All Forum Posts by: Brian Levredge

Quote from @Lacey Bediz:

Hello :) I am looking to buy a property to run as an Airbnb in Chattanooga. I know they have regulations but it seems from the government website you can operate in commercial zones (C-2 C-3 C-4 C-5 UGCCC, IX, RF, RV, CX, SH). I tried to look at their short-term overlay map but can't get access. Does anyone know where these zones are located? One place I am looking at is St. Elmo area but can't find much info online about where I can buy and operate. 

Thanks!

 Those zones tend to be along busy traffic corridors. The hospitality industry lobbied pretty hard for that to happen to give them an edge since those are areas where hotels are located as opposed to residential zones.  Probably going to be tough to find something in St Elmo that checks those boxes.  Tangentially, there are a fair amount of former STRs now being sold around town in part because of the regs and also saturation.  

I can only speak for myself but have been building (specs) in Chattanooga for about ten years now.  

My primary exit strategy in building is to sell the house to an owner occupant.  I've been pretty successful doing that and have done so in different parts of town here over the years.  

Zoning desirablity would be R1.  I prefer infill where there are proven comps/neighborhoods.  As an aside the City of Chattanooga is changing its zoning rules in November so some things may change soon.

Yes.  Location matters.  Typically the higher the lot price the more expensive the house you must build to make the numbers work.  So in N Chatt a lot can easily run 150k-200k and you have to build a 1MM+ retail house to make it worth your while. But that's a smaller pool of buyers here.  You'll want to look in areas that have better regarded schools than others parts of town.  

Much that is outside the city limits is on septic.  So you need to make sure it percs if on septic.  Sewer is often at the curb so no need to cut the street and tie in.  But if you do that's 15-20k easy these days.  

A couple years ago, on a cost per ft basis, existing home sales started exceeding the cost to build new so that drives things.  Plus we get a lot of people moving here from out of market and when coming from Chicago, New York, or Los Angeles, it looks like everything is on sale here comparatively speaking. 

Quote from @Eden Meng:

Hi @Brian Levredge- Since Chattanooga is my market of interest in a very near future, would you mind sharing with me what is the average price per squared footage for cosmetic rehab for fix and flip project?

Thank you,

Eden

Kind of depends on your scope but here's rough breakdown.  All prices are per sq ft, labor and materials, based on 800 sq ft unit:
Demo $1
Paint  $3
Electrical $1.50
Flooring (LVP snap and click): $4.75
Granite $3
Appliances $3
Cabinet refinishing: $1
Tub refinishing $1

I've been both flipping and building specs in Chattanooga (I live here) for about ten years now.  Also own rentals, a PM company, etc and have bee investing here since 2009.  

Quote from @Scott Russ:

Hopefully this type of post is allowed here.  River Gorge Ranch is a high end mountaintop development 15 min from Chattanooga.  I purchase in Feb of 2023 for personal use (not investment), but life has taken me in a different direction.  Not looking to recoup anything I've put in...I'd just like to sell and move on.  Lot is in phase 1.  Neighbors have already broken ground.  1.84 acre bluff lot with partial pond and small creek.  Close to main gate and village square.  Purchase for $273K.  Will sell in the very low $200's (depending on closing fees, etc.).

 Are you still looking to sell this?  

We pay a shade over $5000 for a 2 ton

$150/ft for that size may be a little light due to the fact you don't get economies of scale building smaller.  Finishes will also determine where you land.  It is true your lot could constitute your contribution on the deal, but if you have a construction loan you're going to need to front the money along the way and get reimbursed by the lender as you're doing your draws.  That means keeping a fairly decent amount of money on hand to pay for materials/subs.  Getting the loan with a bank would be a challenge without employment or track record (if self employed) so you're probably looking at hard money and I would venture that may even be a challenge.  Lastly, you'll want to make sure you buffer your construction budget that goes to the bank.  I've been building here for about ten years now.  I typically do 4-10 specs per year.  Happy to discuss if you like.  

I would look at more than just residential if the goal is to get to 500k in cash flow.  It will also make it more challenging by investing in markets that have seen a lot of growth like most of the ones you list.  Reason being is that while I think there's still plenty of runway left in those markets they don't have the same upside they did five years ago meaning you'll have to adjust your time horizons some.  Case in point, in Chattanooga I was buying multi family at 30k per door seven years ago.  Today that number is 90-100k (or more) plus capex.  Prices may come down some but you still won't have that upside to sell and roll the equity over into something bigger to hit your cash flow goals.  

You might consider looking at other asset classes that are less popular such as commercial office.  You may also consider looking at smaller tertiary markets where there will be higher caps and cash flow but not necessarily as much upside on resale.  Best of luck! 

Quote from @Junior Francica:

Hey guys. I am a residential agent but have very limited knowledge on the commercial side of things. I have a commercial building that I am considering purchasing. It is the building that I am currently renting an office space at. The owner is willing to sell and here are the details. 

Sales price 950k, the owner is willing to take a second position on the down payment the bank would require so let's say 20% second loan position for the owner. 

The yearly rental income is $126.9k

Expenses are 48k

NOI is 78.8k

7 tenants are locked in until 2024, 5 are month-to-month, and 2 have leases ending by Dec of 2023. 

Built in 1991 and would say it doesn't need anything major repair at the moment. 

Any other info you may need please let me know, would this deal be worth it?

 Are you renting an office or a separate suite from this owner?  If you are leasing just the office then I'd imagine you have full-service leases in place where the LL includes all utilities and internet and maintains the common areas.  Tenants typically clean their own office.  

These buildings can be cash cows (but management intensive) so it really depends on the existing leases and how far under market the current ones are.  We typically spend a couple bucks bringing up the aesthetic, which helps push rents.  

You will have higher turnover with this type of building, but like an apartment building these are typically not difficult to release in a short time.  If you run your own business out of the building you may be able to qualify for owner occupied commercial financing which is more favorable.  I'm getting ready to close on another one of these, but in full disclosure, if it weren't right up the street from my other one (where we operate from), I probably wouldn't do it.  

Quote from @Tammy Wheatley:

Hello All!

First off, in my home state (Illinois) I have a duplex where I house hack the other side. This is my first investment property that I purchased Feb 2022.

I would like to retire to Tennessee in about 10 years. My son and family are there also. They are near Chattanooga. That area is growing and seems like there is opportunity for growth. My first thought for a property in that area is a vacation rental. That way myself and other family can use it when we come visit.

My question: I am going to visit this week and next. I have a meeting with 2 different realtors to start getting a feel for the area. Who else could I/should I meet with while I am in town? I am looking between Chattanooga, Soddy-Daisy and Dunlap. Anyone know anyone?? :)

STR doesn't make a ton of sense in Chattanooga now that they are pretty heavily regulated. In other words, the numbers won't work great at all. Best to look at long term. Rental appreciation has been great. Of course depends on what asset class you look at as well. You may already be back from your trip but happy to help if I can.