how to start, that is really up to you and your intended long-term/exit strategy.  The one caution I will give you is that there is so much demand for multi-family properties in Nashville right now, that the cash flow numbers aren't nearly as appealing as they used to be.  If that is the route you want to go, find a few potential properties and run some number on them.  If you have any questions on them, throw the numbers to Bigger Pockets and get some additional opinions.

If you want some more feedback, try posting this in the local Nashville forum.

Hope that helps,

Sean

Hey Tyler,

There are quite a few of us lurking, and a couple more who are very active here.  You should probably connect with someone who has a similar strategy to yours.  What do you want to do with this property?

I'm a fix and hold landlord, and I typically use a BRRR strategy. If that perspective will help you, PM me for contact info.

Sean

@Kyle Graves, check out www.reintn.org.  That's the local real estate investors association for Nashville, and it is very active with events every week.