The city of Chattanooga sits along the scenic Tennessee River, just across the border from neighboring Georgia. Chattanooga was incorporated way back in 1839, and since then has grown to a city of almost 190,000 residents, with a diverse array of local industries including advanced manufacturing, healthcare, insurance, tourism, food and beverage production, and more. Chattanooga also possesses a wealth of natural beauty and a small-town feel that makes it perfect for information workers and other white-collar professionals looking to raise a family – something that is not always possible in other high-cost-of-living metro areas in the South and beyond.
Visitors and residents alike have a love affair with the 18+ parks that sit in and around city limits, including The Riverwalk, Point Park, Chickamauga Battlefield, Renaissance Park, and many others. The city also sits on the banks of the Tennessee River, with numerous kayaking, waterskiing, jet skiing, and other water recreational opportunities – perfect for a hot summer day.
As a prospective turn-key real estate investor, you may want to consider Chattanooga for several reasons, including its economic diversity, a relatively low average home price and consistent growth in the total number of home sales, and rising home prices that are projected to be higher than the national average. Let’s look at 6 reasons why you should invest in Chattanooga turnkey real estate.
1. Affordable Local Properties Help You Dissipate Risk
Have you ever heard the saying: “don’t put all of your eggs in a single basket?” The median price of homes sold in Chattanooga in September 2021 was $265,000, which is 10.9% higher than the median price for homes the year before. While home values did increase year on year, they are lower than the high of $275,000 reached this past June in the height of the summer selling season. National observers have taken notice, with Realtor.com ranking the city Number 4 in 2020 among all US markets in terms of projected gains in sales, and prices in the upcoming year.
Affordability can help investors reduce risk across an entire portfolio of properties. Rather than buying a single unit in an expensive city like NYC or SF you can purchase several units in a more affordable region and protect yourself against property damage, bad tenants, or vacancies caused by standard repairs and renovations that you will need to eventually perform as a landlord.
2. A Resurgent Economy
Mirroring many other regions of the country, Chattanooga is bouncing back from pandemic lows, with the unemployment rate falling to 2.9% from a high of 5.4% in June. An August 2021 report by the Chattanooga Chamber of Commerce found that the area attracted over 2 billion dollars of new development funds over the past 2 years. Examples of projects included in that number are Southern Champion Tray’s 80 million dollar planned investment in Centre South Industrial Park, new locations for Sese Industrial and Confluent Medical Technology, and the expansion of PUREgraphite into the former Alstom plant in downtown Chattanooga.
3. A Landlord-Friendly Climate
The regulatory climate for landlords in Tennessee is also excellent, with MillionAcres recently placing the state 3 out of 5 in a recent look into the 5 most landlord-friendly states in the nation. It ranks so highly due to the absence of a statewide rent control law, low landlord licensing fee, lower price of entry compared to other similar markets, low effective property taxes, with properties in Robertson County having a 0.720% tax rate alongside generally favorable landlord-tenant laws, particularly regarding evictions.
The region also has a lower average vacancy rate than the national average, boding well for landlords who want to minimize the time their properties sit on the market. According to a new housing analysis prepared by the Tennessee Housing Development Authority, rental vacancies across the state have dropped below the U.S. vacancy rate of 6.8%, almost half a percentage point higher than the same number in Tennessee, 6.4%.
4: Positive Real Estate Market Indicators on the Ground in Chattanooga
Beyond a friendly regulatory climate, Chattanooga is currently a great place to be a landlord for financial reasons. Rental rates in Chattanooga rose nearly twice as fast as the national average between mid-2020 and 2021, according to a market report from Zumper. Data from the same study shows that the average rent for a 1 bedroom apartment in the city rose by 10%, to $1,100 a month, while a 2 bedroom apartment gained an average of 12.7% for a total of $1,150 a month.
Investors across the US, including mammoth private equity firms, have taken notice, with numerous large-scale purchases of single-family homes and multifamily units purchased in the last few years, including the Integra Vistas in Hixson, which sold for $57.2 million, and the Riverview Grande Apartments in North Chattanooga which sold for $41.7 million, which represents a gain of $10.7 million dollars in value over the same price the property sold for just two years prior.
According to numbers from August 2021, new listings in the Chattanooga region jumped 5.1% to 1,376, while inventory levels sank 32.1% to 1,257 units. Pending sales were also up 9.7% to a total of 1,266 units. The median sales price of homes sold in Chattanooga grew 9.2% to a high of $270,000 and the days spent on market dropped 59.5% to 17 days. It’s still a seller’s market, largely due to big drops in statistics like months’ supply of housing going down a stunning 36.8% to 1.2 months.
5. Tremendous Local Educational Opportunities
Another driver of growth in Chattanooga is its status as somewhat of a local education hub, with 4 major colleges and universities in the city, including the University of Tennessee at Chattanooga, Tennessee Temple University, the Southern Adventist University, and Chattanooga Community College. Students add to the city’s existing tenant base, as many students are not yet in a position to buy – and the presence of educational institutions introduces vibrancy and outside money into the local economy. Additionally, the city sits less than an hour away from the Fort Arnold Air Force base, providing another stream of potential tenants, as well as another large local employer, all adding to the resilience of the local economy.
6. A Healthy and Growing Population
Population growth is a prime indicator of financial health, at least in many cities within the United States. For instance, compare Concord, NH with Detroit, MI and you’ll start to understand why population growth is important. In 1950, Detroit, Michigan had a population of 1.85 million people, falling to 639,111 in 2020.
This long-term, sustained decline in population was partially responsible for the hollowing out of the city’s economic base, which led to a reduction in city services, support for businesses, and most famously, a sky-high crime rate.
This phenomenon is known as “The Decline of Detroit.” While several historical factors led to this situation, including the hollowing out of much of the local industrial base due to automakers and other manufacturers moving overseas – a declining population, particularly in larger cities, can be a harbinger of potential trouble ahead.
Conversely, a growing population shows that people are traveling to the city in question for different reasons, including employment, economic, and cultural opportunities. Over the past decade or so Chattanooga has shown steady growth in the number of residents moving to and living in the city, with a 2020 population of 184,561 compared to 167,674 in 2010 – a solid 10.7% growth rate in just 10 years. Today, it is the 4th largest city in Tennessee after Nashville, Memphis, and Knoxville.