Hello Chattanooga Tennessee!

[Brian Moore]

Investment Info:

Small multi-family (2-4 units) buy & hold investment in Chattanooga.

Purchase price: $160,000
Cash invested: $44,000

In the fall of 2019 I had a few business trips out to Chattanooga and really saw potential in the area. The home prices and rental rates also fit my numbers, so I attended a local REIA meeting to make some connections. Fast forward 15 months and one global pandemic later, and I now own a duplex in the 'Noog!

What made you interested in investing in this type of deal?

I found the numbers very attractive vs. my primary market of DFW. Home prices, property taxes, and insurance rates were all more favorable than DFW, and the 1% rule was very much in effect at the time (although things have been on fire as of late!).

How did you find this deal and how did you negotiate it?

The property had previously been under contract 3 months prior and had fallen out due to foundation issues which they repaired. I found it on the MLS when it relisted, and I contacted the seller's agent to have them double-end the deal. The numbers were great and I offered $5K over list with no financing contingency. It was my intent to get a loan, but had my loan fallen through I had enough cash on hand to purchase without financing. 'No financing contingency' clause helps offers stand out.

How did you finance this deal?

As mentioned above, I essentially made a cash offer but with a 35 day escrow so I was able to apply for traditional financing. Thankfully my rockstar Texas lender was licensed in Tennessee so I didn't need to search for a new lender. Terms were 25% down, 3.25% 30 year fixed with no points. Very good terms for a multi unit investment property. Before COVID these numbers were absolutely unheard of.

How did you add value to the deal?

Currently there are paying tenants in both sides of the duplex so I plan on upholding their leases and then doing major remodels once they move out. There's about $500-700 in additional gross rent once remodels are complete.

What was the outcome?

TBD. I'd like to introduce a new idea I call the SLO-BRRRR or Lazy Man's BRRRR. This involves finding a good deal on a value add property that is already rentable (or rented), and therefore qualifies for conv. financing. Purchase the property with financing and then remodel once tenants have left. In an appreciating market, refinancing your value added property might allow all original capital to be extracted. The added expense of 2 sets of CCs is likely equivalent to HML costs of a normal BRRRR

Lessons learned? Challenges?

Study BP forums, books and podcasts. I learned several techniques from this site that I put to use in this deal. Once you've studied up and know your stuff, take action! Don't try to time the market- if you see a deal that makes sense, make an aggressive offer and go after it! 3-3.5% interest rates won't be around forever, so acquire 'cheap money' while it is available.

Did you work with any real estate professionals (agents, lenders, etc.) that you'd recommend to others?

@Jeffrey Holst and @Brian Levredge of The Old Fashioned Real Estate Show!