Chattanooga TN, opinions?

Question

I'm interested in knowing more about this TN city. Would you say it's a solid place to invest?

Are you familiar with any neighbourhoods in the area that are worthwhile, or any contacts in the area I should hear about?

There are good talks of this being an up-and-coming area with a great community and growing work force.

Appreciate the help!

Oscar Zendejas · Answer

Hi @Guyoz Golan,

Chattanooga is a great cash flow market. I actually relocated from Southern California all the way to Chattanooga to start investing. The BRRR method is working great for me so far.

I would recommended checking out the Chattanooga towns of Hixson, Red Bank, North Chattanooga (Northshore), Harrison, East Brainerd, and Ooltewah.

Great local people to know are @Thomas DeMoss, Realtor for buying properties, and @Brian Levredge, PM for managing properties.

Good luck in your research and investing!

Andrew Ashby · Answer

@Guyoz Golan, I managed to find a 2005 duplex on a quiet street in 37406 on the MLS last year. Bought it for $80,000 and put about $5,000 into each side rehabbing it. I get $1550 combined rents on it. In choosing such a property in such a location, I know this is purely a cash flow play (and guaranteed rent by Housing Authority) and I don't expect any appreciation at all. I also have a very nice SFR in a very nice neighborhood in Hixson with low cash flow but higher chances of appreciation. I highly recommend investing in Chattanooga and using @Brian Levredge, @William Allen, @Thomas DeMoss and/or Levi Eaves (Coldwell Banker Pryor Realty) to help you make your way there. Regardless of where you buy in Chattanooga, or any city for that matter, the basic trade-off equation goes like this: High Cashflow/Low appreciation or Low Cashflow/High appreciation....also reads like this: Less desirable area/high cash flow/low appreciation and trendy area/low cash flow/high appreciation. Good luck!

Brian Levredge · Answer

@Guyoz Golan

I also moved out here five years ago from Los Angeles and have been investing here since 09.  I own a number of rentals myself in addition to my own PM company.  Like many markets there is a lot of demand coming from outside.  If your only access to properties is via MLS then you will be challenged.  I might suggest, depending on your situation, partnering up with someone local that can find you off market properties that may have a team in place already.  That will also be tough though as there are plenty already doing and they may not be looking for partners.  Depends on what you have to offer.

A note about cash flow here.  Even the stuff in East Chatt (37406) is overpriced significantly. I see those selling for 50-90k when you should really be paying no more than 30k.  That is a tough zip though from a crime and rentability standpoint and literally changes from block to block.  Don't 'settle' and buy there just because things are cheaper relative to other areas.  That area  will be ultimately harder to get out of if the market corrects, which it will at some point.  Chattanooga is a much stabler market than many though.  We aren't really subject to the peaks and valleys that either of the coasts and other hot markets are.  So in a way you are hedged.  Your upside is somewhat limited but so is your downside.

Lastly as I own single families and multi's all over town.  There are trade offs to having single families in nicer areas where there will be longer term appreciation and higher rents.  Those tend to be stable rentals.  Sweet spot here in town is 1k-$1500 in rent.  It's affordable to your average family they tend to not sit vacant long.

William Allen · Answer

Chattanooga has great cash flow, I have bought a handful of rentals there over the last few months and they are doing well. 2% plus is not uncommon for off market properties. To @Ali Boone's point, you will have to do work to the property or wait to find the right (as close as possible to) rent ready property to get those kind of numbers. We don't look on the MLS anymore but I would suspect they would be harder to find there.

Good luck!

Oscar Zendejas · Answer

@Guyoz Golan

I agree with @Ali Boone as far as the market at its peak. I am sure most here on BiggerPockets would back me in advising it is not recommended to invest for appreciation at this stage of the market cycle.

Type A neighborhoods with little to no value-add tend to sell over asking price from the demand of owner occupants.

As @William Allen mentioned, deals can definitely be attained with work. In my experience the B and C neighborhoods cash flow very well. In fact, making contacts with local wholesalers will subsidize your deal flow efforts. I will PM you some contacts.

I'm a millennial myself and enjoy the downtown atmosphere Chattanooga offers. It is one of top rated outdoor cities in the country.

My first purchase here was a banked owned property I purchased for $157k (with ARV ~$240k at time of purchase). I invested another $34k into rehab and repairs. The rehab duration was about 3-4 months. Then I had the property rented for $1900. At the 6 month timeline I cash-out refinanced at 75% LTV with appraisal coming in at $252k. So it was an ideal BRRR property.

In regards to PM services, I still consider myself in the early growth stages so I manage my rentals myself. I also tend to get down and dirty to keep my rehab and repair costs low.

However, I would highly suggest to use local PM services for out of state investing.

Ali Boone · Answer

Chattanooga is a very solid city....I'm actually pursuing commercial deals there right now. However, if you are talking about residential investing--the quality of the market is great for it with great market fundamentals, but Chatt properties are in high demand and typically selling for over asking price....and there's really not cash flow there.

It is kind of 'up-and-coming', but it's already 'up-and-came' enough to make the prices soar and isn't overly advantageous on the numbers front.

Feng Guo · Answer

@Andrew Ashby Thanks for sharing your experience in Chattanooga area. That's a great deal.  Do you have any contractor you would recommend as an OOS investor?

Guyoz Golan · Answer

@Oscar Zendejas I'm down with sticking to the cash flow side of things and not 'bank' on speculation. But still, it is something to consider, because if not, I'd rather and look for lower quality areas.

Great stats for that first deal! I agree about PM services but will want to have some sort of foot on the grounds as well (perhaps a JV). You mentioned B and C neighbourhoods, which are specific ones in Chatanooga that you recommend?

Appreciate all the help.

Ali Boone · Answer

Yeah, I'm referring to MLS. I don't have any contacts there that do anything off-MLS, so I don't have a basis for those properties. I'm not sure if there would be any options outside of BRRRRing, but maybe. One of my best friends is a big agent there but again, mostly MLS.

Guyoz Golan · Answer

@Ali Boone , thanks for chipping in. I hear what you say about this city already 'blooming'. Hearing about ost deals going above asking is a clear sign - are you strictly referring to the mls? about BRRRR, I'm not sold on getting anything turn-key, but wasn't looking specifically to BRRRR this.

@William Allen , are you referring to %2 with the typical calculations like here on BP? I understand you are writing from a position (which is cool), but how are you sourcing large deal flow off the market? Any knowledge of to which areas I should look more into for midrange buys? Specifically MF.

Chattanooga TN, opinions?

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