OOS investor interested in Chattanooga market

[Eric Huang]

Hello Chattanooga investors,

I'm an OOS investor based in Seattle. I've been looking to buy and hold a rental property in the area. I've searched in signal mountain, north Chattanooga, and Hixon areas finding no strong cash flow properties. I recently came cross a few downtown properties near the UTC campus within walking distance to restaurants and city vibes. But, the current rent is kind of low (3bed 3 bath 1700sqft for $1700), which make the cash return minimal. What about the appreciation potentials? Is the downtown area rejuvenating?

Many thanks,

Eric

[Adrienne Green]

Hi @Eric Huang! I am a Realtor who helps out of town investors in the Chattanoga market.

My first thought about the situation you shared is where are you pulling those rental rates from? If that's what the place has been rented for, be aware that there are a lot of owners here who charge under market rent, and/or who never raise rent, so when they go to sell after having the same tenant in there for years the rent is very low.

If I was to generalize the Chattanoga market, I'd say often in C class neighborhoods you can meet or excited the 1% rule. In the A or B class neighborhoods, that's not happening. 

There are also certain popular neighborhoods where return will be lower because purchase price is higher, like Highland Park or Northshore.

As far as appreciation, 2020 median purchase price showed 13% increase over 2019.

Please reach out if you'd like to discuss further!