Chattanooga vs Knoxville & Johnson City vs Clarksville vs ?

Question

Hello BP Community

I will be doing a road trip through Tennessee from June 27th though July 8th looking for multifamily properties. Starting in Clarksville, Chattanooga, Knoxville and Johnson City. I'm looking for property with a  strong cash on cash return (10% plus) using a 25% to 30% down payment. I welcome suggestions for other areas I have not listed. Here are some details on what I'm looking for:

- Multifamily or portfolio of residential

- Sales price: Up to $750,000 (I'm doing a 1031 exchange (or reverse exchange) on a California rental property    so I need a replacement property of $575,000 or more

- Timeline for purchase: Need to enter escrow by Oct 7th at the latest

- Class: A, B or C neighborhoods with a sales price under 800,000.

- Condition: Turnkey or Value add. (I'm a contractor so projects do not scare me as long as the lender is on      board)

I briefly drove through these areas about 2 months ago and have have been doing online research since. Seems like Chattanooga and Knoxville are more likely to appreciate with value and rents but Clarksville and Johnson City may cashflow better. In regards to a B- property I'd like to know ease of filling vacancies, vacancy rates, Turnover time, etc.  I would appreciate any insight from the BP community. Also, Any referrals for real estate agents are welcomed. Thanks in advance!

Andrew Austin · Answer

Josh, I am a local investor/realtor in Chattanooga. I grew up here and am very familiar with the market and excited to see how it continues to grow. I'd love to hop on a call to discuss the are when you're free.

Mark Fletcher · Answer

I’m in Johnson City. Just bought my first rental back in May. 54k purchase price and 10k repairs. It’s a 4/3 1,800 sf near the university. Got it rented out at $1,500 before I started the repairs. If you want to go the SFH route, anything near the college cashflows very solid. For anyting between 3 and 5 bedrooms, I use $375 per bedroom to estimate the rent. Just put a 2nd property under contract that I’m planning to flip. It’s a 3/2 1,600 sf at 83k and in way better shape that the other. Both were off market deals. I also do some wholesaling.

James Allen · Answer

@Josh Malgieri - I love Knoxville for investing! One of the best places IMO to get a combination of cash flow & appreciation.

Lots of things going on there between the downtown north redevelopment & south waterfront project, new construction throughout. It has a growing population, 3.63% Job Growth Year over year, 2nd in the state to Nashville in Price growth YOY, Minor League Baseball team is coming back, lots of new jobs to come in, 110 million dollar Airport expansion which will allow more direct flights to Knoxville, Neighborhoods in Knoxville experiencing gentrification, and best of all the houses still cash flow with all the upside.

Peter Nikic · Answer

I think they're all great, but personally prefer and have invested in Chattanooga. I'm not as familiar with the other areas but have heard many great things about all of them.

Charles Jabaley · Answer

First of all, welcome to BP!! So many good markets to choose from, which is why Tennessee is such a great place to invest! So I'm admittedly biased here as an active investor and realtor in Chatt, but I really do think Chattanooga still has so much room to grow. We are seeing more and more people move here from big cities in California and New York, and while there are some that are coming here to retire, it's been a ton of young professionals as more businesses and developments continue to open here. It's also uniquely convenient being situated close to both Atlanta and Nashville, which is another huge draw. Chatt was also on Forbes Top 10 places to visit in 2023, which is a cool little flex, and a lot of times I've noticed that people who visit here end up falling in love with the city and moving here shortly after.

Again, I really don't think there's a wrong answer on this list, because I know people are moving to other TN markets too, but I feel like Chattanooga is one of those cities that's a diamond in the rough and hasn't reached the stage of being overgrown, like a lot of Nashville locals feel has happened to Nashville.

Christopher Davis · Answer

I'll chime in for Knoxville. I am the owner/operator of a private lending/hard money lending company based in Knoxville in conjunction with our local family office. I am a huge believer in East Tennessee, specifically Knoxville in the long term. The demographics of people moving to the south in general are very strong. Knoxville is very much under appreciated compared to most of the country.

I'm more than willing to help you vet anything in the area just reach out

Storme Whitby-Grubb · Answer

@William Lokar @Peter Nikic, thanks so much for your thoughts! I need to dig in a little more on Jonhson City. That's only recently come across my radar. I had been looking at Knoxville and Chattanooga a bit, so good to know you're having success there, Peter.

William Lokar · Answer

I may be biased since I'm and investor and Realtor in the Tri-Cities (Kingsport-Bristol-Johnson City), but the appreciation potential is very strong in this market and the price points are much lower than other the other markets you mentioned.  Higher quality MFH are moving quickly and the cap rates are rather low compared to where we've seen them in the past, but there is potential to grow those cap rates with a little investment.

Storme Whitby-Grubb · Answer

Hello Everyone!

This is my very first post on BP! I've been looking into these very cities for my first out-of-state MFH investment. I'm also open to SFH as I may have to wait until 2024 to do MFH, so may move on a SFH this year if I find the right deal. I know this thread is a few years (and a pandemic) later, but would love to revitalize this thread and hear your thoughts on these cities now? I've friends in Nashville, and am wanting to start/build my portfolio in an area I could possible move to eventually. I'm currently in Los Angeles, and dreaming of moving to the mountains, nature and woodland, so TN has a lot of appeal for long term investments. Any updated thoughts on Knoxville vs Clarksville vs Johnson City vs Chattanooga much appreciated!

Thanks,

Storm

Josh Malgieri · Answer

Hey Everyone thanks for the feedback.

@Mark Fletcher Wow what a great first deal! Those numbers are solid. I am trying to get this exchange done and then I'm interested in SFR deals. I have a friend that purchased a 3/2 for 35k and invested 60k. He is expecting a rental rate of 1600 which I thought was pretty good. I'd love to talk more about the wholesale inventory you'll have access to.

Chattanooga vs Knoxville & Johnson City vs Clarksville vs ?

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