Welcome Back,

Howdy, welcome back to The Wealth Wagon! I hope you had a fantastic Monday. Today we are back to discuss one of our favorite investments, Real Estate! We will also be talking a little bit about how to profit from short term rentals. Enjoy!

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Real Estate Investing

Market Snapshot:

Chattanooga, Tennessee
The Chattanooga real estate market continues to see steady growth, with the median home price currently at $330,000, reflecting a 2.8% year-over-year increase. Chattanooga is drawing attention from investors due to its affordability and proximity to major markets like Atlanta and Nashville. The demand for single-family homes and rentals has risen, with 1,600 active listings, down 5% from last year. Chattanooga’s thriving outdoor recreation scene and lower cost of living make it an attractive location for young professionals and families.
Median Home Price: $330,000
YoY Price Growth: 2.8%
Active Listings: 1,600 (down 5% YoY)

Deal Of The Day:

Triplex in Chattanooga, TN
Price: $450,000
Units: 2 (3-Bed, 2.5-Bath)
Monthly Rental Income: $3,400
Cap Rate: 7.2%
This well-located triplex in Chattanooga offers an attractive 7.2% cap rate. Each unit rents for $1,700/month, bringing in a total annual rental income of $40,800. The property is near key amenities like the riverwalk, dining, and parks, making it an ideal investment for those looking to tap into the growing demand for rental housing in the area. Its proximity to downtown also boosts its long-term appreciation potential.

Real Estate Tip:

Investment Strategy:

House Hacking
House hacking allows you to live in one part of a multi-unit property while renting out the other units. This strategy is ideal for first-time investors. For example, if you purchase a $500,000 duplex and rent one unit for $2,000/month, you could cover a significant portion of your mortgage with rental income. This approach not only helps you reduce living costs but also builds equity in a property that appreciates over time.

Current Interest Rates:

Chattanooga, Tennessee
30-Year Fixed Residential: 6.1%
15-Year Fixed Residential: 5.9%
Commercial Rates: Starting at 6.1%
Mortgage rates in Chattanooga are consistent with national averages, with the 30-year fixed rate at 6.1%. Lower rates for 15-year fixed loans at 5.9% offer options for those looking to pay off properties faster. Meanwhile, commercial loans are also starting at 6.1%, which is attractive for investors seeking multifamily properties.

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Take Me There

Economic Conditions

Chattanooga’s economy remains strong, driven by its unemployment rate of just 3.1%, thanks to growth in the tech, logistics, and manufacturing sectors. The city's focus on sustainability and outdoor activities continues to draw new residents. Inflation has increased construction costs by 3.8%, but demand for homes remains high due to the city’s relatively affordable housing market compared to nearby major cities.

How to Profit from Investing in Short-Term Rentals

Chattanooga’s growing popularity as a tourist destination offers investors a unique opportunity in the short-term rental market. Properties near attractions like the Tennessee Riverwalk or Lookout Mountain are in high demand for Airbnb and VRBO rentals. For example, a 2-bedroom unit that might typically rent for $1,500/month could generate $200/night as a short-term rental during peak tourist season. By targeting properties in high-traffic areas, you can maximize rental income and capture the benefits of Chattanooga’s growing tourism sector.

Key Takeaways:

• Chattanooga Market Update: Median home price $330,000, up 2.8% YoY, with 1,600 active listings.

• Deal of the Day: Triplex in Chattanooga, generating $3,400/month rental income with a 7.2% cap rate.

• Tip: Understanding market cycles can help you time your investments for maximum appreciation.

• Investment Strategy: Consider house hacking to live in and rent out portions of a multi-unit property, reducing your living costs while building equity.

• Interest Rates: 30-year fixed rates at 6.1%, with commercial rates also starting at 6.1%, making it a good time to invest in multifamily properties.

• Economic Impact: Chattanooga’s 3.1% unemployment rate and strong tourism sector are driving real estate demand despite rising construction costs.

Common Real Estate Questions

Q: How does a real estate investor use cap rates to evaluate investment properties?
A: Cap rate (capitalization rate) is calculated by dividing the net operating income (NOI) by the property’s purchase price. A higher cap rate indicates a better potential return on investment, but it may also signal higher risk. Investors use cap rates to compare properties and assess income potential relative to their investment.

Q: What is the 1% rule in real estate investing, and how is it applied?
A: The 1% rule suggests that a rental property’s monthly income should be at least 1% of its purchase price. For example, a property costing $200,000 should generate $2,000 per month in rent to meet the rule. Investors use this to quickly assess potential cash flow and profitability.

^{If you have a questions regarding real estate reply to this email or email us at [email protected]}

That’s All For Today

I hope you enjoyed today’s issue. If you have any questions regarding today’s issue or future issues feel free to ask. Come back tomorrow for information on how to grow your income and wealth. I hope to see you.

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