Knoxville Rental Property

[Rachel Pivonka]

Hello! I have been reading articles on BP for a while now and started listening to podcasts in the last couple months. My husband and I are doing a live in flip in Knoxville TN, which we will sell at the 2 year mark. We are now planning on buying rental properties using the BRRR strategy. We are leaning towards buying a B class SFH because that is what we are most familiar with even though we still have our eyes open for deals on small multiunit in the right location. I prefer to buy in a location with tenants that I am comfortable with and do not have to worry about safety. Are there any investors in the Knoxville area that can tell me what the market is like for class B rental property? Recently someone who lives out of state discouraged us a little bit saying they think there may not many renters who can pay $1000- $1,200 a month, meaning we should buy lower class properties. Do you think this is true? Also, any advice on buying 3 br/2 bth or 3/1 versus a 2 bedroom unit in Knoxville?

My biggest fear is there will not be a market for renters in our price range. I have started watching the rentals listed on Zillow to get an idea. Thanks for any advise, we are trying to learn as much as we can. 

[Gino Barbaro]

@Rachel Pivonka

Hi Rachel

Property classes also take into consideration the age of the property and the amenities.  A properties are newly built, have mostly white collar tenants, offer great amenities, but don't cash flow as well.  They do have much better appreciation, and institutional investors target these assets.

B properties are built within the last 20-30 years.  They cash flow better and still appreciate.  C properties are older, have deferred maintenance, but cash flow.  You need force the appreciation on these properties.  D properties are in distressed neighborhoods, very management intensive

Property classes are used more for apartment complexes and have cap rates as rules of thumb

A property cap rates 3-5

B 5-7 cap

C 8-10

D 10+

Hope that helps

Gino