Chattanooga, TN Multifamily Market

[Edmund Amoye]

Hi,

I'm new to BP and REI; and very happy to have found a supportive community. Here is my situation, broken out into three parts:

1. Where I’m going; 
2. Where I am; and 
3. What I have done so far. 

I need help from experienced REIs in the BP community in filling the gaps between where I am and where I’m going (financing strategy, market intelligence; risks, finding off-market deals).

1. WHERE IM GOING: Using institutional financing (5-10% down) to purchase my first MF property (four to 10 units) in Chattanooga, TN. I plan to live in one of the units and use the cash flow to pay the mortgage. Unless I get an early opportunity to exit, I don't plan to exit for 3-5 years. This will be my first deal so I'm interested in starting out right with the understanding of getting better over time. I'm trying to avoid making huge mistakes. In the short, to medium term, I would like to be a resource and partner for small to medium CRE investors.
2. WHERE I AM: Just joined BP a few days ago. I'm a strategic planner with a strong bias for action and am looking to make a move in 2019. I believe there are deals to be had, irrespective of the current fears of a downturn in H2-2018. I am currently working on getting RE licenses in GA and TN so as to grow my professional network, serving small to medium CRE investors. Data analysis, storytelling, and sales are my strengths. I augment technical analysis with developing local market intelligence.
3. WHAT I HAVE DONE THUS FAR: My research (frequent drives through the market) indicates that though Chattanooga is a relatively stable tertiary market, the MF segment in my target area (the downtown area) has high supply, which may take a while to move through the system. However, it is an attractive market for millennial professionals looking for a more affordable and family oriented locale.

I’d appreciate contributions from experienced REIs in the BP community in filling the gaps on financing strategies, developing better market intelligence; biggest potential risks, finding off-market deals, etc. 

Thanks for your help in lifting another BP member. 

- Edmund

[Brian Levredge]

My answers:

1. WHERE YOU'RE GOING.  First, that's a solid goal.  Anything five units and above is going to be considered commercial financing. That's going to be 20% down.  If you're looking to keep your down payment in the range you suggested you'll need to stick to 1-4 units for your initial purchase. 

2. WHERE YOU'RE AT. Again, solid first steps taken. REI is a networking business. That means going to REI meetings, meeting up with investors for lunch, coffee, etc. Many deals, especially commercial, are done off market. So if your personality fits it then getting out there and networking will suit you well although you may find it takes longer than expected to build momentum.

3. WHAT YOU'VE DONE THUS FAR.   I've been investing in Chattanooga for roughly ten years at this point.  It is a great market.  It's also, as you note, more competitive and supply of Class A multi family downtown is high.  I would also add that triplexes and quads are far less common than duplexes here.  Those are more static in price generally and can still be had at a deal.  If you adjust your parameters and look at other areas besides downtown you can avoid paying a premium which you will downtown.  Also be careful what areas close to downtown you are looking at.  Certain areas still have a long ways to go.